By Don Creswell, SmartOrg
Decades ago, in my (relative) youth, I was a senior management consultant at SRI International (formerly Stanford Research Institute) and interacted frequently with SRI’s Long-Range Planning Service (LRPS), affectionately called “LURPS” within the organization. In the 1970s, LRP was still a big deal. Many companies had large staffs devoted to making long-range plans — more often than not, for five years ahead.
Noting that one of our clients had recently installed a SmartOrg solution to assist in streamlining a really onerous long-range planning process, I asked “So is this a general problem that others have? Come to think of it, I seldom hear the term long-range planning, much less LRP, these days.” The range of blank stares led me to the computer and to Googling long-range planning.
Although it looks like the formal term “long-range planning” is more or less out of fashion these days, it exists in many guises. Some call the process “long-range strategic planning.” Some call it “strategic planning.” Others simply call it “forecasting.” Some believe, cynically, that in today’s rapidly-changing business environment; “long-range” is a futile exercise. There is general agreement that whatever it is called, planning for the future has pretty elastic dimensions.
Wall Street has created another barrier to effective long-range planning. As a strategy manager for AMP said in a Harvard University report, “My company is 149+ years old and naturally suffers from all the issues of incumbent thinking — the need to manage for today and plan for tomorrow. This is often hard in SBUs driven by short-term profit demands whose clarity of strategic thought is weak and the concept of ‘strategic thinking’ is not really valued.”
Another executive felt that long-range strategic planning was only ever relevant to large companies with high fixed costs. He further elaborated, “The position along the continuum from long-range planning to free-wheeling adaptability is determined by the investments, the industry and the image/mindset of the executives.”
All companies must make projections about future growth, revenue, costs and investments. In today’s rapidly moving, volatile environment some question whether long-range planning is a worthwhile endeavor. Like many things in business, “it all depends.” For instance, when planning to develop and bring a new fab on-line a company like Intel is making a huge bet that will not pay off for many years. This is truly where a long-range plan is essential. The extended time horizon dictates the need for the plan to be comprehensive at a macro-level — it is not a detailed budget — and it should address the impact of uncertainty around key variables. It should also be updated from time to time to reflect changes to assumptions in the original plan since unforeseen events can shoot holes in the best of plans over this time period.
On the other hand, Target took a huge gamble opening 133 locations throughout Canada within two years. It soon realized its plan was not working and quickly moved to leave the market. The planning horizon was fairly short when compared to Intel’s building a fab. Perhaps Target’s long-range strategic plan was, no pun intended, “on target” when it was formulated. When strong evidence indicated the plan was not working, executives took quick action. To lower its risk, Target might have taken an agile approach to expansion, opening new stores over chunks of time as the company obtained feedback from the market, continuously updating its plan as learning accrued.
LRP is not a moribund concept. However, planning for the future needs to be shaped to reflect the dynamics of today’s rapidly changing world. A five-year plan may be okay for some industries, whereas a one-year plan may be just right for others. In any event, each plan should serve as a guide rather than as something cast in stone. It should have provisions for updating and revision as circumstances dictate. The plan should also include analysis of the impact of uncertainty on key variables that are important to successful achievement.
The computer power exists today for truly dynamic planning. To quote Greg Martin, President of Optimal Performance Group, “Technology allows real time, on-the-fly updates to planning and implementation of whatever cadence fits the market imperatives the organization faces.”