One of the first things that I look at when designing a strategic conversation is the horizon in which our decisions will have to produce results.
Sometimes (remember 2008…), the horizon is as short as 3 months.
Sometimes (remember the times before 2008…), the horizon is as long as 5 years.
WHAT DETERMINES YOUR STRATEGIC HORIZON
How do you tell what your strategic horizon should be? I look at 2 factors
- How substantial and dependable are the resources we’ll have? The more of a war chest we have to work with, the less we need to worry about short-term needs, and the more we can focus on long-term goals. If we don’t have a war chest, then how confident are we that we’ll be profitable into the future.
- How healthy is the business model? Are we generating a good profit? If not, that’s a sign that we may not be delivering what the market values, or something internally is not working as needed. And it suggests that we’ll need to use resources to fix things before we can use them for building things.
WHAT DIFFERENT STRATEGIC HORIZONS LOOK LIKE
Once I’ve done that assessment, I know whether we need a short-term, medium-term, or long-term discussion.
- Short-term = 0-6 month horizon: tactical initiatives that can capitalize on existing assets, or address existing problems, with the goal of generating revenue or cutting costs. For example, cross-selling to existing customers, or consolidating 2 internal departments whose work has changed.
- Medium-term = 6-18 month horizon: evolutionary initiatives that capitalize on adjacent opportunities and needs – things that are new but close to what we’re already doing. For example, selling an existing product into a new (similar) market, or upgrading an antiquated order-management system.
- Long-term = 18-36 month horizon: transformational initiatives driven by a strong internal or external driver but with major work to be done. For example, launching a new product that needs technical development, or expanding the strategic role of a department (we’re seeing this a lot in IT departments that are being asked to drive digital transformation).
For most small businesses, most of the time, the strategic horizon is 1-2 years. But the horizon can vary from quarter to quarter. So, as you prepare to talk with your leadership team, take into account the resources you have and the health of your business as you outline the agenda for your strategy meeting.
Are you in growth mode, or survival mode?
I have some clients who are growing, some who are hanging on – and some who are transitioning from one to the other. Although most businesses would like to be in growth mode, the point isn’t to say that one is right and the other is wrong – it’s to understand that different situations call for different approaches. And that can be an issue when transitioning from one situation to the other.
HOW GROWTH MODE AND SURVIVAL MODE DIFFER
I did a chart recently for a client of the differences that their company would see as it switched from survival mode to growth mode. There were 15 different areas that would see changes!
In survival mode, your “strategic horizon” (the timing you take into account when making decisions) is the next quarter. In growth mode, that horizon stretches out to 3 years.
And a lot of areas can be “good enough” in survival mode – but need to be tightened up when growing. Those areas include accountability, processes, and hiring. And the inverse is true, too – things that need to be tightly managed in growth mode should be loosened up in survival mode. (Why would you want less accountability or process? Because that takes time, and in survival mode, that time can be better spent talking with customers.)
THE IMPORTANCE OF FRAMING
When you’re having strategic discussions, one of the most important steps is to pick the right “frame” for the discussion. A more tangible way of saying that is, you have to know the right question to ask. This is something that you can do intuitively most of the time. But when companies are going through change, picking the right frame is much harder. And picking the wrong frame can be very costly.
Here’s a simple example. I can create a very different conversation, and a very different outcome, if I ask the question, “What should we do more of next year?” rather than, “What do we need to do differently next year?” The first question is appropriate for a company continuing in the same mode it was in the prior year – baked into the question is the idea that we already know the right “model” of how we do things, we just need to pick areas to emphasize. The second question is appropriate for a company in transition – and in that case, doing more of something you’re already doing may actually hurt you more than help you.
(And, yes, it often makes sense to ask both of those questions in your annual planning.)
As a leader of strategic discussions, you need to be aware of what frame you’re using for each discussion, and you need to build your toolkit of frames, so that you can bring the right one to bear in whatever situation you find yourself in.
My sons love Legos. They love building the kits based on the instructions that come with them – and they love building their own creations out of a bin of parts that is the resting place of all those well-made sets.
When my son is building a triple-winged rocket, or an army base, it’s very clear that the creation process is not connected at all to the sales process. Yet, for some reason, when we are working on an innovation in our business, for some reason it’s much easier to think that the creative process is inherently connected to the commercialization process.
But it isn’t.
Being a business owner, I sometimes think as I watch my son and his Legos, “What would it take to make this little hobby a business?” My mind first goes to customers – their feedback, engagement, and money. And then it goes to logistics – managing the schedules, inventory, work flow.
You need creativity, customers, and control to commercialize innovations. The creativity part comes easily for Stage 2 companies – but if you don’t have customers and control, you’re just playing with Legos. Which, I can tell you from watching my sons, is engrossing and rewarding…but is not a sustainable business model.