What did you expect to happen? Why you should prepare your business to respond to unforeseen events

01 Jun 2021


Blog

Did you anticipate a global pandemic? And when I say you, I mean the senior executives in the business world.

The answer is – highly unlikely, but it does raise an interesting question in terms of planning for the future.

If we take ourselves back to the fourth quarter of 2019 (or even earlier) and imagine the discussions taking place in the boardrooms or leadership meetings in businesses around the world, I wonder what senior executives were talking about? I bet they were discussing how the year end would finish – will we achieve our budget? Will we exceed it? If we have a deficit, how can we close it in a short space of time?

For businesses running their financial year based on the calendar year they would also be looking ahead at the budget for the following year with an emphasis on how to grow the top and bottom line and squeeze costs.

As part of this budgeting exercise, there would most likely have been a target, set by the global corporate office, with a heavy financial orientation and most likely calculated to deliver an expected return to the shareholders and board. These targets would eventually cascade down to local market business units who would find themselves faced with an unrealistic challenge predicated on tenuous assumptions. Sound familiar?

After weeks or maybe months of negotiations between senior executives at a local, regional and global level, a final number would be agreed. This would become the ‘commitment’ for the following year.

Would there be any discussion on risks and opportunities? Maybe, however these discussions would most likely have centred around the challenging targets set, with senior managers trying to work out how to deliver more with less! By default, the centre of attention would have been on the short-term horizon and the plans and activities required to deliver the desired results.

Would anyone be looking at the big picture? Would anyone be looking at alternative future conditions or scenarios? Would they be hypothesising on potential political, environmental, social and technological events that could affect their business? Did they consider these factors when they developed their strategy and, most importantly, did they take the responsibility for bringing them to life on a regular basis to continually refresh the relevance and importance of these key assumptions? In my experience, the answer to these questions would be that there was no, or very little, discussion around these topics.

Well-organised businesses would have had contingency plans in place for circumstances such as delays in new product launches or an unexpected change in the number of customer orders. They may have had alternative suppliers to access at short notice for raw materials, packaging and components, but had they prepared and practiced for a scenario as significantly disruptive as Covid-19?

Did your business react or were you prepared and able to respond? The former is the default position for most businesses where the ‘all hands on deck’ approach is the observed action. It’s also usually the most costly and only those with sufficient reserves of resources will survive – we have also seen examples where unfortunately many have suffered.

The latter position, preparing to respond, is the least utilised yet the most effective. Have you considered how an ongoing approach to reviewing and managing the micro/macro, internal/external assumptions would benefit your business without a massive amount of effort? If you have taken time to identify these assumptions in your strategic planning process and then subsequently prepared various upside/downside scenarios, then doesn’t it make sense to keep them alive on a regular basis to ensure that you have a robust plan A but also back up plans B, C, D and so on.

Preparing to respond to unforeseen scenarios should be a mantel taken up by the business’ executive team, whose role Is to be proactive in leading the business in the right direction. If you’re utilising an Integrated Business Planning process to connect the strategic plans to the executional plans on a monthly basis, but recognise that the uncertainties and volatilities caused by a complex, rapidly-changing market can risk derailing your expected results, shouldn’t you be asking the question – are we ready to respond?

If you’d like to learn more about how Integrated Business Planning can help your business prepare for unforeseen events so you can gain competitive advantage, why not book a space on our Melbourne IBP Executive Education courses in August? Find out more here.


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