Whoa, whoa, whoa.

There have been way too many fun and downright cool postings here lately. Let me do what I do best and douse all this excitement with my buckets of pragmatism.

Let’s talk…….Long-Term Strategic Planning!

Oh, yeah. I know I’ve got you at the edge of your seat now.

I recognize that most people don’t get jazzed up thinking about long-term strategic planning; it ranks somewhere between breaking down a P&L and studying the periodic table. For me, though, this is where the fun is at. Then again, I started planning for my retirement when I was about 10 years old so draw your conclusions.

Strategic planners often use the term “long fuse, big bang” since it covers something that has a long time frame but big consequences. As important as it is, too few companies have the bandwidth or training to go through a formal process to come up with an actionable business plan. Of those that do, many focus on some variation of a SWOT analysis. This is where they list out Strengths, Weaknesses, Opportunities, and Threats. It’s not a bad analysis, but I think it misses the mark when it comes to thinking strategically.

The methodology I like best and what our consulting group here will use is one that was first started by Royal Dutch Shell many years ago. It’s simply called Scenario Planning. Instead of generating lists under four categories, you create a vision of what the world could look like, combine some of these visions to create a scenario, and then deal with the implications of the scenarios.

Why do I think it’s better? For starters, the acronym of choice is STEEP, not SWOT. See, you get one more letter. And it actually forms a word (what the heck is a “SWOT” anyway? C’mon, get a real acronym….like STEEP. It conjures up feelings of being on the edge of something mighty big).

STEEP stands for Social, Technological, Economic, Environmental, and Political and it refers to the focus areas for the discussions around creating these scenarios.

Here’s how it works: you start by thinking about what the world will look like three, four, or five years from now (decide for yourself what makes sense). Start broad and don’t limit yourself to business issues or real estate. Think nationally or even globally before you work your way down to your specific market area. Brainstorm about issues affecting each of the five words from STEEP and come up with broad questions that have some bang to them.

For example, when I consider Social I might ask myself: What is the impact of longer life expectancies and, therefore, an aging population? For Technological: What tools might revolutionize how we go about our daily lives? Economic: Will we be in a recession? Environmental: How prepared are we for a flu pandemic? Political: What changes in government policy are likely to be enacted?

This initial process purposely starts broad to set the stage and get the creative juices flowing. You soon narrow and specify your questions so that they’re tailored to your area and your business. As broad as they are, each of the questions I listed still has implications to real estate practitioners. But to create actionable scenarios, each would have to be massaged to make them more specific. The key is to come up with questions that if you had the answers to you would have a distinct advantage over your competition by being able to plan more effectively.

For my next posting, I’m going to modify some of these questions and pose others that are relevant to residential real estate. Then I’ll explain what one could do with these questions to create scenarios of what’s to come. Finally, I’ll explain how to put in place the crucial steps: analyzing where one’s business is today against those scenarios and how one can better prepare for the world which has been imagined.

This is way better than studying the periodic table.

For those not patient enough to wait for the next post, follow this link for a general outline of Scenario Planning (prepare a pot of coffee before trying to dive into this version).