Dear Strategy:
“Is 5 years a relevant time frame for your strategy when market trends and industries are uncertain in a volatile market?”
Here we have another question that is a derivative of something we’ve answered before. After 80 episodes, I imagine this is going to become a bit more of a rule than an exception! But, as with other variant questions, this one comes with a slight twist, which is why I’ve decided to feature it this week.
Back in Episode 13, I answered a question about choosing the ideal time horizon for a strategy. The gist of my recommendation was to, as much as possible, try to match your strategy timeline with your product lifecycle. In other words, if you have a product that is expected to have a short lifecycle (<3 years), then you might want to have a strategy that looks out over only a 1 to 3-year time horizon. On the other hand, if you have a longer lifecycle product (>5 years), then you’re going to want to look at a 5-year strategy or more. Of course, all of this still assumes that you’re going to revisit your strategy on at least an annual basis, regardless of how many years your strategy covers at a time.
In either of these scenarios, I would say that most companies seem to settle on developing strategies that cover a 3 to 5-year period, with business-to-business companies usually leaning toward the higher end of that range. So, it’s not hard to see where the 5-year number referenced in this question probably came from.
What makes this question somewhat unique is the reference to a 5-year plan inside of a volatile market, which roughly translates into rapidly changing market conditions that become too difficult to predict in the long-term.
Well, here’s the reality: Especially in today’s world, every market is volatile to some extent. Show me a market that isn’t being affected by technology in some shape, form, or fashion. And then show me a technology that isn’t changing at darn near the speed of light! It doesn’t matter if you have a 1-year product lifecycle or a 30-year product lifecycle – at the rate technology is currently advancing, even the longest lifecycle products are going to need to be tweaked, modified, or enhanced somewhere along the way.
“Especially in today’s world, every market is volatile to some extent.”
So, does that mean you should simply shorten the time horizon of your strategy to accommodate this increasingly “volatile” dynamic? Not likely.
Yes, it’s going to be difficult to predict exactly what might happen 5 years down the road. But, honestly, that can be said of just about any strategy at just about any period in time. Strategies are set in the future, and futures are, by definition, unknown. The trick, then, is not to eliminate the unknown but, rather, to try and harness it using the best information you have available to you.
If you can predict the future more accurately than anyone else, you will give yourself a tremendous advantage in the marketplace. In fact, one might argue that the more volatile a marketplace is, the greater chance you will have of foreseeing a future that nobody else cared to anticipate.
The way you do that is by analyzing your past and present situation and, as much as possible, using that information to help predict the future as far out as you possibly can. Note whatever assumptions you make, and then test those assumptions as the market evolves. This will lead to an entirely new set of predictions with an entirely new set of assumptions. And the cycle will continue on in this manner – 3 to 5 years out, 1 year at a time – with the company making the best predictions ultimately winning the game.
I like to think of this as one big game of chess. How many moves should you be thinking ahead? The answer is “as many as you can.” If you plan 10 moves ahead, your assumptions for Move #10 are going to be exponentially less accurate than your assumptions for Move #1. With each move, you’ll update your assumptions while all the while keeping that running 10-move database in your head. And if your opponent is only thinking 1 move at a time, then you’re almost certainly going to win the game.
So, the end game is this: Don’t let a volatile market prevent you from putting together a longer-term plan. Instead, see it as an opportunity to put a plan in place that nobody else is likely to be thinking about. You may not get it all right, but you’re going to get a lot more of it right than someone who’s not planning at all.
Listen to the podcast episode
Dear Strategy: Episode 080
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Bob Caporale is the founder of Strategy Generation Company, the author of Creative Strategy Generation and the host of the Dear Strategy podcast. You can learn more about his work by visiting bobcaporale.com.
