We must live with the fact that we’re not going to see everything coming.
No organization exists in a vacuum. Every business is subject to forces outside its control. As much as we might like to be able to predict, forecast and/or control externalities, reality is that much of what affects a company is outside its sphere of influence. This is the nature of planning and strategy. Stuff that you don’t expect is going to happen does.
That’s the essence of the planning problem: setting a purposeful program of action for a future that is unknown. The things that threaten the strategy are always going to be the things that weren’t in the forecast.
Recognizing these limitations, managers hire consultants and analysts to generate studies, pore over data and develop accurate forecasts that will allow them to have better insight into the future. “If we can only figure out when the market’s going to turn, or how the legislation’s going to get written, or when that technological breakthrough will become cost-competitive, we can develop a strategy and plan to take advantage of the future.” This is the strategist’s nirvana: having the insight into the future that will allow the development of plans and strategies that are proactive, anticipating the future and allocating resources accordingly.
Case Study: Kodak
Unfortunately, nirvana’s not happening anytime soon. Think for a moment about the Internet—how many people saw the effect it would have on business and commercial activity in the 1990s and predicted the rise of Amazon? What about social media? How many people predicted the impact of Facebook and Twitter on the way we work and live? If the experts can’t predict the major events, what chance do we have when the issues are specific to an industry or a geographic area?
Think about a company that, only a couple of decades ago, was arguably one of the most recognized brands in the world: Kodak. The little yellow box of Kodak film was at every cash register of every grocery, convenience and drug store in the U.S. and could be found all over the world. The company stayed innovative, developing the technology that allowed for fast in-store photo development and the single-use camera. Kodak effectively “owned” the photography market.
In 1975, an engineer at Kodak developed the first digital camera. But the executives at Kodak were afraid the technology would cannibalize existing film sales, so they effectively put digital photography on the shelf. While the company did make money from the patent, the patent expired in 2007; and in 2012, having never successfully transitioned to the digital market, Kodak filed for bankruptcy protection.
Get the point? A company that was the market leader, which had access to all of the market data, which had the technology and power to dominate the industry couldn’t see the future—even though it was their own people who made the future possible. If an organization so close to the market and with so many resources couldn’t get the plan right, what chance does a small organization have?
Guiding a Raft
We are going to have to live with the fact that we’re not going to see everything coming. For a long time, many organizations have operated in a planning mode that can be thought of as “move the train down the track.” In other words, we do the analysis, set the vision and mission, see what direction we need to go, and then commit resources toward moving along the path that we’ve established. This is a good exercise; it forces us to think about larger issues than the day-to-day operations of the company. But it doesn’t fit with the reality of the strategist’s world.
Think of an alternative image: about guiding a raft down a river. The guide has a lot of people in the boat and an idea about where the trip will start and end; and, if the guide has floated the river before, may even have a sense of the twists and turns. But the guide can’t control the weather or current, and therefore has limited control over the people paddling. The goal is to get the group from the put-in point to the take-out safely, so the guide has to navigate a dynamic environment, keep everyone working in the same direction, and try to get to the goal without running into too many obstructions. How does the guide operate in such a turbulent situation? By realizing: (a) I’ve probably been here before (or in a situation like this), so I do have experience that helps me figure out what’s going on and what’s likely to happen, and (b) assessing the situation in real time and making constant adjustments.
This is the way we have to think about strategic planning. The strategist is the guide for the raft; she or he has a lot of people needing direction and looking to her or him on how to handle the inevitable variations in conditions. Like the guide, the strategist has to know the various circumstances that can impact the journey and how those circumstances can affect the trip, which ones are most likely to arise, and how to commit resources to keep everyone moving in the same direction. Most important, though, is that the guide has to know the river—but not as a static entity, like a railroad track. The guide has to know the nature of the river and understand how the river flows, how it works its way through the terrain, how weather impacts the river, and how the river will affect the trip.
A Quick Checklist
In the same way, the strategist has to understand the nature of the organization’s environment. Based on our years of work with numerous organizations, we offer the following questions that every business should be asking on a regular (at least yearly) basis to help gauge the environment:
- What are the five issues that you believe will have the biggest impact on the performance of your organization in the next 10 years?
- How good a/n industry/business will this be in the future?
- What are the major factors in the environment and the industry that are changing the rules of the game/obsoleting our business model?
- What are customers going to want in the future that will change the rules of the game/obsolete our business model?
- What are competitors going to do in the future that will change the rules of the game/obsolete our business model?
- Given these changes, how are we positioned in the industry?
Have you thought about these issues? Have you asked the hard questions and forced yourself to think critically about how the environment might be changing? If not, you’re at risk. In an era of constant, tumultuous change, you need to be constantly challenging the assumptions and beliefs about your environment and organization. iBi
This is a revised excerpt from the book Performance-Based Strategy by Dr. Aaron Buchko, Professor of Management, Bradley University’s Foster College of Business, and Steve Fairbanks. It is available on Amazon and at Barnes and Noble.