So what planning horizon should I use for my balanced scorecard? 1 year, 2 years, 6, 10 perhaps?
First recognise that different tools in the overall Balanced Scorecard approach to strategic management are for different planning horizons. Tangible future for 10 years, strategy map for 2-5 years, and scorecards measures for 12-24 months, whilst targets and actions are only 6- 12 months (typically).
It also depends entirely on the industry and their situation. I have worked with clients where the time horizon for strategy and their strategy map is 3 to 5 to 10 years. I have worked with at least two clients whose planning had to be limited to 12 months. I have had others whose planning horizons were three generations (c 60 years). The scorecard on the other hand is usually refreshed every 12-24 months at various levels.
In part it depends on the capital intensity of the industry, so aircraft design, investment in oil and gas exploration and long term planning for a society or community is typically operating around 20 years.
Sure, stuff changes. More importantly assumptions prove wrong or risks and concerns come to fruition. That is why we help clients invest in EPIs: External Predictive indicators or listen to this webcast about External Predictive Indicators
By the way I think it is a a nonsense to suggest that “today’s pace of change is faster than before”. Take any decade over the past 100 years and look at the changes, especially the 1910’s (first world war) the 20, global recession bigger than the last one, the 30’s technology advancement, the 40’s again a global war, I could continue. it is only because we are in it that it seems to change so much. Its only a matter of perspective.
Neither is it about guessing revenues. It is about thinking through the structure of an industry, the demands of consumers and how the business models will change. Then looking for persistent patterns of behaviour that will underpin positions (and ultimately lead to revenue).
