Strategic Planning Horizon: How far out should you plan?
By Robert W. Bradford, President/CEO
To determine your strategic planning horizon, you need to have some sense of how clearly you can see the future environment in which your organization will be operating. There are three critical elements to consider here:
1. How much information is available in our environment?
2. How quickly does the environment change?
3. How well do we gather and understand information about the future of our environment?
The first question – how much information is available – usually varies with two factors: the size of your industry, and the amount of government regulation involved in what you do. The bigger the market – and the more regulation – the more likely it is that there will be good data available for your planning, and some of that data will be well-researched forward-looking data.
The second question is trickier. In general, strategic environments may change rapidly due to technology and regulation, but other forces, such as economics, may cause your strategic environment to mutate even more quickly than you thought possible. As a rule, the more your activities are predicated on technology or a specific economic relationship, the more likely it is that change will affect your strategy quickly and unpredictably.
The third question revolves around how you approach information about the future. If you can, and do, spend a good deal of time and money researching where your environment is heading, you can have some confidence in the information used in your planning – at least to the time horizon that your research can adequately address. If you do not, but you have very good forecast data available to you from, for example, a trade association, you also can have greater confidence in a longer-term plan.
If you feel you can see trends unfolding pretty well five years into the future, it would not be unreasonable to do your strategic planning with a five-year horizon. However, if the future gets very murky just a few months out, you should consider a different approach. There are three workable approaches to strategic planning in a highly uncertain environment:
1. Use a very short planning cycle – revising your plan every 3 months, 6 months or 1 year.
2. Have shorter strategic planning meetings quarterly, and constantly update and revise your strategies.
3. In situations where there is high uncertainly about a possibly catastrophic outcome (ie. Health care reform in the medical insurance industry), create scenarios of the 2-3 most likely outcomes and plan around each.
Obviously, how you approach planning in a highly uncertain environment depends quite a bit on the resources you have at your disposal. A 100 person organization cannot afford to spend as much time and money on planning as a 10,000 person organization, so you will want to assess your ability to use any of the three approaches listed above.
If you have questions about these, and would like an expert opinion on which approach would work best for your unique situation, please contact me at email@example.com.
© Copyright 2011 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.