As 2015 comes to an end, many of us have begun to look towards the New Year and everything that comes with it. With the New Year come prospects of building new relationships, creating new memories and finally getting to that project we’ve been putting off.
For CEOs, this is an opportunity to begin considering long-term strategic plans. Where can the business go in the coming months? What challenges and opportunities will the business face? How can the business stay relevant in an economy that’s constantly shifting?
Here are 10 tips and benefits to long-term planning.
1. Determine How Long is ‘Long-Term’
The type of business helps determine just how far out you should plan and forecast. CEOs of smaller businesses may have more obvious limitations on their future ambitions. Brian Hill examines this further in a story for Demand Media.
“Industrial technology companies may need to do a long-term plan that spans five to seven years because of the complex development steps involved in bringing new technologies to a marketable stage,” he says. “For a clothing designer, a three-year look into the future may be as long as is feasible because fashion trends change so quickly. Choose a time frame that represents the time required to take your company to the next level of success.”
2. It Boosts Innovation
The amount of time and effort spent pondering a business’ path and direction can lay the groundwork for innovation. AJ Agrawal writes about this in a story for Inc.com, with excerpts from an interview with Marc Mertens. Mertens serves as the CEO for creative agency A Hundred Years, an agency that “exclusively works with organizations who put purpose at the core of their business, and helps those who want to bring it back.” Mertens says that long-term planning helps to inspire inventions and “radical innovations,” not just tinkering with existing products or services.
“Sometimes that innovation can unlock new markets and significant new business opportunities,” Mertens explains. “A long-term focus constantly clarifies what an organization is uniquely positioned to do, while bringing a deeper sense of purpose and meaning into the core activities of the organization.”
3. It Helps Focus
The long-term message your business is trying to convey is especially important, and CEOs should keep that message top-of-mind. As Mertens says, one of the challenges will be in “weaving that vision into day-to-day business practice.”
“Articulating the promise of a purpose-driven business is foundational, but the real work lies in driving that vision,” he says. “The 21st century requires an organization to not just have a big vision that goes beyond the generation of financial returns (which is still a great outcome, just not the only one — and definitely not the purpose of the organization in itself). On the flip side, we find organizations who are farther along on that journey. These companies have a sharply defined vision that has a purpose at the core, yet they are challenged to operationalize that vision.”
4. It Emphasizes Collaboration
Most CEOs can’t accomplish long-term goals on their own. A strong management team is an essential part of the puzzle to not only implement the CEO’s vision, but to also collaborate on how the company can get there. Candace Webb writes about this for eHow.com.
“All members of management should be included in the planning process,” she writes. “Because a good strategic plan applies to the entire organization and moving it forward, it is important to ask for each manager’s input. Including all management personnel ensures that when the plan is complete, everybody is on the same page and working in the same direction. Obviously, if the company has security issues and sensitive information involved, it may limit the number of managers to be included in the planning stage, though once the plan is formulated, all members of management should be briefed on it.”
5. It Allows You to Inspire
Getting away from the numbers and projections for a minute, think about how the strategic planning process might help both the management team and other employees. The knowledge that the business leadership has established a clear path and idea for the future can be a major confidence boost. Maureen Kline writes about this for Inc.com.
“You want to help create a bright future for generations to come, so why not say so? Your job is to inspire, strategize, organize and communicate. Your employees will be most productive when they feel a sense of purpose, and if you get the conversation going, they will all come forward with ideas on what to do for future generations. Inspire them to make changes at home, too, and in their communities. Make them feel connected. Tell them they are important.”
6. Be Specific About Objectives
As is often the case in business, it’s essential to get specific when planning for strategy. How much growth is realistic? As Hill writes in his Demand Media piece, imagining where your company could be five years down the road is a good start.
“Describe how large it has become in terms of generating revenues, how many people now work at the company, how the scope of its product line has changed and how it has expanded geographically,” he says. “… Convert your vision into numbers, such as what revenues are projected to be five years from now. A hotel company would have a long-term objective for the number of properties it will own or manage five years down the road. The objectives don’t need to be as numerous as those in the annual plan. Think of them as strategic pillars for your company’s long-term future.”
7. It Can Help the Costs Involved
Big plans typically require making big investments. When those plans can be implemented over an extended period of time, it becomes less of an immediate burden on the business’ finances. Sam Ashe-Edmunds writes about this for Demand Media.
“Long-term strategy allows you to budget over a longer period for new initiatives,” Ashe-Edmunds says. “Trying to fund a new product line or division with cash on hand may not be possible. Using a loan to create something new increases your costs by adding interest. Budgeting a portion of your revenues or profits over a period of several years allows you to properly fund new initiatives without weakening your current operations or financial position.”
8. Think Sustainability
There’s a word that can be intimidating for any relatively new business. The efforts involved in getting a company up and running — and eventually become profitable — can distract business leaders from strategizing for the long haul. In Agrawal’s Inc.com piece, Mertens says businesses must use resources to stay relevant.
“A key pattern we see in organizations not meeting their bottom line is a chronic over-indexing on short-term results,” Mertens says. “Over time, this focus leads to a lack of clear, long-term vision for an organization that deeply inspires both internal or external stakeholders. This is often rooted in a mindset that defines the core purpose of a business as maximizing short-term financial returns. That leads to organizations walking away from their original story, and prioritizing incremental growth over big-picture innovation that ensures relevance in the long term.”
9. It Strengthens Partnerships
It’s always important to keep investors happy and confident about the health and direction of their investments. Establishing specific plans can go a long way toward that goal. As Kline writes in her Inc.com story, “long-term shareholders make better partners.”
“Finance was originally supposed to support production and trade, before it spun off into a whole world of its own,” she says. “The best financial partners are just that: partners. You want them to believe in your product and your strategy. You might find them in your local community or network, or through crowd funding. If your company trades on a stock market, you can still be strategic about courting certain types of investors, such as pension funds, who are more interested in your long-term plans.”
10. Once the Right Direction is Found, Get Started
The collaborative nature of long-term strategic planning should result in a clear path for a CEO’s management team. It can be challenging to maintain day-to-day focus with the agreed-upon long-term plans. A CEO’s guidance, alongside assigned roles in accomplishing those goals, can make it more realistic. Hill goes on to explain in his Demand Media story.
“Select the long-term opportunities to concentrate on based on your data gathering and your long-term vision,” he says. “Decide on the new markets you want to explore, and the new products or services you want to develop. These opportunities are your long-term projects. Assign responsibility for moving each project forward to members of your management team.”
