Three ways to plot your firm’s strategy in COVID era
23 November 2020
By Christian Stadler
On November 7 CNN called the US presidential election for Joe Biden. The other major news outlets followed in quick succession.
As the gripping vote count was entering the final stretch, pollsters across the country sighed in collective relief. In contrast to 2016 they got the presidential election right. But for down-ballot races the predicted blue wave did not materialise. And according to the polls, Biden’s victory should have been much more decisive. After the 2016 election it had become obvious that we couldn’t trust the polls. And yet still media pundits and the public were glued to them.
But it’s not only politics. The addiction to forecasts and predictions stretches into most parts of our life: house purchases, investments, choosing a university. Even our romantic life is increasingly influenced by algorithms that try to predict who is the best match for us.
And of course, this is also part of corporate life. Market forecasts are a core component of most strategies and increasingly AI features. The dream of perfectly predicting customer behaviour, entire markets actually, seems not as distant as it once was. Or are we fooling ourselves?
If companies take an honest look at their strategic plans last year, how many factored in COVID-19? AI and forecasting work well for existing customers and markets in stable environments, but, regardless of whether we get a vaccine or not, the era we are entering now is not one of them.
A world characterised by volatility, uncertainty, complexity and ambiguity (VUCA) calls for new ways to plot the future. The traditional way to create strategy based on a mixture of forecasts and past experience is no longer sufficient.
Three alternative ways to develop strategy will increase an organisation’s chances of developing viable responses to the many unknown challenges and opportunities.
1 Open Strategy
Here is a radical idea: take strategy outside the C-suite. Open it up by involving frontline employees, experts, suppliers, customers, entrepreneurs and even competitors.
IMP, a consulting firm at the forefront of the open strategy movement, notes that the benefits are twofold. First, “bringing people from outside the boardroom, particularly externals, into the conversation increases the chances of coming up with unusual, sometimes disruptive ideas,” Stephan Friedrich von den Eichen, IMP’s managing partner, tells me. This is just what is needed when old business models no longer do.
Secondly, strategy execution often goes wrong, particularly, when their realisation requires staff to make substantial adjustments to their way of working. Mr Von den Eichen says: “By involving them from the start, they have an opportunity to voice their suggestions and concerns. Intuitively they are already working on the realisation of a plan - taking some of the friction out of implementation.”
And opening up is not necessarily complicated. Invite frontline employees to join a strategy workshop, use your online innovation chats to discuss strategic issues, or host a business plan competition. Everyone should understand that their ideas are taken seriously, but be careful not to promise too much.
At the Spanish multinational telecommunications company Telefónica, for example, CEO José María Álvarez-Pallete López devotes time and energy on the company’s social media platforms to such an extent that everybody understands how much he values these conversations. At the same time, Telefónica never created any illusion about where the decision power sits. Leaders are in charge of strategy but cast their vision much wider than conventional top-down strategy development would allow them to.
If you are unable to predict what’s going to happen, why not experiment with different ideas and see which one works? Start-ups have long relied on trial-and-error and hypothesis testing, knowing that there is no point in developing a detailed plan when venturing into unknown territory. Outside the start-up world such an approach has not caught on yet. It might be time to give it a try.
In her timely new book Uncharted. How to Map the Future Margaret Heffernan explains that all organisations can tackle big problems by starting at a “local” level. Instead of an image of a general and his staff coolly surveying the business landscape for a solution, the idea is that lots of different initiatives are allowed to emerge. It’s an approach that fully embraces uncertainty and leaves it to human ingenuity to come up with new ideas.
Heffernan tells the story of Rebecca Hosking, a former BBC producer who is passionate about the impact of plastic bags. In 2007 she convinced her local independent stores in the village of Modbury that going without plastic bags was possible. Together they called a public meeting to persuade the big retailers to come onboard, which they did, providing a free canvas bag to every household in the village. The following Monday the village went plastic free.
Soon the media got wind of the story, arriving in force. And other places started to take note. Chinese officials presented Hosking with a bag emblazoned with: “Our Province follows Modbury!” Overnight the province had banned plastic bags for 32 million people. Others followed suit. A small experiment came up with a solution for a big chunky problem.
The question is how? “The key ingredients”, Heffernan points out, “are need, resource and passion. There is a clear need for a change in consumer behaviour. Hosking has friendly relationships with the local shops and media experience. And she was passionate about the topic. In fact, she had earlier tried to stir up the public with a documentary on plastic waste and its impact on sea life. That failed to create any change. She did not give up. The village initiative was just another experiment with no guarantee of success in advance, just an open and honest ‘give it a shot’.”
Corporations are familiar with this from the innovation space - or at least those who have a track record of breakthrough innovations. 3M, for example, instituted a rule in the early 20th century allowing employees to spend 15 per cent of their time tinkering and experimenting. It’s time to embrace a more experimental approach in the strategy arena as well. If you don’t know the future, why pretend?
3 Scenario Planning
This is a bit like 'dusting off an old trunk'. It’s not a coincidence that I first stumbled across scenario planning when I looked at corporations that survived and thrived for more than a century.
The companies in my Enduring Success book had gone through two World Wars, pandemics such as the Spanish flu, unpredictable economic shocks and technology disruptions. So yes, they had to deal with uncertainty at times. Shell - one of the companies I studied - took scenario planning from the US military into a corporate setting.
The basic idea is as simple as it is appealing: if you can’t predict the future, work with several alternative futures (check out this video where I explain how the scenario planning process works). So prior to coming up with a strategy, Shell developed several - usually two or four - detailed stories of how the future might play out.
Its strategy would then be questioned from the perspective of these stories. Is an investment sensible if the first scenario unfolds? And if so, does it also offer reasonable returns if the second scenario plays out?
It’s important to note: there is no probability attached to a scenario. Pierre Wack, the French executive heading the scenario planning team when Shell first introduced this in the early 1970s, was careful not to include financial modelling in the scenarios. He was afraid that this would create a false sense of predictability. Scenarios have to be plausible and build on evidence but that’s different from the simplicity of numerical forecasts.
In fact, some of Shell’s scenarios seemed very unlikely at the time. For example, in the early 1970s the idea that oil prices might fall seemed improbable. When this turned out to come true, Shell was able to adapt quicker than other big oil companies, arguably turning it from the weakest of the 'Seven Sisters' to one of the strongest.
Scenario planning has helped Shell stay ahead of the curve on several occasions since. For example, when dealing with the second oil crisis in 1979, the fall of the Soviet Union in 1989 and anticipating the industrial rise of China.
Don’t pretend to know the future
These three ways to develop strategy in the era of Covid and beyond have something in common: none of them are pretending that there is certainty in how the future unfolds. They rest on human involvement and the assumption that the process is as important as the outcome.
It brings in different voices and creates a space for imagination, increasing the odds that whatever strategy a company comes up with is suitable for the unpredictable challenges that lie ahead.
This article is republished from Forbes.
Follow Christian Stadler on Twitter @EnduringSuccess.
For more articles on Strategy sign up to Core Insights here.