What could America’s companies have done to fare better in the economic downturn?
Scenario Planning – a strategic method for preparing responses to imagined changes in conditions.
The art of scenario planning is making a comeback from its early days as a military tool, to a popular management practice in the 1970s. Addressing different scenarios as part of the annual planning process enables companies to be ready with identified action steps before a crisis or opportunity hits.
It is credited with many seemingly prescient decisions – including the New York Board of Trade’s 1990s decision to build a second trading floor outside of the World Trade Center.
This year, companies that saw the warning signs early and prepared in advance fared better, some even continuing to generate cash despite double-digit sales declines. Those that are suffering lament that they made changes later than they should have.
Regardless of how well they weathered the storm, many companies are now reporting increased productivity, despite fewer employees, with a relatively low percentage planning to re-hire anytime soon. That’s a negative for the unemployed, but a positive for the companies. It means they’ve found ways to work smarter not harder (a silver lining?).
How Well Do You Plan For the Good, the Bad and the Ugly?
Scenario planning is a world unto its own, with complicated methodologies and potential dangers (such as constructing scenarios based on too simplistic a difference, i.e. optimistic and pessimistic, according to this Scenario Planning Corporate Strategy Model*.
Having survived 2009, you may decide to do more future thinking. Here are some quick questions you’re likely already asking:
• What’s working, and not working, as a result of any changes made this year?
• What should be continued?
• What could use further improvement?
• What wasn’t looked at, that should be?
• How about new opportunities or market trends on the horizon? Can your company get ahead of the New Year with aggressive effort now?
Planning of any kind takes time and focus. Planning for multiple scenarios, even more. But this is planning season. Whether the business climate improves as predicted, tanks further or stays the same, prepare to act quickly!
* For more detailed reading on the subject, see:
Future-Proof Your Organization, CEO Journal, Oct. 2008
The Secrets of Successful Scenario Planning, Forbes Aug. 2009