Planning business in the face of uncertainty

The year of 2019 has already delivered more than its share of surprises: cyclones, floods, fires, and a block on coal imports. The UK and EU are at an impasse over Brexit, India and Pakistan are on the verge of a war, Donald Trump’s insistence on funding for the “Wall” brought the American government to a standstill for 35 days.  Bottled water is now more expensive than Australian milk, yet New Zealand’s a 2 Milk Company has generated a higher market cap than Crown Casino.

Did you ever wonder why only one in five companies has a written plan? Is it that CEOs/MDs don’t believe they can plan in the face of all this uncertainty? Or do they not know how to plan, or not want to take the time to plan, or not want to be held accountable for executing a plan?

Always Have a Plan

Several CEOs say their success is dependent on being opportunists; they want to be free to react to whatever comes along, without being constrained by a plan. Others have a plan in their head but don’t understand why it’s important to write it down and share it with employees. Other CEOs note that they don’t have the resources of a Rio Tinto, can’t crank out multiple scenarios, with weighted risks, so they don’t bother to plan. The response to each of them is the same: Given that uncertainty is the “new norm”, the more uncertain the future, the more imperative it is to plan.

One of the leader’s responsibilities is to develop a planning process and a plan to achieve the company’s vision. If you don’t have a vision, then any road can get you there. But if you do have a vision, the odds of achieving it are very low without a plan.

We’ve learned to manage the risk of flying in an airplane or sailing a boat, by believing that pilots and captains are competent, that the plane or boat is in good shape, that there are standard operating procedures and plans to get us from here to there. When jet streams shift, and rogue waves appear, we expect the person in charge to adjust the plan and still deliver us to our destination. In short, having a plan, with established goals, not only reduces uncertainty, it actually creates more certainty.

Design the Process

The planning process begins with a review of “who you are, as a company”, i.e., “why you exist” (mission), “where you want to be in three years” (vision), and the terms and conditions by which you do business (values). The development of a plan forces company leaders to consider the immediate risks to the company as well as longer-term risks to achieving the vision. Short-term risks include whether you can make, sell and deliver your product/service to enough customers at a price that enables you to grow the business. The long-term risk is whether you can secure increasing numbers of customers who “value” the expanding array of products and services you offer, manage the competition, and keep growing, over the long-term. Natural disasters and changes in interest rates, exchange rates, regulations, new technologies, and more competitors are external risks that are largely out of your control.  But you can control your internal risks: QA problems in design or production, not hiring people with the right knowledge and skills who match your values; not getting rid of misfits, malcontents and non-performers; weak systems providing inaccurate data; entering the wrong market; or delivering poor customer service. Externalities and internalities need to be considered in the planning process and the internal risks need to be addressed in your plan.

How to Plan?

First, be aware of the changing context within which your company operates. Enlist others to help you scan the environment and identify risks that could be opportunities or threats to your business. Your executive team members, employees, advisors, board of directors, CEO groups, a trusted banker or accountant, even economic thought leaders can be sources of information you would never have access to, on your own.

Second, have the courage to keep asking, “What impact could this _____ (change, event, disaster) have on our business?  Our company?” As Andy Grove, founder and former CEO of Intel, wrote, “Only the paranoid survive!” Third, introduce a yearly planning process that begins with the development of a written plan, then schedule quarterly reviews of progress, with discussions of changes that will impact the achievement of the plan. Fourth, teach your employee show to assess the positive or negative impact of a risk on the company’s ability to achieve its vision.

The planning process needs to include robust conversations about how to capitalise on, as well as mitigate risks, with agreement on what resources are required to achieve the vision, e.g., people with specific knowledge and skills; information about customers and competitors; market entry strategies; money for financing growth.

Stay focused on the risks and uncertainties that have the highest probability of affecting your company. The chance of a meteor from outer space disrupting your business is possible but not probable. But fire/flood, cyber-attacks, new competitors, or a change in customer’s buying patterns are all risks that could have a major impact on the business, so develop a plan that takes those risks into account. And stay focused on your vision. Strong winds may require the captain to tack from left to right and back again, but if you always know where True North is, you can keep the company headed in the direction of its goals and long-term vision.