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10 Steps for Strategic Planning to Defend Your Future

8 min read
Figure looking out of airplane window representing strategic planning effectiveness

 

Did you know that the typical five-year strategic planning forecasts perform about as well as  dart-throwing chimpanzees? Cognitive science and behavioral economics scholars have conducted research on people who are the most skilled forecasters among us. Apparently, they perform no better than chance on economic predictions more than three to five years out. Given that gloomy information, you might be asking why I wrote an article about strategic planning at all.

 

You’re in the same boat with my consulting client Beth, the CEO of a mid-size medical management company, when I told her about this same research finding in our conversation about strategic planning in the spring of 2019. Based on her personal experience, she resonated with the accuracy of this statement.

 

Beth told me that about seven years before she and I had that conversation, her company went through a five-year strategic planning process. Well, the plan didn’t go according to plan. The roiling controversy surrounding Obamacare after Donald Trump’s election and Republicans’ taking both houses of Congress caused a great deal of uncertainty and resulting problems for her company.

 

Other predicted trends happened faster than expected. One problem was lower occupancy in her company’s nursing homes due to shifts to using alternative nursing care services such as home health care and retirement communities. Another problem stemmed from a decrease in the more lucrative Medicare Part A patients. 

 

The assumptions built into her strategic plan, and the resulting projects and financial commitments, failed to pan out. The strategic plan, she felt, cost her some serious money. She invested into more facilities and staff than was needed, so that the company’s supply of medical services outpaced demand from customers. 

 

She had to cut costs to compete. Beth even ended up canceling some planned projects and lost the initial investments. She also had to lay off long-time staff to maintain the company’s financial viability. 

 

Not a pretty picture; no wonder she wasn’t optimistic about strategic planning. Wouldn’t you be if you had her experience?

 

The Problems With Beth’s Strategic Planning

 

After taking a look at her previous strategic planning process, it became clear that it suffered from a number of dangerous judgment errors that result from the biological structure of our brain, what scholars term cognitive biases. While we as human beings suffer from over 100 such mental blindspots, not all are relevant for business and leadership. You’ll find the 30 cognitive biases that cause the biggest problems in these areas, and discover where and how these judgment errors are plaguing your organization, in the Assessment on Dangerous Judgment Errors in the Workplace.

 

We know from studies that cognitive biases pose a high threat to strategic planning. Beth’s plan, in particular, suffered from the planning fallacy, our tendency to assume that everything will go according to plan. That dangerous judgment error leads to our failure to build in enough resources and flexibility for various contingencies. Indeed, Beth’s company didn’t account nearly enough potential for problems with Obamacare and other issues.

 

Her plan also exhibited the mental blind spot known as the optimism bias. It’s like it sounds: the optimism bias causes us to perceive a more bright and hopeful vision of the future than is the case in reality. We then underestimate threats and risks, such as the risk of one political party taking both the presidency and both houses of Congress. Beth’s plan mistakenly anticipated that due to the overwhelming commitment among Democrats to Obamacare, there would be no effective challenge to it from Republicans.

 

Finally, the plan proved highly vulnerable to sunken costs. This cognitive bias makes us reluctant to terminate projects after we already sunk some money into them. Due to the strategic plan’s structure, Beth’s company continued to throw good money after bad long after many red flags suggested it might be time to sink the projects. As a result, Beth suffered substantially more losses than needed, making the required financial corrections significantly more painful than needed.

 

As I went through each of these problems, Beth found herself both nodding her head and clenching her fists. How she wished she knew about these problems when she worked with the consulting company that helped her leadership team create that plan, she told me. She wouldn’t have fallen for those traps!

 

Gut-Based Strategic Planning

 

Beth’s experience is pretty common, due to the widespread failure to address cognitive biases in business strategic planning and decision making. Instead, business advice encourages leaders to trust their gut when planning and deciding. 

 

“Go with your gut” may be both the most repeated business advice and the most wrong-headed one. Our gut reactions have evolved for the ancestral tribal environment, not the modern business one. Many of the cognitive biases that cause us to make decision disasters in today’s workplace worked perfectly well for our ancestors. 

