Do Businesses Think Long Term Anymore?

This week in a Wall Street Journal Article titled “It’s Really Hard to Think Long Term” CEO’s compared their current strategic planning horizon with their ideal time frame. For 25% of CEO’s the ideal time frame is longer than 5 years with 37% saying 3-4 years and 37% at 2 years or less. In reality, CEO’s are forced to adjust that to meet the stringent requirements of the market, their boards and their stakeholders. Only 14% have a planning horizon longer than 5 years with 41% using 3-4 years and 44% forced to be strategic in increments of less than 2 years. It is no surprise that most CEO’s shorten their ideal strategic planning horizon considerably due to the pressures to produce quickly. When asked the time period for which they felt the most pressure to deliver strong financial results the largest group, 36%, said 1-2 years. Another 51% gave time frames even less than that. In that context it is easy to understand why strategic planning horizons are shortening, thus, “strategic planning” is less and less about strategy and more and more about operational performance improvement.

Any strategic plan which is for less than 3 years is most likely not strategic at all. In fact, strategic plans have become a label for planning the activities of an organization (not setting a strategy) or a first step in a budget setting exercise. More and more I find that strategic plans have no strategy. The story of the Emperor with no clothes comes to mind! Because a group has been convened to create a strategic plan, the belief is that the work product qualifies as one. Unfortunately, their strategic plan is actually naked—devoid of strategic content. It is not the activity of developing a strategic plan that creates a strategy—it is the approach one uses. And while plans don’t have to be many years out, the time horizon needs to be far enough in the future to encourage new thinking, allow the status quo to be challenged, and consider evolutionary and revolutionary market trends and their impact on the business. Just a few weeks ago I worked with a client that developed a multi-year strategy but then developed an action plan that described expected results by time frame –less than 6 months, 12-18 months and longer term. Most activities (and results) fell in the near term but they are not incremental steps built on what already exists since we gave ourselves permission to think long term. Planning horizons and action horizons don’t need to be the same but shortening planning horizons to match action horizons limits thinking and results.

Are you curious about other common mistakes in strategic planning? Do you want to get the most value out of your strategic planning? Watch this video called Strategic Planning: Three Common Mistakes You Can’t Afford to Make.

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