2023 Scenario Planning at Google

How is Google – one of the leading global tech companies known for its world-class innovation and execution, preparing for an anticipated 2023 downturn in the economy?

By a renewed emphasis on robust business planning and scenario management.

What’s got Google nervous anyway? In October, as the digital advertising market slumped, the company reported that profit dropped 27% in the third quarter from a year earlier, to $13.9 billion.

In response, the parent company (Alphabet) has placed noticeably higher demands on 2023 Planning and Budgeting.

That speaks to the uncertainty the industry is experiencing, and the rigor to which Google is addressing it. With each scenario managers are being asked for the real-world response, for the actions they’ll take – a game plan if you will – so they won’t waste any time putting that plan into action if it's required.

Every company talks about the goal of building agility, Google’s found a concrete way of driving it into the organization.

As you'd imagine, the company is asking tough questions during budget reviews.

What’s the justification for the spending? Are there alternatives and workarounds? What are the plans to increase productivity? If so, what is the timetable and milestones for execution, and who will be the person leading the effort?

I personally know other executives in other industries that are taking a similar approach to scenario management. Here’s what I’ve seen emerge as a best practice:

• Start with a baseline “keep the lights turned on” budget
• Develop discreet initiatives (with well conceived action plans)
• Estimate the impact on the P&L of each discreet initiative
• Create different Scenarios that include/exclude initiatives as appropriate

At some point you’ll need to pick a Scenario to bring to the Board for approval, but you’ll have the game plan ready if the reality on the ground changes

Keep in mind that a Scenario might be “demand drops off 10%” or “there’s a supply chain disruption” or “there’s a soft landing in the economy" or "the new product launch gets delayed six weeks". Of course there is the classic “Best Case, Worst Case, Most Likely” but I lean toward more concrete Scenarios you can build a narrative around.

PS As a former FP&A Manager for Pepsi Cola International I sympathize with how challenging this process can be if you’re reliant on Excel spreadsheets and email updates (to keep it all up-to-date and error-free). But this is a well-known problem that some innovative vendors have addressed very directly.

If you’d like to read more about the challenges Google is addressing (and how) please feel free to read more at https://www.timesfreepress.com/news/2022/dec/28/google-employees-brace-cost-cutting-tfp/