Polyrhythmic Planning: Reinventing Strategic Planning for Today's Business Tempo
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In my recent conversations with chief strategy officers (CSOs), a recurring theme has emerged: the traditional annual strategic planning cycle is increasingly out of sync with today’s rapidly evolving business environment.
Since the beginning of capitalism, corporations have adhered to a yearly planning rhythm, but the current landscape is different. Opportunities and challenges arise and dissipate faster than an annual planning calendar can deal with.
The idea that we need more agile strategic approaches, that we need to turn strategic planning into an ongoing habit rather than an annual ritual, is not new. Strategists have been talking about this for years, using scenario planning, agile teams, shorter planning cycles, continuous feedback loops, and cross-functional collaboration.
But I believe we are approaching a breaking point.
The increasing rate of inflection points
Rita McGrath, one of our favorite strategic thought leaders, emphasizes in her book Seeing Around Corners that inflection points – critical moments when significant change occurs – don’t care about your annual schedule. Until now, we could anticipate such inflection points might happen even if we couldn’t accurately predict when they WOULD happen. But now, the time between when we see that an inflection point might appear and when it actually appears is narrowing to less than a year – less than our annual planning cycle allows.
This creates a more fundamental problem. We have been doing corporate strategic planning for 422 years, since the first corporation in the world was created. And we have always done it annually. But as the gap between inflection point detection and realization shrinks to less than 365 days, the entire idea of annual planning is put into question.
The ancient origins of strategic planning ... and their ties to modern business
So, I got curious. Where does the annual planning cycle come from? Why do we follow it still? How can we change it? What I found is that the idea of the annual planning cycle is really ancient, and although it’s obsolete, we won’t be able to change it. So, instead of looking at speeding up the cycle, we should consider introducing a “polyrhythmic” planning model. Let me explain...
First, the annual cycle comes from nature. In ancient times, societies structured their activities around the agricultural calendar because, whether you were a hunter, gatherer or farmer, the rhythms of when you worked and when you planned were driven by the fact that it takes 365 days for the earth to orbit around the sun. For example, farmers would do all their planting and harvesting in the spring, summer and fall, and then spend the winter doing their planning and maintenance tasks.
The manors, counties, kingdoms, and empires that taxed these farmers scheduled their annual tax assessments after the harvest season when farmers had liquid assets available. When charging for services – in this case government order and protection – it always makes sense to charge people at the moment they experience the value as their propensity to pay is at a maximum.
So, naturally, even as businesses evolved away from farming to manufacturing and services, which don’t depend on the earth orbiting the sun, their practices continued to mirror these taxation cycles:
Financial Reporting: Governments demanded annual financial reporting to align with their taxation cycle, so businesses had to align their financial reporting rhythm.
Budgeting and Forecasting: And what better time to create a forecast and plan than the end of the year when you have to collect your financials anyway?
Organizational Plans: Which makes it the ideal time to do performance reviews, decide on promotions, set salaries, etc.
Operational Planning: And while you are at it, you might as well set your goals, KPIs, and operational plans.
Employees’ Personal Planning: Your employees’ entire lives become pegged to this annual planning cycle. They want to know at the beginning of the year what their salary will be so they can make long-term decisions like whether to buy or rent a home.
You see, the entire system is deeply intertwined. Untangling the annual calendar of 365 days and four quarters would take decades. It’s been attempted before. Henry Ford, for example, proposed a nine-day week so businesses could create shifts of six days on and three days off. But a 40.85-week year was too complex.
And yet, the pace at which the changes in your environment occur rarely correlates with earth’s location to the sun. They happen faster.
In January 2024, you couldn't have predicted that Middle East conflicts or trade conflicts between the US and China and the US and Mexico would have disrupted global supply chains. You couldn’t have predicted that a faulty software update from cybersecurity firm CrowdStrike would lead to a massive IT outage, affecting approximately 8.5 million Microsoft Windows systems worldwide.
You probably wouldn’t have predicted the 2024 hurricane season would be the most active on record, with 25 named storms and 12 hurricanes causing droughts, fires, and flooding, significantly impacting supply chains and necessitating rapid strategic adjustments by businesses.
And we haven’t even mentioned the sky-rocketing acceleration in technology adoption with Generative AI. GenAI reached a level of organizational adoption four times faster than smartphones required. A PwC survey revealed that 80% of technology, media, and telecommunications leaders believed the election outcome could significantly alter their business operations. Yet a month ago, no one could predict what the outcome would be.
The breaking point
We are approaching this critical moment. The planning cycle our environments are demanding of us is moving from five years to three years toward less than a year. Yet our planning cycle is locked into a yearly cycle not because we depend on the seasons anymore but because we tied our taxes, financial reporting, budgeting, performance management, operations, organizational plans, and employees to it. That rhythm is being disrupted.
It’s like a band in which the guitarist, bass player, and singer are all operating in sync, but the drummer starts accelerating. When the drummer's pace exceeds what the other members are able to keep up with, it creates a mismatch in tempo that will lead to a cacophony.
A polyrhythmic solution
How does a company avoid a destructive cacophony? You are not going to be able to slow down the pace of change. You are not going to be able to get everyone to abandon the annual planning cycle. Can a sub-annual planning cycle exist at the same time as an annual one? Actually, it is not unheard of.
Jazz music features what’s known as polyrhythm, where two or more contrasting rhythms played simultaneously. You might have one layer of four beats per measure, and one layer of three beats per measure, and they come together periodically, every 12 measures in this case. We could create new rhythms inside our planning cycle without having to wait for the pace of the external environment to change.
Four innovative approaches
I am seeing some interesting experiments going on in companies attempting just this. Here are four examples:
One of the members of the Outthinker Networks is changing how they do resource allocation. They require each business unit to give up 20% of their annual budget for restorative purposes. That business unit now must operate with 80% of their budget. The 20% they give up is contributed to a companywide fund that will be allotted across business units as opportunities and threats emerge throughout the year. This allows them to transfer funding between business units more fluently.
The Chinese company Haier has a model whereby they’ve experimented with giving employees the option of tying a portion of their salary to the performance of their team. So instead of earning 100% of their salary, they could select to earn 75% as a base and 25% as a performance-based bonus. With the higher-risk option, the 25% would have the potential to be more than the original 25% or less, depending on how their team performs. Haier has found that, because this model is optional, some employees choose to do it and, because the business is performing well, they make extra money. So, they want to put more money at risk and other employees start catching on.
The strategic approach that John Hagel calls “zoom out zoom in” is also popular among strategy officers. The idea is that you “zoom out” several years and get clear on what your goals are, and then “zoom in” to the very short term – say three or six months – and set a strategy to get you where you would need to be to achieve those long-term goals. There’s a great quote by Jeff Bezos that speaks to this: "You need to be stubborn on your vision, but ... very flexible on the details."
Rita McGrath offers another interesting solution. When you have multiple projects that have short planning cycles, it's hard to predict what the results will be. So, you take several of those projects and wrap them up into one overarching theme or portfolio. You basically diversify away the risk and make it predictable. If one project is moving too slow, another one is moving faster than expected, and it is more likely to produce a predictable rhythm.
Implementing polyrhythmic planning
These four approaches can help us create polyrhythm:
Keep 20% of your budget set aside for unexpected opportunities and threats
Convince your employees to tie more of their compensation to performance
Have five-year plans (zoom out) and six-month plans (zoom in)
Plan not on one project, but on a portfolio of projects
We can drum internally at the right beat to stay ahead of the pace of change in our markets, and yet each winter synchronize with our investors, tax collectors, and employees.