Strategic Planning: How to Develop Your Long-Range Vision

If your company is grappling with profitability, your focus - rightly - should be on bringing revenue in the door. "You should think about the long-term future as much as you can afford to - literally," says Arzhang Kamarei, President of Tradeworx, a middle market company specializing in financial technology. "If you don't have a profitable business now, you need to confront that immediately instead of focusing on long-term goals." But once you have some financial breathing room, it's critical to develop longer-range strategic planning to guide your company. A three-year vision is a good starting place, but it can also be useful to project even further into the future.

Of course, there's plenty we can't even begin to imagine about the future. (Ten years ago, no one would have predicted that a website just being launched in a Harvard dorm room would become a near-mandatory corporate marketing channel.) But you can adhere to the following principles to gain insights into the future and develop your strategic planning. Here are five tips that Kamarei uses to keep his business moving forward.

Ask the right questions. Planning too far out is often futile because circumstances change so dramatically. But there are certain areas where long-range strategic planning makes sense. "You can focus on new distribution networks for well-established products," he says. Other good areas to consider include planned or likely regulatory changes, the results of very long-term R&D projects coming to fruition, plus "competitive threats (patents will expire, the competition will surmount your advantages), and new businesses that will be possible once you have meaningful expanded resources, capital, breadth, depth, etc."

Don't look for trends. Look for problems. For most people, it's hard to be a "trend spotter" beyond the obvious - the rise of globalization or the like. Instead, says Kamarei, "You can think about broader trends as questions that can lead to new products, services or strategies. When you read the news, you should be looking for problems to solve. That is how you find opportunity. If you are looking at what competitors are launching or doing successfully, you're reading yesterday's news about a problem they saw yesterday and have solved today. If you want to read about your competitors in a way to find opportunity, you need to be reading about problems with their products or business that you can exploit."

Set aside a "risk budget." Of course, you should prioritize business lines that are currently profitable - but not to the exclusion of future opportunities. "I think that many big companies fail not because they focused on their existing profitable business - that's usually a good bet - but because they had no risk budget for speculative businesses and didn't want to take any steps that would cannibalize themselves," says Kamarei. "That's fine - their competitors will do it for them." It's innovate or die.

Question your assumptions. When we talk about the present or the past, we usually have data to guide us. But since the future is speculative, it's easy to delude ourselves. Kamarei points to three common faulty assumptions. "There's a winner-take-all assumption (e.g., we will have XYZ and no one else will)," he says. "There's the belief that competition will not be fierce and will be incapable of overtaking any current proprietary or technology edges. And there's targeting a pure revenue or profit figure (e.g., 'Our goal is 20 percent margins') instead of forming a real goal." The first two assumptions are wishful thinking, and the latter one is usually invented out of whole cloth. You have to recognize your limitations when predicting the future.

Master your domain. What does it take to become a real visionary? Kamarei believes it's domain expertise. "Too many people are 'visionaries' in search of a field of expertise or an opportunity," he says. "They need to look closer to home to the areas that they actually understand. Or, to put it slightly differently, you don't really have a vision until you've done a lot of domain research to validate your vision. Otherwise, you just have a headline and a gut instinct."

Developing a long-range vision is essential to your company's success - but the future likes to interfere with our best-laid plans. That's why you need to understand your field thoroughly in order to fill gaps and seize new opportunities. How is your company preparing for the future?

Dorie Clark is a marketing strategist who teaches at Duke University's Fuqua School of Business. Learn more about her new book Reinventing You: Define Your Brand, Imagine Your Future (Harvard Business Review Press). Follow her on Twitter and circle her on Google+.