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This month's article is.......
8 Best Practices To Plan Ahead In Turbulent Times
The white waters in which businesses operate continue to become choppier and more unpredictable. There are no longer any quiet eddies and pools where management teams can rest, take stock and prepare for the next set of rapids.
Today’s Financial Times (25 October 2010), for example, includes the following stories:
- Trade imbalances between China, the US and Europe are threatening to destabilise many leading currencies;
- France continues to suffer from national strikes protesting against the increase in pensionable age from 60 to 62;
- The US mid-term elections are likely to see a significant number of candidates from the Tea Party – a conservative, anti-government wing of the Republican Party that didn’t exist 18 months ago – voted into office;
- Wikileaks has leaked confidential military files on the Iraq and Afghanistan wars, highlighting that there are no longer any secrets you can expect to keep; and
- Apple is sitting on cash reserves of $50 billion, demonstrating that some businesses continue to prosper.
- The continued fallout of the UK government’s proposals to cut public spending by £80 billion over the next 4 years.
So, in this period of huge uncertainty is it possible to plan ahead? The answer is yes, but not using traditional methods that rely on steady-state assumptions. New tools and approaches are required to help you maintain focus and deliver growth.
Over the past few months I have been helping several leading businesses create short and medium-term plans for growth. From this work I have identified 8 best practices to help you as you surge along the business rapids into 2011 and beyond.
- Clarify your #1 goal. Despite what the proponents of tools such as the Balanced Scorecard would tell us, not all goals and KPIs are created equal. Management inability to allocate resources effectively is commonly driven from a surfeit of goals. In contrast, identifying your priority performance goal is an effective way to direct critical resources and projects to drive the business forward. Over the last 3-5 years Sky TV, for example, has been able to drive focus and innovation from its #1 goal of attracting 10 million subscribers.
- Focus innovation on what won’t change. A few years ago Amazon’s leadership team, for example, identified three themes which they believe will stay relevant to customers over the coming decade: greater choice, lower prices and faster delivery. Given events of the past couple of years, these seem like a good call, don’t they?
- Develop alternative future scenarios. I worked with a couple of healthcare companies to develop new ideas for growth based on a review of four possible scenarios for the UK healthcare industry. The scenarios enabled the teams to develop solutions that they wouldn’t have thought on by focusing on today’s world. What are the big uncertainties in your indusrty, and what different market scenarios can you envisage emerging in the next few years?
- Develop radical alternative strategies for growth. I have recently helped a UK insurance company develop a new strategy for growth. Alongside its core, preferred strategy, we also spent some time and effort generating alternative strategies. One of these alternatives highlighted the potential for the business – even within its preferred strategy – to create a radically lower-cost operating model. What step-changes are possible for your business if you were to thing about its future in a different way?
- Cut non-core costs aggressively. High costs in non-core areas are a nuisance in ‘normal’ times; during periods of sustained turbulence they are a luxury you can’t afford. Work cross-functionally to identify areas where you can stop, reduce or defer expenditure on activities that are not central to your company’s current or future success. One of my clients is driving each of its business units to deliver material cost savings by identifying what they will stop doing over the next few months.
- Match your growth ambitions to your competitive position. While some companies, such as Apple, have enough cash to do pretty much what they like, most of you will be facing tough choices on where to invest your critical resources. If, like Apple, you are competitively advantaged and financially strong, you can focus on accelerating investment in marketing, NPD and strategic acquisitions to enable you to create clear blue water as you speed ahead of your rivals. For those of you who are less advantaged, the focus should be on maximising current performance and identifying one or two areas where you can develop capabilities and assets to drive future growth.
- Less planning, better performance management. You must eschew approaches that demand six-months of planning nine months ahead of the new financial year. Instead, you should keep your planning period as brief as possible – say a couple of months at most – and put more effort into effective, ongoing management of performance that enables you to change course towards your key goals more frequently. Quarterly reviews and revisions, rather than annual plans, are essential to reflect the level of change and discontinuity in today’s world.
- Set aside growth contingencies. Your desire to invest in the future of your business is likely to exceed your immediately available resources. One client I work with has addressed this dilemma by setting aside a growth contingency at the beginning of the financial year. Only if the company is hitting certain profit and performance targets at the half-year are these contingencies released and the projects accelerated.
The bottom line
These 8 best practices are pragmatic, practical ways in which you can enhance your ability to plan ahead in uncertain, turbulent and chaotic times. They cannot guarantee your company’s success, but they do give you a much better chance of achieving your business goals.