#230: The Future of Planning Is Continuous
Plans are nothing, planning is everything.
Beyond the Tyranny of the Annual Plan
This little minute long video by Brian Cox is a reminder that at the end of the day we are on a planet spinning arbitrarily around its star, and rotating on its axis as it goes.
The relationship between the rotations and the revolutions have given us the day and the year and the approximation of 365 days to a year. And an even more arbitrary pattern of 7 days to a week and roughly 52 weeks a year, or 12 months of about 30 days each. Based on these approximations and the repeating cycle of seasons, we have created social patterns, celebrations, weekends, sabbath, birthdays, anniversaries, summer and winter rituals. Our entire lives are governed by these inherited cosmic patterns.
No surprise therefore that our economic models largely follow these patterns. Winter sales, seasonal stocking and promotions, quarterly updates, annual reports, daily and weekly timings, opening times, weekend shifts, peak time, office rush, month end accounts. Even more recent phenomena such as black Friday are derivatives of the same cycles. But the one I want to talk about is the annual plan. This is the cornerstone of the business cycle. You’ve probably had enough exposure to this. Sometime in quarter 3 the rumblings begin. In quarter 4 there are meetings, offsites, and planning sessions, and the next years plans are locked in, budgets are allocated, negotiated, and finalised. These rituals feel as old as time which is not surprising since they were used in Italy in the 14th century. Yet, I believe the time has come to question the value of the annual plan.
I wrote earlier about the challenge of faster cycle times in business the idea of the intellectual caravan. Today, tools like ChatGPT or Google Gemini get 10X or more better faster than we replace phones. Certainly faster than it takes most large businesses to conceptualise, create and get new products to market. But let’s focus on something every business does - the annual planning cycle. Keeping in mind that the business planning process often starts 4-6 months ahead of the new financial year, you’re actually planning for up to 18 months ahead. The annual plan often includes locking down budgets, allocations, and initiatives. ChatGPT4 launched in March 23. ChatGPT5 is expected end 2024 or early 2025. That’s a gap of 24 months or less. Can you see we’re getting to a point where your planning cycle will not factor in major technology upgrades? What value is your plan if it doesn’t include game-changing technical options, that will be adopted by all your customers, challengers, and collaborators?
I use ChatGPT here as one example of a significantly impactful technology service. Take a step back, and you can take a broader view of the range technology change. Here’s just a smattering of things that will change in the next 18 months:
GenAI Tools: Gemini, Claude, Llama, CoPilot
Traditional AI models: Deepmind’s Alphafold, nVidia’s Jetson, Darktrace’s AI Cybersecurity Platforms, Huggingface’s DistilBERT, Insilico’s PandaOmics - these are all either furthering AI foundational capability or their applications across domains.
Robotics: Spot robots, swarm robots, shape shifting or humanoid robots. Domain specific robotics in healthcare, warehouses, or delivery drones.
Blockchain: CBDCs (Central Bank Digital Currencies), DeFi (Decentralised Finance), Sidechains and rollups, and integration with other systems.
Computing: Quantum Computing, Neuromorphic Computing
Automotives: the shift to EVs, autonomous driving, smarter vehicles, V2X technologies, evolution of hydrogen as a fuel.
All this is alongside the great revolution in energy, sustainability, and healthcare.
So if you’re currently engaged in a business planning exercise for the next financial year, how many of these things have you considered. Sure, many of these won’t impact your business in the short term, but perhaps a host of things that have already happened might. And the adoption of any one of these technologies at scale, creates a host of challenges and opportunities, as well as unintended consequences.
I saw this ad for a cream, on the London Underground. It’s a special cream that is aimed at people who are undertaking cosmetic surgery. And it struck me that the popularity of cosmetic surgery is creating this entire secondary ancillary market of products and services. Presumably, there might be implications for travel, insurance, healthcare, cosmetics, and a host of other industries that will see opportunities (or threats) with the growth of this industry.
So perhaps the question is not what technologies will be invented in the next few months, but which ones will hit critical adoption levels in that time and create new and ancillary markets? That could include electric vehicles, renewable energy, drones, biometric authentication, wearables, smart home tech, 5G networks, and AR/VR devices, to name a few. Which of these could directly impact your business, or create ancillary markets / risks that you should consider? Also as the geopolitical environment remains volatile what else could create threats and opportunities to your model? The geographical shift of chip manufacturing, disruption in food supply chains, and the impact of wars cybersecurity are examples of the geopolitical volatility.
