While many companies today conflate the need to budget and the need to plan as a single process, the future of better business planning will need to rely less on “the bottom line” and instead focus on a model that will preserve continuity while better adapting to the changing landscape. For decades, companies have focused on a companywide business plan; however running an organization by numbers does not provide clarity on how each element of the business works. Instead, what companies need to focus on is a system that will allow them to do rather than plan to do.
1. The modern business planning must be performance-focused.
This is not to say that businesses do not require budgeting; however, a “leap of faith” in business initiatives shouldn’t be completely dismissed. For example, if Apple did not utilize some of Steve Jobs’s radical ideas, which did not seem economically viable at first, Apple would not be the corporation it is today. There are many ways to create continuity within the organization while allowing room to achieve business objectives instead of simply financial ones. As Jobs would urge his employees, “think different.” Thinking simply financially is exactly the status quo that Apple boldly rejected, a reminder that the aesthetics of a tool are just as important as – or more than – its functionality.
2. The modern business plan must assess decision variables quickly and intelligently.
A successful business requires a combination of meeting financial targets but also achieving its overall business objectives. Budgeting creates the constraints to ensure a company does not fail; planning lays out what methods and resources are necessary for overall success. Instead of simple goals (“Sell more, sell more, no matter what!”) a business plan must focus on concrete measures (“Our objective is to increase profits by two percent. How can we achieve that?”). However, only a small percentage of companies are able to analyze dynamic scenarios and quantifiable what-if planning. To assess decisions variables quickly and intelligently, a business plan must allow executives to answer what happens to revenue, costs, and so on under scenario A as opposed to any additional scenarios. The better a business is able to evaluate its options, the better a business will be able to determine the best fit for the circumstances.
3. The modern business plan must create a single vision for all the different groups of a company.
Integrated business planning is exactly what it sounds like: to improve forward-looking activities across a corporation – instead of specific departments – to increase the organization’s financial return and improve its strategic position.
Each department has its own array of objectives. However, many of these activities are related to other departments. The future of business planning must utilize the data in one plan and incorporate it into any related activities. For example, a sales forecast would drive a production plan, which would feed a financial plan. However, in many companies there are no direct connections. The old model of an annual corporate budget coupled with individual departments’ quarterly reforecast will not fly in the rapid economic changes. The modern business plan must provide management across the entire organization with the ability to budget and plan in relation to a corporate strategy.
4. The modern business plan must better utilize people’s time.
Business planning has always been a pervasive activity in modern business; however, what’s most important is following through a plan’s many objectives. Success in business stems more from doing than from planning, obviously. However, without a comprehensive set of business scenarios examined and understood, managers across an organization may not be able to best respond to each set of circumstances.
Additionally, many employees only have a general idea of how his or her activities affect the overall strategy. Being able to measure accurately the impact of activities as well as a stronger coordination across an organization produces a much stronger forward-looking strategy.
Just as planning is easier than doing, change is much harder than simply encouraging change. However, companies that are better able to access and integrate better data will have better business plans. Without improved information technology, it is unlikely a company will be able to make meaningful improvements to its ability to plan.
However, this isn’t a story with a sad ending. Today’s new generation of business leaders are very similar to visionaries like Steve Jobs, dissatisfied with the status quo and open to using technology to take a “leap of faith” and turn the old model of business planning on its head. Corporations are looking past desktop spreadsheets and manual systems to better construct potential business models. With more time to integrate operational and financial data into business models, organizations will no longer need to take a budget-centric approach to business plan and instead focus on performance and strategic position.
There’s no question that the current business and economic landscape will continue to change; however, with the right data and structured business plan, corporations will be able to take each and every circumstance in stride.