Leaders, you just can't see around corners

Seeing around corners is a mantra often discussed as a need in business today. The cold hard reality is that you cannot see around corners, that’s what makes them corners. What you can do is prepare, anticipate and be ready to act on what you discover as you turn the corner. More and more today I see businesses trying to manage risk and uncertainty with more process, more forecasting, more controls and more accountability. In a world of global supply chains, rapidly changing customer needs, competitive threats, global and economic uncertainty leaders need to find more effective ways to manage risk. Far too often the solutions being implemented today are requests longer term and more accurate forecasts or more detailed action planning. You cannot control uncertainty, you can only adapt to it. In new product development, companies want to “know” the product will be a market success, they ask product managers to be more accurate with sales estimates 18 months before the product ever launches. The list of requests to be more accurate on longer time horizons is endless today. These requests come while we as leaders constantly claim that uncertainty is the new normal, or we live in “Volatile, Uncertain, Chaotic and Ambiguous” times, making leadership ever more difficult for us. As leaders our goal should be to build a more responsive company. To accomplish this one recommendation I make is creating agility plans. Agility planning is a set of previously determined actions you plan to implement in the event of various challenges or disruptive events.

I am reasonably certain that during the market crash of 1929, when the US entered WWII, during the gas shortages of the 1970’s, during the financial crises in 2008 or throughout the many recessions, natural disasters, weather events or political upheavals that occurred throughout history leaders of the day likely said that they were living in unprecedented times. Change is inevitable, looking all the way back to the Greeks, Heraclitus said, “The Only Thing That Is Constant Is Change.” We all like to think our own times are harder and more difficult, and to be fair, perhaps one difference of our time is the speed at which changes are coming at us. I think we can look to many things in life, and some things we do well in business already to find methods to deal with uncertainty and help us better manage risk. I don’t believe that the business with the best forecast wins, I believe the most agile and adaptable business that invested in preparation wins. The organization that dedicated time and effort to disruption readiness and agility planning, operating with a sound strategy, will be the ones who win.

We have some relevant examples of where this is being done well and we can learn from these to help our overall business management and risk mitigation strategies. Let’s start with most production operations. In most manufacturing and supply chain organizations we develop emergency preparedness and continuation of supply plans, in other words, we have predetermined documented escape routes in the event of a fire, and we practice fire drills to make sure it’s not chaos in the event of a real emergency. We demand the same of our suppliers, we also hold inventory and work to dual source critical components to protect supply. In an even more basic example, going back to our early school years there is another example where we practiced and prepared for a fire. There was a very good reason we practiced fire drills, to avoid chaos and keep people safe in the event of an emergency. The alarm sounds, alerts of us danger and moves us to action. The action has been practiced and rehearsed, we have been conditioned to act in an orderly, controlled manner, following our leader safely out of the building. A Simple lesson applied in buildings all over the world and yet this concept is lost in some critical areas of our businesses.

Leaders today manage to the month and quarter all too often with lagging metrics only reacting after the disruption occurred and we need to “stop the bleeding.” We even call these fire drills. We are often acting in the moment with little planning as we scramble to respond. In postmortem analysis we typically find that there were leading indicators. How often have you heard, “why didn’t we see this coming?” followed by “we had the data and should have been able to predict this.” The truth is we have more data and information today than we ever have previously. We have the luxury to see more and get more insight than our predecessors ever did and yet we continue to manage from lagging metrics looking in the rear view mirror, surprised when we don’t make our numbers and launch into a fire drill.

To be successful today businesses must prepare for disruption with greater rigor. The prepared business must change where and how they invest their time. A clear strategy and operating plan help enable a better response when a deviation occurs. Prussian Field Marshal Helmuth Karl Bernhard Graf von Moltke is credited as saying, “No plan survives first contact with the enemy.” I believe that is true and for me personally, I would rather face an enemy with no plan. So how do we begin planning and creating an agile business capable of rapid direction shifts to changing events? First, the use of leading indicators can act as needed “smoke detectors” or “fire alarms” in the business alerting us to potential threats and motivating us to act. Leaders should allocate as much time to planning and what if analysis, as they do to a forecasting process that is typically only 60% - 75% accurate. A forecast accuracy of 60% is poor and unfortunately typical, yet every day we choose to make critical business decisions based on what amounts to just better than a coin toss. In addition to the waste of time creating forecasts, we expand the problem conducting postmortem analysis trying to explain a miss to the forecast. It is worth noting that missing high is generally seen to be as bad as missing to low so the explanation of a miss is a near certainty in the process. It was a forecast, moderately useful at best and yet we work to explain the miss.

The successful business of tomorrow will be the one that is faster to respond with predetermined well-rehearsed actions. Respond and act faster than your competition and you can better deal with downturns or capitalize on opportunities. I suggest running “Financial” fire drills the way you run actual fire drills. Plan, anticipate, ask what if, make sure you have considered multiple scenarios, both good and bad, and have thought through the actions you will take. When the time comes take out your playbook and run the play. It is likely you will have to adapt your tactics but better to adapt in an emergency that to try to start from scratch and figure out what to do.

The examples of opportunity to do this better are everywhere and current. Taking one from current events we can consider the grounding of the Boeing 737 Max aircraft. Regardless of Boeing’s reediness, the question for you is, As a leader of the business would you have been prepared and acted fast enough to this disruption? I know from experience that Boeing conducts exhaustive testing putting a new aircraft through its paces before ever releasing. An aircraft is probably one of the most complex products on earth. The testing is extensive and difficult, taking many months if not longer. Despite all that and the confidence it gives both Boeing and the customer I would have suggested (and I am not saying they did not), Boeing had a planned response if a problem was identified after launch. It is fine to trust your process and your testing but doing contingency planning and having a defined response, that includes who is responsible, knowing exactly how you are going to react, what resources are designated to pull and from what programs, having clarity as to the projects that will be the first ones put on hold if an emergency occurs makes the overall response faster. A better response also helps customers have confidence that you are on top of things.

In my career I learned the hard way that our business did not have a clear and documented plan to manage a recall. As a result, we were slow to make decisions, did not have good plans or process, had no way to track products shipped, no clarity how to communicate with the customer and no clear definition of ownership for actions and the overall action plan. We had to put it all together on the fly from experience. No harm was done but we scrambled more than necessary and had to face some hard lessons learned.

There are always examples where events like this have disrupted a business on a large scale. In recent memory I recall the J&J Tylenol crises, the Toyota breaking issue, the Ford Explorer roll over problem. Ultimately, the point is that it can happen to anyone, even you, investing in preparation is just a good idea.

To be a nimble and responsive business I recommend putting some smoke detectors in place in your metrics, developing an agility strategy to improve your response times to leading indicators or disruptive events. These situations can be either good or bad, the point is to respond appropriately and quickly. Taking steps today and making this a part of how you run your business will make you more responsive and ultimately more successful.

If you are interested in exploring this topic further in your business contact Headwaters consulting at [email protected]

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