In times of great uncertainty, the standard thinking says to focus on being nimble and reactive. The standard thinking is wrong. The truth is that, when the future is most uncertain, CEOs and retail leaders need good long-term strategic planning.
During the Great Recession, Starbucks experienced declining profits and closed over 600 stores. In Q1 2008, their profit was down 28% year-over-year. At the start of that same year, Howard Schultz returned as CEO. His priority? To start “reigniting the emotional attachment with customers.”
Schulz believed that, even in challenging times, there would be an interest in everyday luxuries like lattes. He recentred the company around the customer and moved away from the pursuit of new directions. One of the resulting innovations is Starbucks’s mobile app, which has 31 million active users and holds more than $1.6B in deposits, making it bigger than 90% of US banks. The app is home to Starbucks Rewards, one of the most popular loyalty programs of all time.
The current operating environment has given companies a number of excuses to forego long-term planning. Most players are sitting on the sidelines, waiting to see how factors like AI or the uncertain economic forecast are going to affect their business.
When we chat with our clients, their biggest objections to creating long-term strategies relate to the macroeconomic environment and technology. And no one is denying that another black swan could appear. But while the economic climate can evolve or rapidly shift, having a well-drafted long-term strategy can prevent such challenges from determining your company’s outcome.
When you skip out on long-term strategic planning, you fail to be bold — and that’s bad for business.
Strategic planning is regularly marred by two common failures: neglecting to plan and creating a vision of the future that is too narrow. Continuing business as usual for the next five years is not planning — that’s executing on today’s plan.
A lot can change for your long-term horizons. To effectively strategize, you need to ensure that today’s operations are relevant in the long run. As a team that has worked with leading Canadian retailers to renew and future-proof their strategies, here are our top three ways to make sure you’re doing strategic planning right:
- Know your customer
Most organizations engage in knowing their customer by analyzing data (including trends) about consumer behavior or asking their customer service and sales departments about consumers’ greatest pain points. However, these approaches only solve today’s consumer challenges. They fail to recognize the factors critical for understanding your customers in the near and distant future.
Reactive planning and short-term strategy solve an immediate problem, but waste energy that could be devoted to creating more meaningful value. The most common mistake is responding to a short-term trend instead of the long-term underlying shift that created it. The metaverse is a great example of this. Brands spent millions of dollars on activities in Decentraland, a platform that has 38 active users. Directionally, these brands were on the right track. All signals indicated that individuals had an increased willingness to connect with each other through independent and brand-owned channels. However, companies that rushed into the metaverse failed to understand why and how someone might want to engage with them. They focused on the effect, not the cause. Our 2023 Nearly Now report identified a desire for community, particularly through non-virtual activities like live music. Disney’s long-term strategy identifies the same desire, with plans to invest $60B in theme parks and cruises.
Go out and talk to your customers. When you ask them about their lives and day-to-day anxieties as opposed to what colour they like their packaging, you’ll understand their underlying values and the kinds of solutions that create irreplaceable value. Good long-term planning forces you to envision the shifts that will affect your business and your customers. By envisioning the future, you can position yourself to benefit from new opportunities instead of simply reacting to change.
- Have a vision
Some companies have hazy or opaque vision statements. You can recognize these opaque visions: they aren’t aspirational, differentiated or reflective of a desire to meet people’s needs. When your vision is poor, your strategies to achieve that vision are likely to resemble the same tactics that every other business in your industry is attempting.
In times of great uncertainty, a clear vision acts as a north star for the business, as well as a motivating beacon for its employees. Patagonia has been clear about their vision: they’re “in business to save our home planet.” While grandiose, it is communicated and enacted through the products they make, how they make them and the impact they have on their employees and the planet. In every line of business Patagonia has developed, folded and divested, they make decisions in clear alignment with their vision. They are rewarded for this through their success in the market and through low employee turnover (4%!!).
Create a vision that understands and seeks to meet the fundamental and unrealized needs of your customers. Only with a clear, compelling vision will you be able to develop a relevant long-term strategy.
- Align teams with a cohesive story
Long-term strategies are often created behind closed doors, without the engagement or participation of different parts of the business. It isn’t possible to get all 30,000 of your employees to co-write a strategy, but when you don’t engage your managers and teams in key moments, you stunt participation and hurt your organizational alignment. Employees might ask “Why are we doing this?” or “Why have we chosen this direction?”
You can impart a sense of collective ownership around your developing long-term strategy through internal and external storytelling. Stories give your strategy meaning and drive purpose for all teams, not just the team that sets the strategy. Having a shared understanding of the long-term strategy is how companies guarantee everyone is in alignment and invested.
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In these turbulent times, a long-term strategy is not a luxury but a necessity. The best time to embark on this journey was five years ago — but the second-best time is today. It is through long-term thinking that companies perform better, grow their market share and create new markets. Would you rather be paralyzed by uncertainty or emboldened by vision and opportunity? Would you rather react to your competitors or create a strategy and purpose to drive you?
Kareen Proudian and Jared Gordon are two of the founders of Faculty of Change. They and their team work with established retailers to uncover new sources of growth.
