The CEO of an innovative specialty plastic producer was struggling to get some long-term investments approved by her board. The CEO had used the annual review of their 5-year strategic plan but found it ineffective. While the business was running well and board satisfied with performance, those longer-term opportunities seemed out of reach. Unsatisfied with the outcome, the CEO sought help from Growth Arc Advisors to help her.
As a first step, Growth Arc evaluated the current 5-year plan, and reviewed the progress made in the growth portfolio.
We found several growth initiatives, all of which began to show revenue in year 4 or 5 of the financial modeling, albeit small. Upon discussion with the team, we learned that these represented large opportunities overall, but that it would take time to develop them.
As we reviewed the growth portfolio and the progress made, we saw slow progress. It seemed that activities against each of these initiatives were often tabled when current-year performance required more focus. Each initiative had its own champion on the Leadership team, yet those opportunities didn’t seem to get any closer over time.
Traditional approaches to strategic planning, such as the Annual Five Year plan with its detailed financial modeling, provides valuable insights for short to medium-term goals and often focus on developing targets for public commitments. These can be excellent methods, and we have run numerous such exercises with teams. However, they can also hinder the progress of game-changing opportunities that require early investment.
Detailed models and a commitment-focused mindset often bias analyses toward well-known business sectors, downplaying uncertain opportunities. Modeling unfamiliar scenarios in detail is challenging, and business teams hesitate to commit with their bonuses “on the line”. As a result, growth opportunities appear as minor contributors in later years, while near-term validation activities are sacrificed for short-term priorities, setting up a repeating cycle.
Growth-oriented companies often juggle too many initiatives without making progress, while execution-focused firms have too few, having already culled them. Both approaches under-represent growth potential. These often get reflected in investor valuations, leaving both board and the C-suite frustrated.
Recognizing the limitations of their analysis and subsequent effects on execution, the CEO and leadership team asked for alternatives. Growth Arc recommended a planning method called "backcasting," which we facilitated. This alternative approach involved projecting a future business at 10-year maturity and working backward to identify the hypotheses underpinning these businesses and identifying early initiatives required to confirm and develop them.
Through the backcasting exercise, the leadership team assessed several large breakthrough opportunities that could radically transform the business and accelerate growth. They recognized that previous work to confirm these opportunities had been consistently delayed due to a focus on near-term goals.
It became evident that the current initiative portfolio was inadequate to confirming all the necessary hypotheses for these opportunities. The team moved to prune the portfolio to only those critical projects with largest impact. The initiatives were then incorporated into the operating plan, this time with emphasized priority, alongside existing business initiatives from the Annual Five Year plan.
The CEO and leadership team successfully identified and prioritized breakthrough opportunities that would transform and accelerate growth in their specialty plastic production business. This alternative approach allowed them to overcome the limitations of traditional 5-year planning exercises and enabled them to strategically allocate resources to confirm and develop future opportunities. The insights gained from the backcasting exercise provided the CEO and leadership team with a clear roadmap for the future, allowing them to make informed decisions and take necessary actions.
Armed with these insights, the CEO crafted a strategy narrative for the board that depicted the possible long-term future for the business. They identified the near-term priorities that were crucial to realizing this future and could not be pushed off. The board finally seeing a clear path to growth began authorizing requested investments.