15. Short-term thinking?
Three Months Isn't Enough - Myopic Short-Term Planning
I recently had a conversation about planning horizons that left me scratching my head. There was one particular comment: "There's no point in forecasting outside of the next three months."
This sentiment was undoubtedly born from frustration with uncertain market conditions, fair enough. However, hasn't uncertainty been the norm for a long time now?
I suspect it also represents a fundamental misunderstanding of what good S&OP/IBP planning is actually for.
This year:
In my experience, any organisation serious about sustainable success needs to be planning across at least the 'current financial year plus one financial year' horizon. In my shorthand, that's 'CFY+1FY'. This isn't academic theory; it's necessity.
The current financial year planning (aka: Budget) is obvious enough. You've made commitments to stakeholders, set budgets, and established targets. Achieving these isn't just about this year's performance – it's about delivering your promise.
But it's the "+1FY" part that separates companies that thrive from those that merely survive.
Next Year: +1FY
Consider the practical implications. Think of planning like navigating a boat at night. A three-month horizon is like using a spotlight – you can see the immediate rocks and hazards, but you're essentially navigating from rock to rock, ie: potential crisis to potential crisis. A CFY+1FY approach is like having a GPS and radar – you chart a course to your desired destination that sees and avoids all obstacles before they become urgent.
Consider the implications of just using a spotlight. Major capital investments, talent development, market positioning, supplier relationships, product development cycles – none of these operate on three-month timelines. If you're only looking three months ahead, you're perpetually reacting rather than acting.
Planning-to-Fail
There's a truth many organisations learn too late: if you're failing to plan for the future, you are planning to fail in the future. This isn't motivational poster wisdom – it's business reality.
Companies that limit themselves to short planning horizons will find themselves caught flat-footed by predictable challenges. The seasonal demand spike they've experienced for five consecutive years becomes a surprise, again. The contract renewal they knew was coming becomes a scramble, again. The competitor's product launch that was telegraphed months in advance catches them unprepared, again.
The False Comfort of Certainty
The appeal of short-term planning lies in its apparent certainty. Three months feels manageable, predictable, controllable. But this is an illusion. Market conditions can shift dramatically in three months, just ask those who follow USA tariffs. Without longer-term context, short-term adjustments often solve immediate problems while creating bigger future ones.
The CFY+1FY approach acknowledges uncertainty rather than hiding from it. You're not predicting the future with crystal-ball accuracy – you're building adaptive capacity and maintaining strategic direction even when tactical adjustments are needed. If your competitor is doing that and you are not, ask yourself: who is going to be the winner?
Making It Work
This doesn't mean drowning in elaborate planning documents or endless scenario modelling. The key is developing a view across your extended horizon while keeping your planning processes agile enough to adjust as conditions change.
Question: What decisions are you making today that will impact performance 18 months from now? What opportunities and risks are building outside your three-month window?
The companies that consistently outperform aren't necessarily the ones with the most sophisticated planning systems – they're the ones that understand planning is about creating future options, not just managing immediate pressures.
In uncertain times, the GPS and radar don't become less important – they become essential.
Share your thoughts about your planning horizon. I'm keen to know who tries to see the future, and who reacts to it!