Thought starter
Venetian blinds: why every plan dips then climbs
Take the last five years of plans, draw each one's revenue line on the same chart, and add what happened. Laid on top of each other they look like venetian blinds. The actual line runs underneath all of them.
Each plan starts a little below the last one's promise. It dips or flattens for a year, then climbs to a number nobody reached. Most businesses have this chart and have never drawn it.
The chart is the most self-observable strategy fact an owner has, and one of the least examined. Examining it makes everyone who signed a plan uncomfortable.
Why it happens
The plan is a negotiation, not a forecast. The Board wants growth and the divisions want budgets. The executive wants an achievable number. The number that emerges is the one everyone in the room can live with.
The number is set from ambition, which is next year's. The trend, which is the last three years', plays no part. Nobody in the negotiation has to show that the curve has ever happened before.
Then the year runs. The business misses the plan and explains the miss. Every miss has an explanation: a lost contract, a weather event, a competitor's price move, a delayed launch.
Each one is true. Each one is also a one-off. So the next plan starts from the same curve, because nobody has touched the underlying model. Nobody puts last year's plan beside last year's actual and asks what the plan got wrong about the business.
The dip is the giveaway. A plan that dips before it climbs knows this year is already lost. It concedes the near term to buy credibility for the climb. It looks prudent, but it is the same optimism, moved one year to the right.
What it costs
The obvious cost is credibility. A Board that has seen five blinds stops believing the sixth. It discounts the executive's real forecasts, when there are any, with the rest.
The less obvious cost: the strategy is built on the plan. Where-to-play choices, investment cases and hiring plans all rest on a revenue curve. The business's own history says that curve will not happen.
Money is committed against the climb. When the climb does not arrive, the business cuts the initiatives it funded halfway through. The business gets the worst of both outcomes.
And the momentum case never gets written. A business that projected its last three years forward would see where the current course leads. The plan exists to avoid exactly that view. The blinds are a way of not looking.
The one-page fix
Put three years of plan-versus-actual on one page. For each year, show the plan's revenue and profit, what happened, and the gap. Then set next year's targets from that record.
If the last three plans were each missed by a similar amount, the starting point is the trend. Any ambition above it must be tied to a named initiative with an owner and a date.
Discuss the page without blame. The purpose is to find what the plan keeps getting wrong about the business.
A customer churn rate assumed lower than it is. A price rise assumed to stick. A sales ramp assumed faster than any the business has achieved. Those are the strategy's real assumptions, and the blinds are where they show.
Explain resets. When the target changes, say why in one sentence that points to the evidence. An explained reset builds credibility. One quietly absorbed into next year's curve spends it.
The five stages
Whether plans are checked against what happened is one of the practices in a Stages of Excellence strategy assessment.
At the bottom, every year's plan shows a dip then a climb and nobody compares. One step up, misses are explained as one-offs and the next plan starts from the same curve.
In the middle, last year's plan is put beside actuals once a year and discussed without blame. Above that, three years of plan-versus-actual sit on the table when the next plan is set. At the top, the plan has been close to what happened for three years running. It is neither missed nor comfortably beaten, because the targets start from where the current course honestly leads.
Most businesses are at the bottom two. The move up is a page and a meeting.
Three tests
Before the next planning round, answer three questions. Does the last three years' plan-versus-actual exist on one page? Was the last plan's miss explained as a one-off or as a fact about the business? And does next year's plan start from the trend or from the ambition? A business that answers no, one-off and ambition is about to add another blind.