How do you plan for something you can’t predict?
With the Coronavirus (COVID-19) now spreading rapidly across the globe, many businesses and governments are scrambling to deal with the impact.
While the number of those with the virus is comparatively low in ANZ compared to other parts of the world (so far), the impact is notable. These include the impact on tourism, with airlines Qantas and Virgin reducing international flights by up to 90%, and hotels across the country with significantly reduced occupancy. The tourism industry in Cairns has estimated a potential loss of $100m by the end of March. Panic buying, although not unique to Australia, has limited supply of toilet roll with empty shelves a common sight in supermarkets including Costco, Coles and Woolworths. Sporting events are either being cancelled, including the Australian Grand Prix, Super Rugby, and international one day cricket or being played to empty stadiums like the NRL. Additionally, the slow-down of shipping from China impacting the supply chain into Australia and New Zealand will mean delays on consumer goods, not least tech products.
At Christmas, the world hadn't heard of Coronavirus and barely three months later, it has become a pandemic that is pushing the economy into recession.
So, what lessons can businesses learn from this?
There will be more ‘unforecasted’ major disruptive events. Coronavirus is not the first unforecasted event to have had a significant impact. The SARS outbreak in 2003, the Japan Tsunami of 2011 and most recently, the Australian Bushfires, also had a far-reaching impact that either nobody or very few saw coming. And neither will Coronavirus be the last such event, so we should all be prepared.
Being prepared provides a business with an advantage. Whilst it is not possible to forecast which events will occur, it is possible to prepare for them. In their book, Great By Choice, Jim Collins and Morten Hansen identified a core behaviour of "Productive Paranoia", employed by what they call “10x companies” (those companies that outperform their industry peers by a factor of 10). The authors describe the leaders in these companies as constantly asking "What If" and developing plans to exploit or defend against possible outcomes. Their research indicated that 10x companies were no more or less lucky than their peers but were able to use their preparedness to react more quickly and take action to mitigate or exploit events.
You don't have to predict future events accurately to be prepared. Businesses across ANZ should ask questions to uncover the types of event that can seriously disrupt their company, such as:
o What if we lost our number one customer’s business?
o What if there was a pandemic?
o What if our major material availability dries up?
o What if there is a technological breakthrough that makes our products less useful, e.g. Uber to the taxi industry
o What if the industry becomes commoditised?
Each of these specific events has happened somewhere, so the impact and lessons are well-documented and easy to find allowing organisations to think about the implications and prepare.
Creating a framework to focus on the future is valuable. While most organisations would recognise the value of ‘preparedness’, relatively few effectively take this approach. To prepare for, and take advantage of unexpected events, organisations can benefit from a process that:
Drives an external or outside-in view of the business
Pushes the planning horizon out past the short term
Makes the integration points between functional plans in the organisation clear so that when unplanned events occur, the critical areas of focus for the business are understood
Executives need to constantly be asking ‘what if’ and driving preparedness. The issue for many executives is too much time and energy spent into the ‘here-and-now’; accurately predicting results for a month to a year, rather than looking out over the next five years. A business management process such as Integrated Business Planning (IBP) provides the framework and operating cadence for organisations to regularly take an outside-in view to identify areas in the business with the greatest uncertainty, and to run ‘what-if’ scenarios that enable contingency plans to be put in place.
So, how well are you planning for the unknown?
By Stuart Harman, Partner at Oliver Wight Asia Pacific (www.oliverwightasiapacific.com/)
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