 

For instance, it was highly beneficial for our ancestors to eat as much sugar as possible, such as when they found an abandoned beehive. Those who ate the most sugar survived and passed on their genes; unfortunately, this instinct today harms us greatly, as the obesity epidemic in the US makes clear. We have inherited the sugar-eating instinct and other unhealthy behaviors in our decision making, and tend to rely on these gut reactions without realizing that they don’t serve us well in modernity. 

 

Tragically, even business strategic assessments meant to address the weaknesses of human thinking through structures and planning are deeply flawed if they don’t specifically account for cognitive biases. Take the most popular of them, SWOT, where you try to figure out the Strengths, Weaknesses, Opportunities, and Threats facing your business. 

 

SWOT assessments usually fail to account for our mental blind spots. It’s particularly problematic that SWOT is almost always performed in a group setting, and cognitive biases are often exponentially increased in group settings. One particularly large problem is known as groupthink, where groups tend to coalesce around the opinions of a powerful leader.

 

SWOT and similar strategic assessments give a false sense of comfort and security to business leaders who use them. These comforting techniques result in appalling oversights that ruin profitable businesses.

 

By now, you – like Beth – might feel pretty down on strategic planning. She certainly did, when we discussed these typical problems with strategic planning and strategic assessments.

 

Defend Your Future Through Effective Strategic Planning

 

Fortunately, there’s a much more effective way to approach strategic planning and assessment. 

 

Rather than making a simple strategic plan, you focus on assessing potential threats and opportunities and building them into your plan. You emphasize making your plan flexible and resilient, able to handle unanticipated developments that you didn’t consider when you made the original plan. You also work to counteract the typical cognitive biases that cause your plans to go astray. 

 

An easy way to do so involves using a technique I developed called “Defend Your Future.” This technique allows you to get the benefits of strategic planning – confidence, clarity, certainty – without the failures, risks, and problems accompanying typical strategic planning and assessments. 

 

It’s informed by extensive cognitive neuroscience and behavioral economics research on defeating cognitive biases and making the most profitable decisions. I refined it in over two decades of consulting and coaching for leaders at mid-size and large companies and nonprofits. By using this method, you can tap into both my business expertise and my knowledge of groundbreaking scholarship, without straining your budget to hire me. 

 

The benefits from this technique don’t come from a perfect forecast of the future; beyond a couple of years, such forecasting is like relying on a dart-throwing chimpanzee, as I mentioned earlier. They stem instead from knowing you’ve done your best to make yourself and your organization as safe, secure, and stable as you reasonably could with the information and resources you have available. No one could ask for more. 

 

Beth perked up as we talked about the “Defend Your Future” technique. She definitely wanted to protect her organization from threats and position it to seize opportunities in a flexible and resilient manner. As we talked further and I shared the details of this approach, she grew more and more excited, realizing it would have addressed the vast majority of the problems with her old strategic plan. 

 

She still had some skepticism about strategic planning due to her bad experience in the past; as the saying goes, “once bitten, twice shy.” Nonetheless, she had confidence in my ability due to a successful culture shift I oversaw to improve collaboration between doctors and nurses in a hospital her company managed.

 

While I provide guidance to my coaching and consulting clients when I support them in doing this technique, you may not have anyone on hand with the expertise needed to help you through this technique. If you don’t, I recommend you learn about research-based techniques to perceive clearly cognitive biases and to understand the principles behind them. Then, you’ll need to assess the ones most strongly impacting your workplace, and learn methods to defeat these mental blindspots most powerfully impacting your career and business, as well as your relationships, professional and personal alike.

 

Likewise, you will gain from integrating structured decision-making techniques into your toolkit, whether for quick everyday decisions, for moderately important choices that substantially impact your bottom line, and for decisions that are either critically important or highly complex or both. You’ll also need to know how to avoid failure and maximize success in implementing decisions and managing projects and processes. Finally, apart from structured techniques, you’ll find invaluable gaining habits and skills of mind to notice when cognitive biases are about to ruin your day and prevent this outcome.

 

Given that the “Defend Your Future” technique is meant to shape your overarching strategy, you’ll find yourself using these more targeted techniques and mental skills for components of the strategic plan you’ll eventually develop. “Defend Your Future” is a good fit either for a team or an individual. You can use it to develop a strategy for your personal career, your business or other organization, your department in a larger organization, your physical and/or mental health, your civic engagement, your relationships, and other areas of personal and professional growth.

