Gartner Research

Pivot Forward: Guidelines for 2021 Planning

Published: 07 October 2020

Summary

2021 is a critical year for technology general managers and leaders. Expectations for growth and uncertainty complicate the 2021 planning process. New buyer values and economic considerations place a premium on plans with the greatest consistency between internal and external factors.

Overview

Key Challenges
  • 2020 was a year in which many companies wrote off their plans, goals and targets as they sought to survive the crisis. Stakeholders will not accept this approach for 2021.

  • COVID-19 and the related economic downturn has disrupted high-tech firms’ 2020 plans for continued growth and innovation. High-tech leaders need to plan for the coming year and provide guidance to their organizations and stakeholders; however, COVID-19 continues to create systemic uncertainty for the future.

  • Past performance is an unreliable predictor of future potential in a disruptive situation. Companies, buyers and competitors have different expectations for the recovery: No bounce back — only bounce forward.

Recommendations

Technology general managers seeking to define your vision and strategy for 2021:

  • Create your initial financial year (FY) 2021 plan by evaluating the fit between external realities and internal plans. Document assumptions and data for evaluation.

  • Apply the Pivot Forward framework phases to understand the context and challenges facing your core customers and markets.

  • Strengthen your plans by using the FY21 planning assessment to identify mismatches between internal and external forces. Make adjustments to your plans to improve that fit.

Introduction

Leaders set low expectations for 2020 that they will not be able to extend into 2021. IT spending is expected to contract through the remainder of 2020 and into 2021. Planning for 2021 is complicated given the uncertainty regarding when and where spending and the overall economy will recover. In addition, past performance provides a limited guide for future planning. This requires making plans based on presumptions of the future in an uncertain environment. Bottom line, leaders cannot rely on past planning processes and assumptions to be effective in the postcrisis world.

The stakes for 2021 planning are high as firms want to participate in the return to growth while conserving cash and costs until that growth returns. Leaders should be realistic in their plans based on the forces shaping economic and investment decisions. This is not a “goldilocks moment.” No one will get the planjust right, but there are ways to get a higher-quality plan.

Developing your initial 2021 plans and then testing them against internal and external factors identifies weak spots and creates a stronger plan. Technology general managers and other technology leaders use the Pivot Forward framework to lead in times of crisis. This framework, in addition to specific planning questions, provides an assessment tool to improve your 2021 goals and plans.

Analysis

Pivot Forward planning rests on the need for technology and service providers to bounce forward during a crisis. COVID-19 and the related economic challenges represent the current crisis. The need to bounce forward is simple, the crisis and its resulting economic and business impact are changing customer needs, values, expectations and conventional wisdom. The result is unprecedented uncertainty. J.P. Morgan highlighted that 86 of the S&P 500 companies have suspended earnings guidance.

The crisis disrupts FY21 planning processes as prior proven practices no longer reliably produce predictable results. Technology general managers and leaders must plan, but it needs to be a plan based on new assumptions and a renewed fit between the external outside-in forces and the internal inside-out capabilities of the enterprise. The relationship between external and internal creates a framework for assessing and improving the quality of FY21 plans.

The COVID-19 health and economic impact have an uneven effect on companies, industries and regions. The combination makes knowing the state of your key customers a critical planning input. The Pivot Forward framework describes this context in terms of four different phases of customer and market recovery. The four phases, shown in Figure 1, provide a way to identify where your customers stand today and their expected needs, values and actions. See for additional details on the model.

Figure 1. The Phases of the Pivot Forward Framework

Applying this framework to 2021 planning involves the following steps:

Figure 2. Pivot Forward Phases and Customer Context

The Pivot Forward framework provides a starting point to understanding customer and market context. It provides an input to your plans, investments and actions. Completing the initial draft of the plan creates the basis for assessing the plan’s quality and feasibility.

Planning involves setting goals, targets and assigning resources. There are no right or wrong numbers, but there are better reasons for those numbers. The company is expert in its product and current customer knowledge. This assessment approach concentrates on exploring the qualitative aspects of the plan and its assumptions in the form of three areas: customer willingness and ability to pay, comparative advantage, and go-to-market focus. Figure 3 highlights the interaction of these factors.

