What makes a strong strategy in the highly uncertain future business environment? Is making a financial cushion enough?
Before pandemics, the business press liked to hype such industry-shaping strategies because of their potential to create enormous wealth, but the sober reality that came with the virus is that most companies lack the industry position, assets, or appetite for risk necessary to make such strategies work.
Executives become risk-averse more than ever. They pursue small, low-risk investments. And some are still in freeze mode not knowing that taking a wait-and-see strategy creates a window of opportunity for their competitors.
How to decide whether to bet big, hedge or just wait and see? How to prepare for an uncertain future?
Traditional strategic planning will not work in many cases. To be precise – that approach serves companies well in relatively stable business environments. In other situations I would say is dangerous. But still mostly because of outdated sources of management knowledge. So let this be a wake-up call for those types of people. Underestimating uncertainty lead to strategies that neither defend against the threats nor take advantage of the opportunities that uncertainty provides.
But don’t take it to the extreme – assuming that the world is entirely unpredictable can lead you to abandon the analytical rigour of your traditional planning and base your strategic decisions primarily on gut instinct which is not the way you want to go.
CEOs can predict the future of any business accurately enough to allow them to choose a clear strategic direction. Any business which strives for a strong strategy for uncertain times needs a discipline for thinking rigorously and systematically about uncertainty (infuture.fashion services may be helpful).
Today add 3 words to your CEO’s dictionary:
A company vision is like knowing the desired destination. You know where you are today and where you want to get to in the future. A well-articulated vision is a strong statement that starts future planning.
If visioning is setting a destination, forecasting in developing a route to go from where you are now to where you want to be. Forecasting is considering where your business has been before and how it has developed to where it is now and then is extrapolating where it might (and should) go in the future.
Considering a range of potential shifts and then developing outlines of plans to deal with them is what we mean by scenarios. Scenario planning helps executives develop plans to respond to possible market disruptions enabling making better decisions under crisis situations. By engaging employees in this process, leaders get to know their employees more and the team build a more resilient relationship with the organisation. Altogether the company is being more adaptable if a crisis hits.
Let me round up with some important questions to start your preparation for uncertain future.
1. Most fashion businesses have a vision. Is it up to date and clear to the entire organisation?
2. Most companies use forecasts. Do those forecasts include estimates of the uncertainty they might predict?
3. Most organisations have not utilised scenario planning. How might scenario planning have helped your business weather the global pandemic? What scenarios should be planned for next?
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