Note: This is an abstract from John Hagel and John Seely Brown publication
Achieving impact that matters today
WITH change and performance pressure only accelerating, it may be time to reassesshow we approach strategy. Traditional approaches don’t account for the increasing pace of change and risk generating diminishing returns or missing the mark entirely. Fortunately, there is a more promising way to address the challenges ahead.
What’s wrong with the five-year plan?
Despite the challenges of strategic planning in a rapidly changing world, most companies have remained loyal to the five-year plan as a basic framework. Some have moved to a three-year planning horizon to address the growing uncertainty, with a few taking the dramatic step of abandoning a longterm strategic plan altogether. Regardless of the time frame, executives have increasingly adopted a reactive approach to strategy.
To sense and respond as quickly as possible to events as they happen. Many see strategies of movement as the most effective way to cope with change and uncertainty; flexibility and speed are keys to success.
What’s been the result?
Many companies are spreading themselves ever more thinly to deal with an ever-expanding array of initiatives. Even the very largest companies are wrestling with the realization that the number of new programs exceeds the available resources. They are also realizing that these initiatives tend to be incremental in nature, due not only to limited resources but to the programs responding to short-term events.
The results are not encouraging. We have been tracking the performance of all US public companies over the last half century. Measured in terms of return on assets, performance on average for all public companies has declined by over 75 percent since 1965.1 If the goal of strategy is to at least maintain current financial performance over time, this is unfortunate evidence that the current approaches are not working.
There is an alternative to reactive strategy and incremental steps. It’s based on an approach that some of the most successful digital technology companies have pursued over the past several decades. It goes by different names; we call it zoom out/zoom in.
This approach focuses on two very different time horizons in parallel and iterates between them. One is 10 to 20 years: the zoom-out horizon. The other is six to 12 months: the zoom-in horizon. Notice a key difference from the conventional approach—the five-year strategic plan—that many traditional companies take. Companies pursuing a zoom out/zoom in approach spend almost no time looking at the one-to-five-year horizon. Their belief is that if they get the 10–20-year horizon and the six-to-12-month horizon right, everything else will take care of itself.
A desire to learn faster
Faster learning is what drives this approach to strategy: These companies’ leadership teams are constantly reflecting on what they have learned about both time horizons and refining their approaches to achieve more impact in a less predictable world.
Notice, too, that this approach is distinct from scenario planning or scenario development. Many large companies’ top teams have engaged in exercises asking them to imagine a range of alternative futures and focusing on those that seem most likely to materialize. But then the offsite meeting ends, everyone goes back to her day job, and often nothing really changes. However provocative, the exercise i an alternative approach
KEY QUESTIONS ACROSS TWO TIME HORIZONS
- What will our relevant market or industry look like 10 to 20 years from now?
- What kind of company will we need to be 10 to 20 years from now to be successful in that market or industry?
- What are the two or three initiatives that we could pursue in the next six to 12 months that would have the greatest impact in accelerating our movement toward that longer-term destination?
- Do these two or three initiatives have a critical mass of resources to ensure high impact?
- What are the metrics that we could use at the end of six to 12 months to best determine whether we achieved the impact we intended?
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