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16 May 2008

Long Fuse, Big Bang (Part 3 of 3)

Posted by Nicolai Kolding

For those of you who have read the first two parts of my trilogy on long-term strategic planning:  I swear I’m almost done.  If you have actually enjoyed this ride, well, thank you.  We should meet one day.  I can only assume you’re one-of-a-kind, wildly misunderstood, absurdly funny (if only to yourself most of the time), and have the kind of mind that collects countless random statistics (most of which have no practical applications).  You probably drive a manual transmission.

You ready then for the grand finale?  Let’s hop to it.  If you recall, our two questions created four Scenarios each with a probability attached.  Our next step is to assess the organization’s level of preparedness.  Ask yourself:  what would happen to my company if any one of my Scenarios came true?  As an example, let’s take the bottom left Scenario:  in this instance we have broker commission rates artificially capped at 2% while Goozillsoftmart has decided not to become a player in direct brokerage.  For any company that has already been doing business at 2%, this could be a welcome environment.  They can go about business as usual while their competitors scramble to reposition themselves.  For many, it would force a hard assessment of how the company is structured.  The result would inevitably be dramatic change.

Ask the same question for each of your Scenarios.  In each case, assess where you stand and what would have to be done in order to thrive in the new world order you’ve imagined.  Try to get as specific as possible:  factor in costs needed (both dollars and human capital) as well as implementation time.  Although the tendency will be to focus on the negative implications, with some thought you are sure to imagine the upsides to each Scenario.  What is it about your company now that could be accentuated?   The more unique to your company a positive trait is, the more you should consider emphasizing it.

The next step is to review the probabilities attached to each of the Scenarios and compare them to the cost/opportunity analyses you created.  This is where you decide where your resources will be best allocated over the next several years.  Let’s say a very-low probability Scenario would cost a tremendous amount to adjust to.  Unless some of those same changes would also be needed in your higher-probability Scenarios, your resources are best allocated elsewhere.  But say that same low-probability Scenario instead has a small cost attached to it; making the change could be viewed as an insurance policy, assuming it does not negatively impact other Scenarios.  In many cases, your conclusions won’t be so cut and dry.  But what you’ll likely see is that some of the same changes could “solve” several Scenarios.  You may conclude that some changes should wait until you have more “proof” that one of your Scenarios is developing.  Even if you do this, you’re out ahead on the planning curve.

The key now is to build annual and multi-year budgets consistent with what you have concluded from this process.  If your expenses aren’t adapting to the Scenarios, challenge yourself to live up to your conclusions.  This is the hardest part.  You may find yourself second-guessing your Scenarios in order to avoid change.  The better response is to go back to your Scenarios and test your conclusions.  If you still believe in them, then get out there and move your company in that direction.

In order to keep your Scenarios living, look for articles that directly support or refute any of them.  Start four folders and file articles in each.  With time, you may notice one folder growing faster than the others.  By this process, you periodically review your probabilities and make adjustments as needed (e.g., if a particular Scenario had a 10% probability but that folder is bursting at the seams, you may want to rethink that 10%).  As probabilities change, so too do the plans.  It keeps the process dynamic.

That’s it!  Simple, right?  If you now feel ready to plan based on this method, I suggest you include all your valued employees and agents in the process.  Not only will it maximize the creative ideas, but my hope for you is that you will create Scenarios that everyone in your organization believes in.  When that happens, your entire organization should better understand, and thus embrace, any changes you propose.

Be bold.  Be daring.  Challenge yourselves to see the future first.

2 thoughts on “Long Fuse, Big Bang (Part 3 of 3)

  1. Ok, so after I read the first paragraph of this post, I thought, have we met? And what’s wrong with liking numbers anyway? I have a tendancy to want to reduce everything to a number. I love it because it’s concrete. Thanks though for this series because it adds a level of complexity to the concrete and forces those of us who tend to review the “what just happened” to the “what if that happens”. Very enjoyable reading however twisted the accepting mind must be!

  2. Thank you, Mark. If you ever find yourself in Parsippany, NJ (and, let’s be honest, who wouldn’t love a trip to Parsippany, NJ?) look me up!

    What I love about scenario planning is taking, as you put it, the “what if that happens” possibilities but adding structure without being rigid. I have seen it in action and it’s an amazing process to watch people’s eyes grow as they go through the steps and “see” possible futures.

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