One of the hallmarks of the 20th century’s Communist governments was the obsession with five-year strategic plans. Whether in the Soviet Union or China, central planners spent enormous amounts of time on these plans and presented them as the key to economic prosperity. China still announces each of its plans with fanfare and excitement.
Although they are typically on the other end of the spectrum philosophically, business organizations also have a penchant for engaging in long-term strategic plans. Many consider the mark of a successful executive to be their ability to mould a vision into logical targets over the next five years. An entire organization then shifts direction like a big ship turning in the water, seeking a new horizon.
The problem with five-year strategic plans is that they no longer fit our world. This was true 10 years ago and is even more true post-pandemic. A five-year plan is bound to be out of date by the end of year one and that makes it a futile exercise.
I’m not advocating for dropping strategy and improvising. Instead, organizations should embrace shorter strategic plans—12 to 18 months—that can be formulated rapidly. The shorter scope and higher frequency of these plans give management teams the ability to make the most out of trends and unexpected challenges. Anything longer is akin to gambling.
Another Form of Gambling
There’s a whole industry of futurists who claim to predict the future. Companies hire them and put them into a room to come up with bold and exciting ideas. Maybe it works or maybe they are following William Gibson’s lead and looking in places where “the future is already here.”
Organizations should not be in the future-prediction business. They need to make educated bets on how to shift trends in their market, but that is different than hoping (or praying) that a trend lands in the right slot.
The last three years gave organizations two major opportunities to drive growth. First, we had unprecedented consumer demand in home goods and products. Second, we had the opposite shift in services and experiences. No company could have planned for these two events in their strategic plans. The best simply threw away their plans and reacted to what was going on around them.
Take a look at Disney Parks & Resorts. Visitor volume dropped significantly due to COVID restrictions. Instead of waiting for traffic to return to normal, Disney embraced a new strategy. They focused on providing more value options that customers could purchase for extra fees. They also introduced an app called Genie+ that allows customers to easily skip lines. Disney is now seeing record-breaking profits despite fewer visitors.
When I work with companies on strategy, I disabuse them of the notion that they have better-than-average prediction skills. Instead, they should simply focus on frequently refreshing their strategy to realign their organization to reality.
Good Enough is Fine
When I share the idea of shorter strategic plans with organizations, it makes intuitive sense. After all, few executives are comfortable with their ability to predict what will happen in six months, let alone five years. However, organizations push back on shorter strategies because of how time-consuming it can be to create them.
The five-year approach has led many organizations to engage in months-long — and sometimes years-long — strategy formulation. They consult everyone, validate ideas and then put everything into a nicely formatted document.
You can’t spend six months formulating a strategy for 12 months. That math doesn’t work. There needs to be an appropriate outcome to the time invested.
The key to shorter strategic plans is shorter formulation times. Strategy shouldn’t take longer than a week to formulate and many organizations could do it in a day. To do that, you need the following:
- Get everyone together in-person or virtually in undisturbed time blocks.
- If you need any research, compile it beforehand.
- Have someone facilitate the formulation to avoid getting stuck on minor issues.
- Take advantage of the many strategic frameworks available.
- Tackle two to three major objectives at most.
- Focus on “good enough” instead of perfection.
A 12-month strategy doesn’t need to be perfect. Good enough is fine. You’re not planning for the entire future of the organization, just the next year.
Relics of the Past
Whenever I see an organization tout a five-year strategic plan, I know they are living in the past. Despite their best intentions, they are bound to miss countless opportunities by forcing themselves to an arbitrary future.
Worse than that, if they do hit all of their goals, they didn’t think big enough. They left value on the table that could have been captured if they simply refreshed their strategy more often.
Communism is a relic of the 20th century, but it lingers on when we hear news of China’s five-year plans, or when a business announces theirs. It is time to retire long strategic plans in favour of a format better suited for the 21st century. ′
Ruben Ugarte is a Vancouver-based decision strategist and consultant. He produces a free weekly newsletter called Growth Needle and is the author of the 2021 book Bulletproof Decisions: How Executives Can Get It Right, Every Time.