 

10 Steps to Truly Effective Strategic Planning 

 

Step 1: Scope and Strategic Goals

 

Decide on the scope and the strategic goals of the activity that you will evaluate, as well as the timeline, anywhere from 6 months to 5 years. Remember that your forecasting will deteriorate the further out you go as you make longer-term plans, so add extra resources, flexibility, and resilience if you have a longer projected timeline. For the same reason, make your strategic goals less specific and concrete if you have a longer time horizon. 

 

Step 2: Gather

 

Gather the people relevant to the activity that is being evaluated in the room, or, if there are too many to have in a group, representatives of the stakeholders (a good number is six, and not more than ten people to ensure a manageable discussion). Make sure the people in the room have the most expertise in the activity being evaluated, rather than simply gathering the higher-ups. The goal is to give input on various attributes of a vision of the future and then address any potential problems and opportunities uncovered. 

 

At the same time, have some people with the power to make and commit to the decisions that will be reached during the exercise. Consider recruiting an independent facilitator who is not part of the team to help guide the exercise.

 

If you are making the decision by yourself as a business professional (for example, a solopreneur deciding on your marketing strategy for the next year), write out a list of various stakeholders who are relevant to the project. This may reflect competing goals within your own project if you are a sole decision-maker.

 

Step 3: Explain

 

Explain the exercise to everyone by describing all the steps, so that all participants are on the same page about the process.

 

Step 4: Your Anticipated Future

 

Consider what the future would look like if everything goes as you intuitively anticipate and how many resources it would require. 

 

As I discussed this step with Beth, she recognized that her leadership team and the other consulting firm seven years ago only went up to this step, skipping the rest of the critical steps.

 

Step 5: Potential Internal Problems

 

Now, consider what the future would look like if there were unanticipated problems internal to the business activity that seriously undermined the expected vision of the future. Write out what kind of possible problems might arise, including low-probability ones. Also lay out the kind and amount of resources (money, time, social capital) that might be needed to address these problems in alternative visions of the future.

 

Evaluate the likelihood of each problem in percentage terms and multiply the likelihood by the number of resources needed to address the problem. Try to convert the resources into money if possible in order to have a single unit of measurement.

 

Next, consider what you can do to address the internal problems in advance, and write out how much you anticipate these steps might cost. Finally, add up all the extra resources that may be needed due to the various possible internal problems and all the steps you committed to taking to address them in advance. 

 

If you are planning this out as a group, first have everyone suggest problems ANONYMOUSLY, then discuss each scenario as a group, come up with resource amounts ANONYMOUSLY, and finally average out the differences between amounts. 

 

Beth asked me about the anonymity; I explained that the purpose stemmed both from the goals of addressing groupthink, and also of permitting people to share potentially unpopular and even politically dangerous points of view. She recalled how she heard some rumors in her company’s grapevine that some people weren’t thrilled about the optimism of the strategic plan; she dismissed the rumors because no one brought up these points publicly. With this in mind, she conceded the usefulness of anonymity.

 

Step 6: Potential External Problems

 

Complete the previous step for potential problems external to the business activity.

 

Beth really wished that the strategic plan seven years ago had this section, as it would have greatly increased the likelihood of a more realistic assessment. 

 

Step 7: Potential Opportunities, Internal and External

 

Go on to consider what your anticipated plan would look like if unexpected opportunities opened up; most will be external, but consider internal ones as well. Next, consider the likelihood of each scenario and the number of resources you would need to take advantage of this opportunity. Try to convert the resources into money if possible, for the benefit of a single unit of measurement.

 

Consider what steps you can take in advance to take advantage of unexpected opportunities and write out how much you anticipate these steps might cost. In the end, add up all the extra resources that may be needed due to unexpected opportunities and all the steps you committed to budgeting to take advantage of these potential opportunities. 

 

If you are planning this out as a group, first have everyone suggest opportunities ANONYMOUSLY, discuss each scenario as a group, come up with resource amounts ANONYMOUSLY, then average out the differences.

