I recently spoke with a Product Portfolio Leader from last year. She explained that she had spent 3 months creating a plan, presented it to her leadership and only after the plan had received approval two of the major assumptions made during the planning process turned out to be wrong. She laughed while she told me this story, but honestly it didn’t sound that funny to me.
Slow planning in a fast reality is a problem that is addressed through the practice of continuous planning. In manufacturing environments supply chains can collapse overnight. Prices of materials can go up and down within weeks and customer’s needs can change within days or weeks. Thus planning in manufacturing has to be fast – in fact even faster than production. The risk in planning is typically higher in manufacturing than what most planning folks are willing to admit.
Annual Planning is a Liar
Annual planning was created for a more predictable world. First, gather as much data as possible to create the best possible plan for the next 12 months. Lock in budgets for the next year and then put the plan into action and hope that everything goes according to plan. Simple. Orderly. Reassuring.
Annual planning was designed to work in a more predictable environment, so when that environment’s turned upside down by huge disruption, then 12 months of planning locked into a 12-week operating environment is nothing but pure guess work, done with the aid of more sophisticated spreadsheets than before. And yes, this could be even more dangerous than simple guess work, as the illusion of precision is a highly seductive thing.
The biggest problem for most companies is that the data required to plan are already in the company but not in a form that can be easily shared. This data is in fact scattered throughout the various functions of the company, often in the form of information that each department is using to run their part of the business. Thus Engineering has its own set of data, Finance has its own set of data and Sales has its own. During the quarterly reviews, each department tries to reconcile their information to create a single view of reality. Unfortunately, this view is always late and based upon a map that was created three months prior.
Step 4: Continue to Plan
It is important to remember that annual planning cycles and review cycles are not the same as continuous planning. As mentioned previously, keeping the plans that have been developed for annual planning “alive” between review cycles is crucial to making better decisions during changes in conditions.
In practical terms, that means:
- Real-time visibility into portfolio performance, not just snapshots taken at month-end
- Shared assumptions across functions, so engineering, operations, and finance are reacting to the same version of reality
- Structured ways to re-prioritize when resources get constrained, rather than defaulting to whoever shouts loudest in the room
- A clear record of why decisions were made, not just what was decided
Prioritization reasoning: It is typical for organizations to have meetings where they make decisions around product prioritization. Often the reasoning behind those decisions is lost shortly after the meeting. In six months time it is not uncommon to be unable to understand why a particular product received funding as opposed to another. Continuous planning helps to keep the plan “alive” and creates accountability as well as provides a means to maintain institutional knowledge.
Cross-functional alignment: the part everyone quietly skips
Unless there is cross-functional alignment within a company, even the best tools and best plans fail. Why? The individuals creating a plan for a project have different goals for the project. They’re working off different assumptions, seeing things from different perspectives. They’re speaking different languages.
Of course, there are natural conflicts that exist between the goals of the different functions. Sales has every intention to deliver the best possible solution to every customer’s problem. He wants to promise the customers the moon and the stars. However, there are natural conflicts that exist with the intent of the Engineering function. The Engineering function wants to build a stable portfolio of products. He wants to bring the products to the market on time, within budget, and with minimal risk. His intent is to deliver value to the customers by building good products that meet their needs in a sustainable manner. Operations also has the same intent as Engineering. The intent of the Operations function is to support the production process. He wants to support the production process by ensuring that there is stability in the production processes and plans. If things change too much then the whole production system can be destabilized causing chaos on the production floor. Therefore, the Finance function wants to make sure that there is stability in production as well.
Does your planning process surface the conflicts that naturally exist between the goals of the Sales, Engineering, and Finance functions early in the planning process while there is still time to make changes to the plan and execute it to meet commitments, as opposed to ‘baking’ these conflicts into commitments that are difficult to reverse later in the planning process?
These organizations implement a continuous planning platform for manufacturing, like Gocious’s continuous planning platform for manufacturing. On this platform all functions can work with the same data for all products under consideration by the company. So for example, sales, marketing and product development can work with the same data as commercial, engineering and financial functions for example. There is no longer any need for different functions to run their own spreadsheets, only to meet up in quarterly review meetings to compare numbers and discuss the differences.
A Quick Look At What Changes
| Area | Periodic planning | Continuous planning |
| Decision speed | Weeks to revisit assumptions | Days or less |
| Cross-functional alignment | Synced at formal reviews | Ongoing, shared visibility |
| Prioritization | Set annually, rarely revisited | Adjusted as conditions shift |
| Risk exposure | High, gaps discovered late | Lower, issues surface earlier |
Here is a table outlining some of the main directional change that you would look to implement in your planning process and see it work in your business planning and portfolio management practice. This is NOT a simple task to change the behavior of the Finance, Marketing and Sales function to continuous planning. This is NOT a simple task to change the behavior of your Engineering function to share their assumptions with the Finance, Marketing and Sales function. This is a big change in behavior and will take a long time to change and to work but – there is directional change here and that’s what we are all looking for as part.
Speed as a competitive factor, and why the gap is worth obsessing over
Competing on product innovation requires that all manufacturers running a portfolio of products operate with a 6 month or less lag between a market signal arriving and the portfolio responding to it. Every lag in time results in a competitor moving to that space. In the interim, customer relationships will slowly erode until they go into a sharp decline. A good product will get defunded because the data supporting its existence arrives too late. This is a particularly bad form of waste. You can clearly see where you went wrong after the fact but that does not help.
The point of continuous planning is to remove as much distance as possible between what is really going on in a company and what the planning and decisions are based upon. As mentioned earlier, in manufacturing processes the distance between a wrong decision and the consequences of that decision can be very severe. For this reason, it is worth obsessing over the amount of distance between what is really going on in your company and what your planning and decisions are based upon.
