If
your business or industry is predictable, you need not continue reading. If,
however, there is uncertainty about the future of your markets or industry,
then your company should examine the way it plans.
Making assumptions gives us a false sense of security and puts
blinders on us.
What is the old line about the word
“assume” making an “ass out of you and me?” Not to be profane, but traditional
strategic planning totally botched the economic downturn/recovery of the last
five years. Traditional strategic planning is based on assumptions. The
planning group makes certain assumptions about the future – about variables
such as economic, political, social, technological, regulatory, environmental,
etc. Making assumptions is just another way of saying we are attempting to
predict the future.
Really? I would suggest that there are situations
where economic, social, political, technological, regulatory, and environmental
factors will drive fundamental change in every business and industry of every
person reading this e-Letter. It’s really only a question of degree, pace, and
timing.
In Scenario
Planning Part 4 – Benefiting from Disruptions, we discussed how various
organizations (e.g. Blockbuster, Kodak, Encyclopedia Britannica) could have
avoided significant market pain by utilizing scenario planning. Without being
overly critical, these organizations were complacent – and they made
assumptions about the future that proved to be very wrong. Each was overtaken
by forces that were not within their traditional industry competitive analysis.
Have the courage to consider the tough questions.
How will your
business be impacted by the following?
·
Technology - How much will technology
change your industry? Will your business or industry be affected by any of the
following
o
Mobile ordering; Mobile product/ price
comparisons
o
Mobile payments
o
“Showrooming” in brick and mortar stores
and buying online (e.g. Best Buy and
Amazon)
o
Contextual offers/specials, loyalty
programs, other specific knowledge about customers
o
Social commerce
o
Apps for everything
o
Efficient visibility and management of
supply chains (from end user order entry – directly impacting each step of the
supply chain)
·
Social/Environmental
o
Power moving to the consumer (away from
institutions)
o
Buyers have equal or greater knowledge
than sellers
o
Changes in culture, attitudes
§ Will
today’s 20-something millennials abandon the desire for home ownership?
§ What
long-term impact will the “green” movement have on markets, products
·
Demographics - Is your customer base
affected by demographics?
·
Aging population in certain markets
o
What does the negative birth-rate and
aging population mean for European economies like Greece, Spain, Italy, etc.
o
Baby boomers retiring, selling businesses,
eldercare, etc.
·
Economic
·
Will the new housing construction market
stay at the bottom for another 10 years?
·
Is the U.S. facing a period of
structural high unemployment?
·
Long periods of “stagflation” or
inflation
·
Will increasing labor rates make China
less competitive? How will outsourcing look in 5-10 years?
·
Regulatory – The list is endless…
·
Healthcare?
·
FDA?
·
Trade?
·
Tax reform (Elimination of subsidies, elimination
of deductions (e.g., mortgage interest), business expenses, etc.?)
Some organizations will say scenario planning is too difficult
and elect to take a simpler course.
Most organizations perform traditional strategic planning
or business planning/ budgeting because it is comfortable and addresses a short
timeframe. However, we now know that the world is uncertain and interconnected.
Companies can no longer ignore uncertainty or try to assume it away. As author H.L. Mencken is quoted, “For every
complex problem, there is an answer that is clear, simple, and wrong.”
That is your opportunity. We’ve seen the number of companies doing scenario planning triple since 2008.
Since 2008, the number of our
clients that are doing scenario planning has more than tripled. Companies that are scenario planning are
examining different possibilities of the future and determining their
competitive response. They are modifying the trends and information that they
monitor so that they can develop “early warning” signs. These companies are
building flexibility into their planning and adaptability into their leadership
and culture.
