Vale strategic planning - welcome to Resilience Planning

In the wake of rapidly changing global landscapes, the traditional long-term planning horizons have become increasingly untenable. We're living in an age where the unexpected has become the norm—where a global pandemic, technological leaps, and economic upheavals and demographic upsets or even major corruption scandals redefine our business world expectations regularly. I know I'm not the first to reflect on the difficulty of planning in a world where a new shock occurs monthly if not more frequently. As one major local example, in Australia where I live, our previous Reserve Bank Governor perhaps unwisely prognosticated publicly in 2022 that interest rates would not rise - see link here https://www.smh.com.au/politics/federal/rba-admits-rate-call-proved-incorrect-but-says-it-may-have-to-do-it-again-20221115-p5byf8.html. They subsequently did rise, and many people who believed in his crystal ball predictions were burned, some very badly. But we shouldn’t really blame the Governor - the issue is the volatility of the world we inhabit that makes forward predictions very difficult.

It was once standard practice to chart our course with five-year plans, but such strategies now seem almost quaint. But the evidence is clear: from the speed of digital transformation to the volatility of international markets, we are reminded that change is not just inevitable but accelerating. So does that mean planning is useless? Far from it. There's an old military saying (which I will mangle a bit) that "planning is essential even though the plan may not survive first contact with the enemy". I agree with this. So what's left if we can't plan our way to a five year horizon? Scenario planning helps through giving us some future scenarios to consider - but I think there may be a better way.

A pivot to a Resilience Planning

I propose a pivot—a turn towards Resilience Planning. Just as with a financial portfolio, the idea is that the business selects a future return and risk parameters, and then creates a portfolio of products and services that in total can provide the return and benefit expected.

The essence of Resilience Planning is not to have a fixed single focus on a product or service, but rather to be better equipped to navigate through the valleys and peaks of change. The cornerstone of Resilience Planning is to foster an environment where adaptability is ingrained, and where change is not feared but embraced, in the context of risk / reward parameters. This means investing in our people, encouraging continuous learning, and maintaining a mindset that is open to new ideas and ways of working. But fundamentally, everyone needs to become familiar to a greater or lesser degree with the notion that there is NO risk-free path. Everything is a trade off between risk and reward, and the task is to find out what parameters your business is comfortable with and to retest, and reset those parameters in accordance with the changing business environment.

This approach also means being prepared to tolerate higher levels of risk for some parts of a business in exchange for higher potential returns. Management of such a Resilience Planning approach will not be straightforward - it is after all more complex, and recognises that some parts of the portfolio might provide a lower return in exchange for lower risk, something that shareholders will need to understand and support. This will require leadership with great communications skills.

I have been thinking about this concept for a quite some time, and actively involved in its execution with clients, so I realise just how strange the notion may be to organisations that wish to have a firmer view of planning for the future: something I believe is a mirage. I think there's more to be gained by embracing the notion of uncertainty and building as much resilience into our businesses and our own lives, as our appetite for risk and return dictates.

What do you think? I'd be delighted to hear your views.