Blog
Last December was the time to look back at the year that was and now the time to look at the year that will be. In looking forward we hope for better and prepare for worse. Traditionally this means setting goals and making resolutions (ostensibly for the year but in reality they are good only for January and February). This process has been complicated over the last three years due to the recession and political turmoil. The only thing certain has been uncertainty and while our only fear was supposedly fear itself it has been real enough to freeze us in our tracks and wonder if the light we see is the end of a long dark tunnel or an approaching train.
How would we characterize 2012? There are a few indicators beginning to emerge.
- This will be a year of mild growth and continuing political grid lock
- The free fall of 2008, 2009 is over, the shell shock of 2010 / 11 is going undiagnosed and untreated
- Debt is on everyone's mind
Despite the indicators there are two things can be done to ensure that 2012 will go better for us: have a plan and think strategically.
Have a plan
The most familiar paradigm for the planning process reads: "If you fail to plan you plan to fail". The common sense behind this statement begins to break down when we test it and find that 100% of respondents are not planning to fail and yet only 25% have a plan. What gives? While there are many reasons we do not plan, let's look at a very relevant reason coming out of 2011; it is very difficult to plan in an environment of uncertainty.
There is another paradigm on planning (coined by General George S. Patton) that suits our current state: "When the situation is obscure, attack". How does this work? When things are not clear the best way to organize resources and define a clear path is to attack or move forward. Standing still is not acceptable in battle or in business. Either move forward or retreat but have a plan and execute it.
Another reason we fail to plan is due to a misunderstanding of what planning is. At its core planning is simply taking what we know and assembling it into a course of action. This is a matter of designing our own path versus having it designed for us. If life is a stream then planning means placing a water wheel in the stream and tapping into its energy. This beats drifting with the current and hoping against hope that there are no waterfalls ahead.
It is also helpful to know what planning is not. It does not require one to predict the future or lock the business into an inflexible series of responses to changing conditions. It does require knowledge of the status quo and an idea of how to deploy strengths and exploit opportunities. Trees are good examples of long range plans; life means growth but not every branch will survive.
Another means to plan in uncertain times is to look at what has changed that we can plan for. There are always changes at some level that can be analyzed for their impact. What follows is a list of things that seem certain to have an impact on 2012.
- Growth in GDP is projected at 2 ½ % to 3 ½ %
- Consumers have reduced debt and are less likely to borrow
- Banks have adopted stricter lending guidelines making capital harder to raise
- Businesses have become highly risk averse
- The population is aging, older consumers are not spending as freely due to losses that they cannot recover
- More consumers indicated they paid cash for Christmas than ever
- Cyber Monday was the biggest in history
The need to plan is urgent due to the level of uncertainty in the economy and in politics. Taking coordinated actions will result in a better outlook and positioning for this year and the years to come. Failing to plan is the first step in planning to fail.
Think Strategically
"Foresight or valor does not make a general invincible. It is the strategy that leads to inevitable victory". -- Sun Tsu
The great general makes an important point; the journey is a lot more successful when there is a destination in mind. Thinking strategically is akin to preparing for a trip; knowing where we want to go and having an expectation of what we will do when we get there is vitally important. Yes, the situation is obscured by very real concerns but there are at least these four things that can be done to improve our businesses now:
Know what you know. Take time during this slower period of sales to evaluate the following things:
- Business processes
- Budgets
- Personnel
- Markets
Review (or initiate) a SWOT analysis to make sure we understand our strengths and weaknesses. Thinking strategically means to concentrate on efforts that have the greatest chance of improving the business. Taking time to evaluate and improve processes, analyze markets, update budget assumptions and develop personnel is the spring training camp of business.
Plan for growth
Making more money is a problem we all would like to have. Failing to plan for how we will use an increase in revenue to improve our businesses is a problem that we would not like to have. Here are some questions to get answered when creating a growth plan.
What products will benefit the business the most from increased sales? Knowing the answer to this question will provide strategic direction to marketing plans. There are many different approaches to the market, each with its own nuances. Throw out assumptions based on 2007 and start with a clean sheet of paper. Determine what products are the most advantageous to sell and craft an approach to reach those customers as a preference. Design the product mix that works best and take strategic actions to reach those markets with an effective message.
How much capacity is available to accommodate growth? Knowing the answer to this question will establish trigger points to initiate a response to increased sales. Eliminate guess work and avoid being risk averse. Failing to add capacity when it is warranted is not strategic thinking.
Where would you add capacity? Answering this question will indicate what to do when more capacity is called for and provide guidance in the amount of investment required and help set ROI goals.
Manage risk
The only risks to be worried about are the ones not being managed. Good risk management strategies assure that during times of economic stress the business shrinks by going on a diet instead of suffering an amputation. Growth creates risk when resources are invested, new markets are explored and new products launched. It is also risky to become so averse to making changes that opportunities are ignored. Knowing what you know will be the first step to understanding strengths and managing risks successfully.
Things to think about when managing risks in 2012:
Threats: Does 3% growth ensure survival? Can the business accommodate another year of flat revenue?
Opportunities: What risk need to be managed in order to take advantage of opportunities? What kind of money can be raised and what return is needed to justify an investment?
Design-in flexibility
Taichi Ohno (the father of the Toyota Production System), designed a system which has revolutionized the modern approach to manufacturing. He developed his method during a time when the fledgling automotive industry in Japan was struggling to stay afloat. His first challenge was to efficiently build a large mix of vehicles in the same factory and compete with western car makers who could dedicate entire factories to a limited number of models and versions. His work is most noted for its impact on quality and efficiency yet he was as dedicated to designing in flexibility as he was in any other aspect of his work.
Building a culture that encourages change, adaptation and improvement is a cornerstone to becoming efficient and staying relevant. It is more important than ever to think in terms of flexible responses to emerging challenges, especially when facing an uncertain terrain. The Land Rover conquered Africa because it could adapt to the varying landscapes. It was not the fastest, most comfortable vehicle and did not have huge load carrying capacity. The operator could however take it anywhere on the continent with confidence that it was better suited to the variety of challenges than any other choice.
Designed-in flexibility impacts Main Street in different ways. It could mean creating multi-functional roles for personnel, developing multiple revenue streams, implementing culture change to encourage innovation and continuous improvement, or all of the above. Think in terms of a land rover versus a freight train. Which one is better suited to traversing uncertain terrain and off road (out of the box) performance?
Conclusion
There is no silver bullet or crystal ball. Building a winning team takes planning, thinking strategically, and managing the details. There are uncertainties to face but effectively dealing with what you know and the changes that have occurred will equip our businesses to be winners in 2012.
Contact:
Steve Bathe
Vice President Business Development
HiLev Performance Solutions
864-752-8404
For additional information email us at info@hilev.com
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