Where do you stand on business planning? Essential to success? Waste of time? Out of date before we start? The foundation of our competitive competencies? Whichever end of the spectrum you reside in, most businesses follow some form of strategy and build some form of plan. The main questions are perhaps how detailed the research is that formed the strategies and how adaptable the strategies and plans are to emerging competitive forces. If your business plans are set in stone for the next 5 years, chances are that it will ignore changes in your PESTLE influences. If you fly by the seat of your pants, reacting to every situation that arises, you are unlikely to build the competitive advantage competencies and tilt the value equation for customers. Read on to see some examples of why business planning intentions do not always result in the best strategies.
Planning for more of the same
One of our clients, which for confidentiality purposes we will call Alpha Limited, operates in the manufacturing sector. The customer base has been established over a long period of time and they are exclusively business-to-business. Think Beyond was introduced to them to support them with challenges in employee retention and productivity. One of our early observations was that little time was invested in planning, with the owners getting together and setting a budget in an afternoon. After years of a consistent approach to planning, aiming for 10% revenue growth per annum, the wheels had started to come off. Revenue was going in reverse and the knives were out. This was the undercurrent beneath their other challenges.
Alpha Limited had relied on a superficial approach to planning for so long that it was assumed that it worked. As performance waned, there had to be someone to blame. Our research into employee experience highlighted a ‘toxic culture of blame’ where staff carried the can for problems. It also highlighted a deep divide between staff and management, with profit accumulating into wealth at the top but employees struggling to make ends meet. Productivity was a complex interplay between motivation, poor processes, poor conditions and a perceived ‘drift’ in the business. Part of the solution was to engage the staff in initiatives to improve the business and to make some strategic ‘big bets’ with enough flexibility to respond to an evolving environment.
Planning beyond our capabilities
Most entrepreneurs, investors, visionaries and chiefs have a level of ambition. This drive to succeed leads to some successes that usually outweigh the failures that they quickly learn from. The result is usually a growing business and net wealth over time, as long as they take people with them and the ambitions are achievable. For one of our clients, which we will call Delta Limited, they aspired to grow by 25% per annum and to scale their capability to the same degree. This ambition, fed by some recent successes, made a lot of sense to the new investors. They made it a key target for the management team and so, expected monthly reporting packs to track progress, based on past success. Think Beyond was engaged to find ways to grow beyond 25% per annum, looking at sales and marketing strategy, product launches and new target accounts.
What became clear from the first business planning workshops was that capacity grew regardless of top-line success. Products were in development that had no relationship to key strategic choices. Furthermore, the technology choices were not led by customer demands. A few key personnel shouldered the majority of decisions, brought the majority of experience and managed an ever-growing workforce. The investors were becoming restless just halfway into the first year. Delta Limited also made new business a ‘fixed’ assumption, though we all know that customers play the tune. The result was a difficult admission that building more capacity was not the same as building competitive competency. The organisation had forgotten to plan how to scale efficiently, to innovate and to serve its customers, especially since competitors had caught up on their initial technology advantage.
Business planning for gut instincts
Doing nothing is a strategy in itself. Highly-capable and intelligent leaders often resist the relatively ‘slow’ process of business planning. They instinctively feel that they are somehow ‘reigned in’ once a set of strategic choices are documented and ‘undervalued’ when plans are formed that people want to stick with. One of our clients, which we will call Omega Limited for confidentiality purposes, was led by a charismatic, educated and energetic leader. They were always ‘ready for action’, displayed a high level of engagement in any interaction and also set a high tempo in any meeting. Think Beyond was engaged to provide assurance over the plans of the management team, each of whom led a business unit, which we hypothesised was to uncover why they were not doing exactly as instructed by the leader.
In the first meeting, we were introduced to the other directors, each of whom appeared credible and on top of their game and clear on what they were trying to achieve. As we delved into the running of the various business units, one trend became clear. There were no plans. Each director assured us that they ran their unit to the best of their ability and the firm was hugely successful. However, there was a consensus that planning was a waste of time and that they were dynamically reacting to strategy changes.
Omega Limited did not have any formal strategies, no documented plans and no modelled business choices. The management team were all reacting to the ideas, suggestions and criticisms of the leader. Additionally, business unit teams were in disarray, unclear of what they were working towards or why. Customers complained of slow response times, lack of product innovation and staff who did not seem to care.
The best strategies are researched and emergent
Arguably, a business with a fixed plan at least knows where it is heading, though it should consider emergent strategies. A business with no plan is perhaps the most able to break away from ‘groupthink’, though it must provide clarity of purpose and direction. Business planning does not need stone tablets, a hammer and a chisel – the world turns too quickly for that. No business planning invites chaos and ‘reflex’ actions to respond to one problem after another, which over time may grind down employees and customers.
Here at Think Beyond, we advocate a researched set of strategies to identify growth and improvement opportunities. Such initiatives may be adapted, added to or subtracted from over time in response to emergent strategies. We also encourage a wide range of inputs to the planning process to cover all perspectives, not just the top table. In conclusion, fear not that business planning is inflexible, that the world will move on or that it has no benefit. All extremes are bad for business, though some prefer the status quo.
If you would like to find out more, why not email us your question or ask us to arrange a call.
Still not convinced? Check out a summary our planning services and how we use research in unique ways.
Finally, why not read why issues can take you away from success and our thoughts about different planning horizons.