2021 Closing Thought - Does the artificial annual business cycle make sense anymore
Yuval Noah Harris in his book Sapiens declares that Companies are a collective figment of our imagination designed to overcome the limitation of building community sizes of 150 people or more. To monitor this legal fiction called Company, the regulators have taken it a step further and enforced a 12 month reporting cycle. Meanwhile the investor community has started measuring the financial performance into a quarterly reporting cycle and in some cases monthly using Annual Recurring Revenues (12 months view from any particular month) to define the success and valuation of the business.
For listed companies, the annual planning cycle at the end of the year is a major event. I vividly remember the intensity of these sessions in IBM Japan when some of these hackathorn FCP (Fall Cycle Planning) sessions would stretch across a few days without a break or even a visit home. Even in private companies, annual planning is a major event where the new year is looked at with great optimism and many grandiose plans are made for the new year.
Meanwhile business operating methodologies have evolved and we at Moving Walls have adopted OKRs (Objectives & Key Results) model. Besides the hard financial KPIs, OKR has allowed the leaders to go after ambitious but transparent and measurable objectives that are relevant to the long term sustainability of the business. We have blended it with AGILE methodology to improve communication, tracking and feedback across the business. When the business can run on a daily standup, weekly tracking, monthly KPIs and Quarterly OKR (which includes long term sustainability metrics), it makes you wonder the role of an annual planning cycle. Covid-19 has also added another dimension of business unpredictability that makes planning beyond a quarter a challenge.
As 2021 comes to a close and we are at the end of our 2022 planning cycle, I can accept that a business activity every 12 months has a role. But I believe that the current planning methodologies are outdated and need a major revamp to align with the business world of the new normal. I also believe that we will find a better model before the FCP of 2022.
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Investment Management
2 年Very well written Srikanth. To add further, we would have not seen the likes of Amazon and Tesla, if they had fallen victim to chasing short term profitability targets at the expense of building a stable business.
CMO at AirAsia MOVE | ex-CARSOME | Branding | Martech I AI
2 年Love this
OOH | DOOH | Chief Growth Officer @ ideacafe.agency | Marketing Communications
2 年Right legendary investor John Doerr propagated and mastered the OKR methodology in his early days as an investor and it does fit in well with the current context as well.. All the best Srikanth and more success to moving walls as well??