For years I’ve sat down with my team and done our annual business planning, scoping out what we want to do, what we did, and where we’re going from here. We’ve done it a bunch of different ways, but ultimately it’s something we have to do, so we do it.
A few years ago, I started wondering how this all came to be. Who created this concept, and how did it become so mainstream? Well, this year, I went ahead and found out.
These Have Been Around for a While
Now, you might think that annual business plans have been around since there have been relatively modern businesses, but it turns out that’s not the case. These things first popped up in the mining industry in 1800s France, when companies were more concerned about supply than demand.
But the version we think of today came about in the 1950s. Things changed a bunch at the end of World War II, and businesses had to adapt. Now they felt the need to shift the way they budgeted to plot out how their sales strategies should work, how to handle financing, and management in general. The idea was to project out not just one metric, but most if not all of them. The process I use every year basically started right there.
The World Gets Bigger
If there’s one constant, it’s that everything keeps changing, and annual business planning is no exception. Technology is no different, and by the end of the 1990s, it was starting to factor into the equation. Now you could do better reporting with faster computers, which meant you could crunch even more data. It was pretty fantastic.
It was good timing, too, because globalization became substantially more important. Businesses weren’t just thinking locally anymore. They had to consider opening up their markets worldwide. Now you’ve got whole different areas, regions, products—coming together in one system. How do you manage it all?
With a bigger and more complex annual business plan, obviously. But thanks to the improved (and today, even more so) computing power at their hands, they could do a lot of it automatically. Excel became everyone’s best friend, and then even more specialized options came onto the scene, too. Eventually, we got to where we are now.
Continuous Refinement
Obviously, what we do today isn’t exactly what they did back then. Over the years, we’ve added new functionality and methodologies as the market demands. That’s ultimately the point and why so many different options have come up. Take McKinsey’s Business System Framework, for example. It came about in 1980 as an idea and came to fruition in 1985. It’s just one of the many different methodologies companies used back then and even today to do their annual business planning.
As we look into the future, you can see a bunch of ways this can change. The introduction of AI into our world, for example. Using large language models to deal with and calculate all of our data will make the annual planning process go a lot smoother.
Why Your Business Should Do an Annual Business Plan
The bigger the company gets, the more important annual business planning becomes. It’s a critical way to stave off financial problems and can help you get a handle on what’s to come. Really, it’s the best way to see where you are, and where you’re going and determine what you want to accomplish. Checking things off a list is always fun, right?
What kind of annual business plan should you do? Well there are many options, but one of my favorites involves AI. In fact, it’s just one component of this system I’ve been working on. Interested? Take my free AI Ecosystems Assessment. It won’t cost you anything other than a few minutes of your time, and in the end you’ll find out how ready your company is for AI. And that’s important because your next annual business plan may be a little bit different.
(It’ll use AI. That’s what I’m hinting at here.)