 

Beth really wished her team had considered this in the original plan. Due to some of the same pressures faced by her company, the nation’s second-largest nursing home chain went bankrupt in 2018, resulting in sales of many facilities and other valuable assets, along with great opportunities to hire top-notch staff. If Beth’s company had reserved some resources instead of investing them into trying to build new facilities of its own – a number of which had to be canceled – they could have gotten valuable properties and human resources at fire-sale prices. 

 

Step 8: Check for Cognitive Biases

 

Check for potential cognitive biases that are relevant to you personally or to the organization as a whole and adjust the resources and plans to address such errors. I recommend you check for all of the 30 most dangerous mental blindspots in professional settings found in the Assessment on Dangerous Judgment Errors in the Workplace. If you don’t have the opportunity to do so, make sure to at least check for loss aversion, status quo bias, confirmation bias, attentional bias, overconfidence, optimism bias, pessimism bias, and halo and horns effects

 

If you are planning this out as a team, discuss the cognitive biases, then come up with resource amount adjustments ANONYMOUSLY, then average out the differences.

 

Step 9: Account for Unknown Unknowns (Black Swans)

 

To account for unknown unknowns – also called black swans – add 40 percent to the resources you anticipate. Also, consider ways to make your plans more flexible and secure than you intuitively feel is needed.

 

Initially surprised by the 40 percent figure, Beth realized the value of this step when we discussed the collapse of the 2008 housing bubble and the Great Recession, and prior to that, the dotcom boom and bust. Given the political turbulence surrounding healthcare, reserving 40 percent made sense to her.

 

Step 10: Communicate and Take Next Steps

 

Communicate effectively to organizational stakeholders about the additional resources needed. Then, take the next steps that were decided on during this exercise to address unanticipated problems and take advantage of opportunities by improving your plans and reserving resources.

 

Conclusion

 

By the end of our discussion, Beth determined that she and her leadership team needed to do this exercise for the next three years; she didn’t want to do a longer plan, due to the political instability associated with healthcare at the time we had the discussion in the spring of 2019. She was very happy with the outcome after it was completed during a weekend strategic retreat in early summer 2019. She felt confident it would be critical to addressing the threats and seizing the opportunities for her company, along with boosting resilience and flexibility.

 

You should use the “Defend Your Future” technique for any medium or long-term planning you do for your organization or your career. To help you remember the technique, you can use this decision aid.

 

Key Takeaway

 

Effective strategic planning involves: 1) Identifying potential threats and opportunities; 2) Planning how to deal with them; 3) Reserving sufficient resources to address threats and opportunities; 4) Making your plans resilient and flexible. —> Click to Tweet

 

Questions to Consider (please share your thoughts in the comments section)

 

  • What problems did you experience in the past with strategic planning that the “Defend Your Future” technique might address? How might it address them?
  • In what areas might the “Defend Your Future” technique most benefit your organization? What about your career?
  • What next steps can you take to bring it most effectively  to your team and integrate it into your organization’s processes? What about into your personal career plans?

Image Credit: Max Pixel/Nikon D7100

 

 

Bio: Dr. Gleb Tsipursky empowers you to avoid business disasters as CEO of the boutique consulting, coaching, and training firm Disaster Avoidance Experts. A best-selling author, he wrote Never Go With Your Gut, The Blindspots Between Us, and The Truth Seeker’s Handbook. Tsipursky’s cutting-edge thought leadership was featured in over 400 articles and 350 interviews in Fast Company, CBS News, Time, Scientific American, Psychology Today, Inc. Magazine, and elsewhere. His expertise stems from his background of over 20 years of consulting, coaching, speaking, and training experience across North America, Europe, and Australia. It also comes from his strong research and teaching background in behavioral economics and cognitive neuroscience with over 15 years in academia, including 7 years as a professor at the Ohio State University, with dozens of peer-reviewed academic publications. Contact him at Gleb[at]DisasterAvoidanceExperts[dot]com, follow him on Twitter @gleb_tsipursky, Instagram @dr_gleb_tsipursky, Facebook, YouTube, and LinkedIn. Most importantly, help yourself avoid disasters and maximize success, and get a free copy of the Assessment on Dangerous Judgment Errors in the Workplace, by signing up for his free Wise Decision Maker Guide.

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