Our Experience in Innovation
As I run an innovation function, we are additionally exposed to the changes both in terms of the technologies and new models, but also as a reasonably new team and function our own concept of what good looks like over the next few months keeps evolving. In each of the past 3 years, I’ve found myself reviewing significantly our goals and directions halfway through the year, and this year is probably no different. In a sense, we’re in a de facto 6-monthly planning world, and I don’t see that changing in a hurry.
Can Organisations Change?
Is it even possible for large organisations to think about shorter planning cycles? It’s certainly not easy and comes with a lot of challenges - both cultural and structural. But is it possible? Absolutely. It takes 3 key ‘first-steps’:
The annual plan is not the god. A lot of decisions are taken in organisations based on whether or not it’s in the plan. The plan, once agreed becomes the god. But we need to recognise the limitations of the plan if the underlying environment and assumptions have changed.
Real time data and reporting is both possible and necessary. Awareness of how the market has changed, or is changing is the gold dust.
Building in a mid-year reset is a simple first step. Reviews are common, but reviews tend to be based on adherence to the plan. A reset specifically poses the question of whether the plan needs an update. Have the goalposts shifted? Have new opportunities become available?
Google’s use of OKRs encourage quarterly goal setting and reviews. Zara’s fast fashion approach requires many mid-year adjustments to new products, supply chains, and campaigns. Tesla re-prioritises product features based on emerging technology trends and customer feedback. Netflix adjusts its content creation and release models based on ongoing shifts in consumer tastes and preferences.
The Zombie Plan - Even Longer than a Year
There are of course organisations which even now get into multi-year plans - 3 year or worse, 5 year plans. There can certainly be projects and programs that span multiple years - such as constructing a new factory for a planned new product for an automotive company. I met the head of design for a major car maker, who told me that he starts thinking about new models more than 10 years before they are built and launched. This is different from organisational plans that span multiple years and try to define the minutiae of planning and capital allocation on a multi-year basis. These are usually zombie plans. They live on long after they are effectively dead. The world has changed, the market realities are no longer the same, but decisions are still being made because 24 months ago, somebody thought it would be a good idea.
It’s a great idea to think many years ahead. You may have a vision and goals for the future. These ideas can form a north star that informs your plans. And these visions may evolve and shift, thereby impacting your plans. It’s just a bad idea to lock yourself into a tight plan of investments, resource allocation, and especially at the cost of ignoring emergent signals about risks and opportunities.
"Plans are worthless, but planning is everything" So said Eisenhower, referring to the fast changing nature of the battlefield where plans much be redrawn frequently. A useful metaphor for planning in a world of change.
AI Reading
AI & Innovation: what kind of innovation can AI analytics support effectively? According to this piece - process innovation, and recombinations involving a wide range of technologies. Conversely, AI is not as useful with incremental and completely radical / blue-sky innovation. (HBR)
AI Art: The problem with AI Art is that it is ‘born co-opted’ - it doesn’t enable counter-culture - it drives everything into mainstream. (Cory Doctorow - Medium)
AI Skills impact: It improves your output but perhaps not your capabilities. Once removed you go back to your old levels of outputs. (BCG)
AI and Inequality: will AI increase inequality across countries? Katya Klinova from the UN Global Pulse thinks so. (MIT Tech Review)
Other Reading
Moniac: In 1914, while much of the world was at war, Alban William Philips was born in far away New Zealand. Over the course of his life he worked in a gold mine, hunted crocodiles, busked with a violin, rode the Trans-Siberian railway and was arrested by the Japanese and accused of spying and nearly executed. He survived and came to London where he built the Moniac machine (aka the Phillips machine) - a series of mechanical and hydraulic components that collectively demonstrated the working of the macroeconomic equations as it was able to solve for up to 9 equations simultaneously. This was, in 1949, an incredible analog computer. (FT)
Digital Twins: Digital Twins in healthcare are enabling personalised medicine and replication of the functioning of human organs. (Economist)
The Story of Apple: this great piece traces the story of Apple and asks whether Apple can continue to dominate the world. (Bloomberg)