Future relevance requires a strategy. No-one can predict the future except to say that it will be different from the present. How can you ensure your current strategy provides future relevance? ‘Strategic timing’ is part one of a three-part blog series outlining the strategic cornerstones required for reinforcing business longevity.
Seeds of thought
Early spring is often a great time to think ahead. While business is busy with budgets, nature is busy with growth. As the sun shines for longer, fuel for thought is abundant for the visionary strategist.
The Strategic review which usually precedes a budget, is typically the time for considering strategic relevance. A 3 – 5 year timeframe is the mean duration of choice for strategic targetting, as outside that is considerd too far in the future to predict. But is this right? This is where strategic timing can help.
There are two parallel aspects to strategic timing; Timing of asset lifecycles, and timing of market demands. The visionary strategist will consider the timing of the asset lifecycles in conjunction with market demands to drive asset lifecycle management (ALM), thereby setting a strategy to optimize asset capability and longevity appropriate to meeting predicted future demands.
Timing of Asset Lifecycles
Every company has assets. Fixed assets, human assets, commercial assets and intangible assets which provide long term potential. ALM considers the lifespan of all these assets from inception to disposal.
If your asset lifecycles are longer than your 3 – 5 year strategy then what will you do with your remaining assets? Are they in the right condition and still relevant for the void that occurs after your strategy?
Within construction, energy and defense industries, fixed asset lifecycles typically extend past 20 years, and in all industries human assets extend past 50 years, leaving the majority of the asset value being used to drive revenues past the typical strategy period, which positions the timing of typical strategic targetting at odds with the revenue generation potential of a typical asset base.
It would surely be better in these cases to consider consolidating ALM’s to drive strategic timing, ensuring each asset has capability and longevity to accommodate its potential.
Timing of Market Demands
Market demand ultimatley drives revenue for your businesses outputs. Markets trends ebb and flow to a multitude of drivers, and in todays VUCA world it can change very quickly. Remaining relevant in these markets requires predicting market demands to your current and future outputs.
This is where strategic scenario play is important so as to counter the unpredictability of future market demands, with weight adjusted options enabling market risk assessments and mitigations to better position your assets for future demands.
Whether it is technology propelling industry disruption, or slower trend shifts, the visionary strategist will want to use strategic timing to position the right assets at the right time to leverage advantage.
What about Budgeting?
I would surmise that the main reason for the 3 – 5 year strategic targeting is not predictability but the linkage to budgets, providing the convenience to convert your strategic target to financial goals.
Of course even with strategic timing, budgets will still be required, but they will be an extract from a longer strategic cycle, with an awareness that the numbers are to finance a point in time which is not an end unto itself, but a moment along a more enlightened journey built around strategic timing marrying asset potential with asset value.
OK I’m interested, where do I start?
IFS CPM solutions allow what-if scenario play to provide performance feedback through your business KPI’s, and integration to your budgets supporting the 3 strategic cornerstones mentioned in this blog series. Go onto the IFS website IFSworld.com to find out more, or email me on firstname.lastname@example.org
Read part two of this blog series here.
I welcome comments on this or any other topic concerning Finance, HCM, CSR & business strategy. Connect, discuss, and explore using any of the following means:
IFS website: www.ifsworld.com