Evaluating the connections between internal and external factors shown in Figure 3 provides an agile approach to plan assessment. External factors set the context and the outer boundaries for the plan. Many of these boundaries will change in 2021 as different industries, customers and needs reflect demands in a recovering economy. External factors are critical in planning as it is unlikely your plan can go beyond the limits of external factors.

Internal factors are the things you can influence. They reflect both current capabilities, products and operations as well as the investments needed to reach new levels. These factors have changed significantly for 2021. These changes include new digital sales and service channels to reach and engage customers. They extend into a greater emphasis on creating business outcomes and meeting customer cost and cash expectations. An effective plan recognizes the need to enhance the capacity of these factors to meet revenue targets and goals.

Figure 3. An Effective Plan Balances Internal and External Forces

Three areas for planning evasion emerge from the intersection of internal and external factors. The stronger the intersection, the higher quality the plan. Evaluating those intersections through a series of questions explores the assumptions and interactions between internal and external factors across three main dimensions:

  • Customer and Market Willingness and Ability to Pay: What is the capacity of customers to recognize, value, purchase and gain value from your solutions?

  • Comparative Advantage: Where should you win in the market in terms of your total offer compared to the customer’s view of their needs and alternatives? A total offer includes the solution, terms, service, experience and more.

  • Go-to-Market Focus and Effectiveness: How well will your capabilities be able to reach and engage customers in the market with messages and experiences that matter?

Taken together, these dimensions address why customers need products or services, why they need your products and services, and how well you engage their needs in ways that lead to your products. Evaluate and evolve your 2021 plan assumptions and conclusions.

Annual planning requires a dynamic process to transform market understanding into financial models and revenue goals. While the financial modeling aspects of 2021 planning remain largely the same, the impact of market assumptions has changed. Recognizing the need for agility and speed in a changing environment supports a simple iterative process highlighted in Figure 4.

Figure 4. Evaluating and Evolving Future Plans, an Approach

Start the assessment process early in plan formulation, particularly when assumptions remain implicit or are believed to be well-understood. Take the following actions for each major iteration of the plan:

  • Take a pass through the questions in each of these areas to explicitly state planning assumptions. Apply the questions in order, starting with willingness to pay and ending with go-to-market considerations.

  • Look at the assumptions and evaluate their fit with market realities along the major themes. Pay particular attention to assumptions that either rely on prior assumptions — they may no longer be valid in 2021 —or assumptions that seem too good to be true.

  • Leverage available market information, including Gartner Market Share reports, Market Opportunity Maps and Peer-Indexed Performance data, in evaluating assumptions.

  • Identify weak assumptions and beliefs. For example, given the duration of the sales process, will your go-to-market approaches generate sufficient leads to meet revenue targets? Revise the plan, identify new initiatives or refocus actions as required.

Keep the assessment process simple. Focus on raising the visibility of planning assumptions, particularly the implicit assumptions, which are likely to be disrupted in the change to a recovery. Go through this process with each iteration and version of the plan. Concentrate on the three factors that describe the fit between internal and external factors.

Willingness and ability to pay evaluates the alignment between your revenue plans and the customer/industry’s economic outlook. The COVID-19 and related economic crisis changed this factor for 2021. Customer uncertainty over their 2021 revenue limits their willingness to make investments while raising the bar in terms of financial and business impact. Assessing key customers against the Pivot Forward framework provides a gauge for this factor.

Respond to the following questions to evaluate your plans from this dimension. Be careful to consider the implicit connections between external and internal factors.

  • Are there sufficient active customers in the market to meet your revenue goals? Are these customers interested in seeking a solution?

  • Are your 2021 plans overly reliant on a particular industry? How favorable are industry and market economics in support of customer investments? Is there sufficient revenue visibility and stability necessary for customers to make purchasing decisions or is the industry outlook uncertain? Will the customers in that industry support your revenue model? How well are active customers aligned with your focused industries?

  • Is the value offered easy for customers to notice? Do they have the internal capacity to realize value from those solutions? Does the value of your offer fit with the economic realities shaping customer needs? If the industry is oriented around cash preservation and cost reduction, are those central to your product value?

  • How attractive is the customer experience in relationship to the cost of your product or service? Is the experience worth it or are customers expecting more from solutions meeting their needs? Is the value of your experience aligned with the value to buyers or those who benefit most?

