Leicester City, Brexit, President Trump…. Who Knew!! Virtually no one with a major media platform predicted these outcomes. And even if one got them right, the reactions by financial markets and business community in general still went against expectations.
If 2016 was rough for pundits and pollsters, perhaps more surprising is the astonishment over the fact that forecasters got things wrong. One could say it was just another bad day in the office for those trying to predict the future. That’s not surprising, we’re only human.
However, we can’t escape the future or assessing what lies ahead. Running a business depends on defining goals and objectives over the short, medium and long term, and assembling the capabilities and resources needed to operate and succeed within an expected environment.
While uncertainty is a given, should we give up efforts to plan for the future? Certainly not. The mistake lies not within making assumptions that will turn out to be wrong, but rather in believing that such assumptions will be mostly correct.
So, the question is: how good are we at changing our mind when the facts change? And is our business set up to learn and adapt quickly enough? Here are a few ideas on how to approach strategic planning in an environment characterized by uncertainty.
Planning Matters – More than Ever
Business cycles have become shorter, feedback loops faster. Technology and social media play their part here. Long term success must be grounded in a strong vision, supported by an ability and willingness to adapt along the way. Preparing for contingencies is critical. It starts with accepting that uncertainty is guaranteed and acting accordingly. Just as one might carry an umbrella if weather forecasts predict rain, businesses use visible trends to make assumptions about the future. Extrapolation and a natural tendency to be optimistic do play a part in how such plans may look. And when the landscape shifts, those with advance warning will be ready to cope and thrive. So far so good. Everyone does it. Big deal.
But being prepared to a change and being willing to change are different things. Understanding when Plan B must be deployed is the real trick. One must process information and make the required adjustments in a timely manner.
This is not easy. Whether it is one’s low propensity to admit being wrong, a tendency to blame people rather than solving problems, or systems and processes not receptive to change or unable to accommodate it, there are plenty of obstacles along the way.
Two behaviours are especially helpful here:
- Keep your eye on the bigger picture: Look to what is happening in the real world. Was it a coincidence that — with oil prices at $147/barrel in July 2008 — utility companies were going door to door offering customers to lock fixed gas prices for the next two years? By December, oil dropped to $30/barrel. Anyone failing to look beyond the July 2008 numbers was then stuck with higher bills for another year and a half.
- Schedule more time out of the office: If management at publishing company Pearson took time to visit university bookstores, or talk to students, they might have noticed that inventory was piling up and be less surprised by a steep drop in sales last year. Executives spend a lot of time in their office, overburdened with work and in meetings, making decisions based on what they see from there. This is to the detriment of other important activities, such as getting out and talking to customers, suppliers, and employees about what is going on. Make a habit to get out and meet with these people in their own environment, to learn what is going on. The more diverse the perspectives, the better – and be receptive to new information even if it’s not what you want to hear.
These two habits will increase awareness about changing winds. But a business must also align processes and systems to act upon this information.
Create Flexibility in the Decision Process
If planning in the face of uncertainty is essential, a plan for the future must include both clear-cut goals and room for change.
- Invest in “sensors.” Information is everywhere and ever abundant, but nobody has the full picture. One should not rely solely on information pre-packaged by third parties, which will no doubt cater to their own particular goals and worldview. Invest in primary research, and in systems and people that can collect and process the right information to create actionable insight. For example, create a way to collect customer feedback and process it so that you can understand what the actual customer experience is (as opposed to the assumed one).
- Evolve your planning process. As you collect information, develop a process to incorporate it into your decision-making processes. Once you make your annual plans (or even long term strategy), set regular review and assessment milestones to incorporate new data. Ensure there is an understood protocol for evaluating new information through the decision making process of the organisation. Develop a consistent review system, set KPIs and regularly measure them against benchmarks to identify issues and adapt your plan before it’s too late.
- Bring people, and evaluation systems, along. Humans are naturally tempted to ignore warning signs when hoping for a more positive outcome. And there may be comfort in “sticking to the plan” when everything else around is changing. But if perseverance is a virtue, stubbornness is not. A company culture that is flexible and does not consider a given plan as fixed in stone is valuable in the face of uncertainty. At the same time, if evaluation and reward systems are set to punish those willing to change tack, corporate inertia is the inevitable outcome. While it is important to foster a culture that is open to change, aligning KPIs and rewards must go hand-in-hand with it.
So, while it is critical to plan for the future, it is just as important to collect information along the way. Ensure that data comes from a wide range of sources, and that you interact with the real world to validate it early on. At an organisational level, make sure your business has both the systems to analyse information and decision processes and protocols that allow for changing tack when needed. Do invest in systems and capabilities to generate relevant insight into how your business is performing and how the environment around it is changing. And encourage a behaviour and culture that focuses on solving problems rather than apportioning blame, so that insight can be turned into positive action and long term success.
Nest321 can assist you in developing a robust yet flexible approach to strategic planning, to provide the critical bridge between your present reality and your future goals.