How do you start your planning sessions? Do you talk about historical sales and profit results? Discuss large current customers? Discuss market segments and share? If you do these things, you’re planning from the past rather than planning for the future. These activities define where you are today, and where you’ve been. But how are these important when planning? Isn’t the objective to develop a plan to sell and be profitable in the future – not the past?
Unfortunately, all too many companies use this approach of planning from the past – and it gets them into trouble. For example, Motorola (see chart here). When in despair the Board hired a new CEO in 2004 – and he immediately focused the company on the future, getting a rash of new products out the door in a hurry. Including the successful Razr. But then, they began planning from the past. How could they sell more Razrs? How could they increase Razr share? These efforts led to widespread price discounting. The company sold more Razrs, but it ended up in terrrible shape because it didn’t launch enough new products for a rapidly evolving market.
So now Motorola is behind in "smart phones" (read article here.) This amazes me, because 3 years ago I had the chance to interview a just-left middle executive from Motorola’s handset division. He showed me a beautiful, elegant smart phone that was functional and ready to roll out. He had championed the design and launching the phone. But, Motorola didn’t launch it, and even let him go, because they "didn’t see the marketplace" for smart phones. "People want phones with text today" is what he told me, "and the top brass at Motorola are focused on selling just that." Planning from the past. It wasn’t hard in 2005 to recognize that RIM was growing fast, and all kinds of people would want email access, internet access and other applications from a single device. A little scenario planning and Motorola would have seen that they were perfectly positioned to lead the market. Instead, they kept selling the old product and ended up late to market with new ones — having only 1 smart phone on the market today.
Ford (see chart here) did the same thing. Pick-ups and SUVs were big sellers and very profitable. So Ford kept trying to sell more. And they marketed hard the "beasty" Mustang in ads showcasing the Ford-family chairman. But was it really hard 3 years ago to predict that $2.50/gallon gas would slow sales of these products? Was it hard to predict that growing petroleum demand in India and China would keep oil prices high? There was no scenario planning about what people wanted in the future – only planning for how to sell more of what they had long been selling. So now we find out (read article here) that when Kirk Kerkorian offered to buy 20 million shares of Ford existing investors tendered 1 billion (50x the allotment). Investors have lost confidence in a company that was unwilling to plan for future needs – and now says it will take another 3 years to "retool" for current market requirements.
Doing more better, faster and cheaper is what we all do every day. But when we plan, we must move beyond those activities. We have to develop scenarios for the future in order to see the impact of staying on the current course. For Motorola and Ford, staying the course has hurt them badly. They succeeded well doing more of the same, become category share leaders, technology leaders, and product leaders in what they were doing well several years ago. But the markets shifted. Mobile phone customers moved to more functionality and higher design requirements – things that were not hard to see in scenario development. Auto customers wanted better gas milage. Planning for the future – using scenarios – would have helped both companies overcome Lock-in to old practices that got them into trouble which may sink their businesses. There’s a lot of risk to planning from the past in today’s highly dynamic global markets.
