In a time of unprecedented global uncertainty, planning for the future may seem redundant – but in reality, planning has never been more essential. Data shows that times of crisis increase fragility and volatility of leadership positions, meaning that a forward-thinking and adaptable plan for future crises is necessary to secure leadership roles and success within the industry. Time after time, research has proved that the organizations willing to make thought-out, decisive moves in the time during and after a crisis will be disproportionately rewarded with a cutting-edge lead in the global market and long-term success.
This stance is consistently supported by investors, who are increasingly willing to give management more flexibility in order to pursue long-term strategies, even if this results in sacrificing short-term earnings. A Boston Consulting Group survey found that 90% of institutional investors said they would support such moves by companies, and two-thirds reported that this support included current margins being sacrificed in order to gain future advantages. This raises the question of how, with the support of flexible investors, an organization can plan for the future with adaptability as a core pillar, but without sacrificing ambition and the vision of the organization.
As the world continues to change and evolve at a rapid pace, it is clear that the way businesses approach planning and budgeting must also change. Traditional methods of simply looking at previous results and extrapolating from there to set stretch goals and allocate capital are no longer enough and are likely to provide a significant disadvantage against competitors. Organizations must be able to adapt processes, planning, and way of thinking to stay ahead of the curve.
Basing future targets for margin improvement and growth on the current state leaves significant room for uncertainty and reduced adaptability in the face of unexpected change. Even prior to the onset of Covid-19, there was a consistent trend of business model lifecycles shrinking from year to year. This has been accelerated by the pandemic, which provided a wealth of both threats and opportunities to be seized. The openings in the industry allowed adaptable organizations to accomplish far more in one annual cycle than a standardized plan based on the previous year’s success would have allowed. This emphasizes the importance of planning for a wide range of possible future outcomes, allowing opportunities to be monopolized and growth to be achieved regardless of unforeseen changes in future circumstances.
While the future cannot be guaranteed, data and analytics allow organizations to predict the more probable outcomes while also additionally creating adaptable processes that will enable a decisive response to left-field circumstances. The further that planning can be extrapolated outside of “probable” and into “plausible”, the more robust the response from the business to future crises will be. The scope of consideration includes geopolitical change, fluctuations in technology and trends, and changes in legislation or workplace environment.
Corporate planning for a fluid range of potential future outcomes can involve leadership teams developing a potential set of future outcomes the organization could experience, and answering detailed questions based on effects, responses, and opportunities in these scenarios. Businesses may also wish to outsource to external experts in the field of future planning for corporations to acquire a more detailed estimate of how the future environment in the industry or global marketplace may look.
Outside likely scenarios, plausible scenarios that can be incorporated into planning should include scenarios in which the organization achieves unprecedented or disproportionate success or a considerable competitive advantage in the industry. Once these scenarios have been detailed, they can be connected to potential decisive pathways of action such as investments and divestments, partnerships and acquisitions by the organization that may have led to this point of success. Working backward from this hypothetical success allows a pathway to be visualized that monopolizes on the core strength of the organization to capitalize on new trends and technologies, as well as decisively enter openings in the market with competitive innovations. In this way, planning exercises support ambitious thinking, which improves workplace culture and unites the workforce and leadership teams with common goals. This additionally expands the idea of what “success” looks like to the workforce, deviating from a limited model where only one outcome is viewed as successful.
Following the initial creation of these scenarios, leadership must then examine the strategies they have created to see how these respond under different scenarios. Factors such as regulation, cost of integration, trade tension, and cost advantages are taken into account and compared. Strategies that are applicable and profitable to the most potential scenarios and offer superior risk-adjusted ROI can then be selected and executed, whereas others that become disadvantageous outside of a specific set of future circumstances can be discarded. Some strategies can be monitored and then implemented if external circumstances change unexpectedly. This validates decisions regarding investments and prioritization while allowing adaptability to be maintained and improved on.
Once applicable strategies have been selected and key milestones and actions have been prioritized, change is implemented via committing capital. Because multiple strategies have been selected accounting for different sets of potential future circumstances, systems need to be developed that account for this variability. Critical shifts in the market, such as inventory and order volume, must be tracked via an indicator dashboard, allowing actions to be triggered in response to market shifts.
The use of a capital allocation model specific to each scenario is an option that allows organizations to pinpoint time-sensitive strategic decisions which need to be implemented immediately under a variation of financial and economic conditions. This model allows decisive action to be prioritized and organized, and prevents a loss of momentum that would otherwise lead to missed opportunities and delays in times of crisis. This is especially effective for scenarios regarding recovery of the earnings, debt, and revenue of an organization, as strategic capabilities can be funded and implemented without retroactive confirmation after the appearance of selected indicators in the market.
Corporate strategy and strategic planning is a process, not an outcome. The environment is constantly changing, including on a day-to-day basis, and change can arise unexpectedly, whether this is a change in the geopolitical climate or a shift in the competition. Monitoring the landscape is therefore an essential ongoing process for alerting leadership teams to shifts as well as allowing prediction of an upcoming change that is likely to snowball. Constant monitoring allows swift orientation to new sets of conditions, as well as a thought-out and decisive response. This provides a significant competitive advantage in the long term and allows opportunities to be seized before competitors in the industry.
Alongside ongoing monitoring, re-evaluation of strategy must be frequent and streamlined. Traditionally, a strategy was often reassessed on a semi-annual schedule or even an annual schedule. In a dynamic modern environment, a monthly schedule for re-evaluation and reporting allows up-to-date assessment of how resources are released and comparison of current progress to predicted progress. Future scenarios can then be re-imagined and altered, and action can be transformed or reprioritized.
A diverse, adaptable corporate strategy is a permanent change in planning and budget-setting for many organizations. However, it creates a path toward a highly resilient business that will achieve higher growth and ambitious goal-setting in response to external change.
In a time of unprecedented global uncertainty, planning for the future may seem redundant – but in reality, planning has never been more essential.
Although many organizations are now incorporating informed decisions in regard to marketing budgets, very few were able to measure their ROI on their marketing spends and treat this process as a priority. Throughout 2020, research carried out by Gartner discovered that just 54% of organizations based major marketing decisions on the results of data analytics.