Supplement your qualitative assessment with quantitative data provided by Gartner’s IT spending forecasts and Market Opportunity Maps. Evaluate the results of your questions with an eye to understanding the customer’s and industry’s interest and capacity to solve needs supported by your products and services.

  • Consider your revenue plans to be at-risk to the extent that customers do not have the resources, attention or capacity to engage with you. Strengthen your plans with internal, rebalancing actions that improve customers’ capacity to engage and transact. This can include adjusting marketing messages, commercial terms, product complexity, sales complexity and more.

  • Your revenue plans may be too conservative if your internal capabilities are focused on lower-value/opportunity industries and customers. The low-hanging fruit may be low hanging, but it is not the only or the most valuable revenue available. Evaluate additional potential revenue from repositioning products toward higher-value needs, rapid time to value or concentrating on higher growth industries.

Willingness and ability to pay considers the overall market potential. Are there enough customers with the right needs? Will those customers have the ability and interest in investing to solve those needs? This assesses market capacity. The next criteria looks at your position relative to others in that market.

Comparative advantage is a familiar concept. It exists where customers consider your solutions, offers and experiences more desirable than market alternatives. Comparative factors changed dramatically in 2020 as customers made significant changes to their IT environment. Cloud adoption and workplace transformation (work from home) have transformed IT operations and service models. These developments expand the range of alternative solutions and competitors at a point solution and service level. Pay particular attention to alternatives offered by hyperscalers and other platforms.

The strength of your 2021 plans rests in your ability to be better than your competitors in ways that matter to your customers. Evaluate that comparison using the following assessment questions:

  • How effective is your value articulated in customer terms? Are you playing a “me too” marketing game? Is it easy for buyers and customers to see differences in ways that matter to them? Is the path to business benefits for your solutions easier to understand and realize than others?

  • Are your market share and potential share gains sufficient to realize your revenue goals? How effective is your plan in leveraging your market share? What are the expected countermoves from competitors? Where and how is their value and your value vulnerable to comparative pressures?

  • How well does your customer experience compare with direct industry competitors and leading technology companies? What is the contribution of experience to your value proposition and potential? See for additional details.

  • How will planned product or solution innovations, enhancements, new products or new commercial terms tip the balance in your favor? Will these investments be sufficient to establish a clear and noticeable difference? Or are you playing catch up to market leaders?

  • How strong is your company’s value connected to the trends and values of your customers’ industries and geographies? How strong is your brand permission and standing in your most important markets, compared with market leaders or alternatives?

Look beyond your internal market and competitive assessments when considering these questions. Concentrate on the relative differences as you may feel strong in a particular area but be comparatively weak to others. Leverage Gartner market data and analysis, particularly Peer-Indexed Performance (see ), Vendor Capability Assessments and Magic Quadrant analysis. Solid plans require establishing a desirable position in the minds of customers and markets that lead to greater deal consideration, conversion and upsell/cross-sell revenue.

  • Explore the potential disadvantages that threaten revenue plans when you are at a comparative disadvantage. Disadvantages matter most when there is a weak fit between buyer and customer perception of their needs and issues when compared to your value statements and solution references. Next look at comparative fits with other products or solutions. Finally compare your value proposition against the “do nothing” alternative — which is minimum viable comparison. Improve opportunities by picking your spots in the market where there is a match between product strengths and customers values.

  • Exploit potential advantages in situations where you have superior fit, value and sales capabilities that could attract more business. Exercise caution as these factors may be more than customers or the market can absorb, leaving the door open for disruption. In these cases, consider doubling down on target markets or competitors that are particularly vulnerable on a comparative basis.

Comparative advantage reflects the superiority of your solutions, values or terms compared to the customer needs and potential set of solutions. The quality of revenue plans rests in understanding not just your strengths but, more importantly, your relative strengths and challenges when compared to customer needs and competing alternatives. Comparative advantage gives the organization a viable market position, but it does not guarantee revenue. Organizations need to take a hard look at their go-to-market focus and sales effectiveness.

Go-to-market focus and effectiveness examine the sales dynamics, coverage and performance of marketing and the sales processes/funnel. The structural changes created by the health crisis require paying additional attention to this area. Limitations on direct customer contact and the need for digital engagement change go-to-market dynamics.

Consider the following questions to evaluate your effectiveness in this area:

  • How effective is your sales experience and support at reaching and engaging customers and prospects effectively? Is the sales process logical to customers? Can they accelerate or skip steps based on their need? What is the investment customers and buyers have to make in you to become effective and valued customers?

  • What specific changes have you made to account for increased remote interaction with customers, buyers and prospects? How are you increasing engagement with these groups with limited face-to-face interactions? Which digital engagement/interaction channels are you investing in?

  • Are your solutions sufficiently presented in an industry or market context, or are they sold as general solutions? Has the crisis narrowed the consideration set while emphasizing fit with the customer’s industry? Are your solutions really industry-based or are they horizontally or back-office-functionally oriented with an industry veneer?

  • What is the average time spent in the sales qualification and close process — the funnel? What do customers have to know or accept before they are well-qualified and have a high potential to close? Is your go-to-market approach created to generate enough leads at the front of the pipeline to achieve your revenue goals? On average, how many interactions are required for a new customer or new buyer to reach that level of understanding about your products?

In addition to the more sales-oriented questions, consider the overall effectiveness and sensitivity of your 2021 plans to further economic, commercial and other shocks:

  • What is the tolerance of your business to variances from your 2021 revenue plan? What happens if you miss the business forecast by more than 10%? Are your plans ready for these types of changes? If there is little room for error, then how are you managing the planning and execution process?

  • How prepared are you to handle dramatic changes in the near future? How are you monitoring the economy, markets, customers and technology factors? How does that monitoring influence ongoing plans and adjustments?

  • What must become true for the company to achieve its ambition and plans? List out the external things that have to happen for you to achieve your 2021 goals. Are these reasonable to assume? Do you have resources aligned to facilitate them? How could these things be overwhelmed by competitors, customers or other events?

Go to market and sales effectiveness are the throttle on revenue growth and plan achievement. Augment your understanding of the responses to these questions with Gartner data, where available, about consideration rates, conversion rates and buyer values, which can be found in Peer Insights and Critical Capabilities analyses. Previously effective go-to-market and sales approaches can be disrupted by market, customer or competitor actions. Consult Gartner support for the most appropriate phase of the Pivot Forward framework for additional considerations and actions.

Your 2021 plans indicate go-to-market and sales weakness when they presume above-market consideration and conversion rates. This happens in one or more of the following situations: We believe superior sales collateral and marketing programs will overcome prior consideration rates. We have to generate significantly more front of the pipeline leads to meet revenue goals. We have to extensively educate our customers about their needs and our solution before they become a viable prospect. In all of these situations, the go-to-market approach does not fit with the product or customer need. Either the go to market is too weak, the need poorly understood or the product too complex to support the revenue goals.

It is easy for a plan to become a mathematical and budgeting exercise. Too often, plans emphasize the budgeting part of the equation — what you can spend — rather than the revenue side — what you expect to earn. The resulting disconnects cannot turn a plan into a work for hope or fiction. Effective plans reflect an understanding of both the external and internal forces and market realities in critical areas.

  • Understanding how well your solutions fit with the customers’ ability and capacity to consume them is critical. It is also the first and best area where improvements have their greatest positive impact. That is why the assessment starts with customers.

  • Competition complicates the customer’s view and appreciation of your solutions. The goal is to be the best solution option for the customer’s situation. Effective plans know “where to pick their spots” and how to create spots where they have sustainable advantage. This turns a competitive assessment from building a list of strengths and weaknesses into a strategic plan to create and leverage opportunity.

  • Companies can still fail to achieve their plans when they have great customer willingness to pay and strong sources of comparative advantage. In these cases, the company itself is the problem. Go to market and sales effectiveness represent the linchpin for your plan. It is also the aspect of the plan where you have the most direct control or influence. Evaluate and recognize disconnects in this area as they are the simplest to correct and pay immediate benefit.

Technology leaders need effective plans for 2021. Those plans have the greatest consistency between internal and external factors. We all face a need to bounce forward into the future defined by new expectations and realities. Assessing and testing your plans, using Pivot Forward and these questions, support that goal.

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Evidence

Analysts:

Mark McDonald

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