Start planning for the futility of planning

Planning is essential for the survival of companies. It helps set the course for the company and provides a template for how to retain customers and hopefully grow the business. Unfortunately, a lot of planning is around resource allocation and communication, which is fine in itself, but doesn’t take into account the most important issues in long term survival, which are mostly beyond the control of the company.

The things we don’t talk about are exemplified by the following.

Technical obsolescence - a new technology or process is available that undercuts your company’s products.

Change in competitor landscape - unforseen competition from larger competitors – domestic or international.

For example, during times of economic downturn many large consulting and professional services firms start taking on the jobs that small firms would normally do at the cost of keeping their staff employed. This effectively kills many small firms.

Alternatively, a well established player from another market (e.g. China, India, Brazil, etc.) can come in to your market and upset things.

Slump in demand – e.g. demand is weak due to the state of the economy, or customers saving rather than spending due to a fear of losing their jobs in a recession.

Political risk - Regulatory interference is another killer. Projects take longer to be approved. More administration is required for compliance leading to higher costs. Your industry sector could be specifically targeted by government. Legal rulings can have a similar effect.

Unknown unknowns - totally unforeseen and non-predictable events can also kill a company. For example, with the recent revelations that the US NSA is effectively spying on a lot of global internet traffic, many non-US users of US cloud based services are rethinking their patronage of such services. In this case a sudden drop in customer numbers could kill a good company almost overnight.

Mixed in with all the above is a decent amount of research which tends to show that the survival of a company over a 10 year period is a random outcome so long as the company has passed through the formative years of startup.

To put that in its starkest form, it is the factors beyond your control that will make or break your company in most circumstances. All the systems and the process you have in place are about delivering what products and services you already have profitably. Research shows that better systems and processes are really about fiddling the edges. You may achieve slightly better results than your competitors but it isn’t a major factor in the longevity of your company.

So, having said all that, what can we do? How do we plan for things we can’t plan for.

Establishing resilience is the recent terminology being used. Obviously it consists of simple things like having enough savings to push on through a downturn and having a broad enough customer base to lose some and keep going.

Less obviously, resilience also means evolution – adapting to a change in environment. Plan for obsolescence. Set up a group of thirty somethings with the task of working out how to put your current business out of business. Then when they work it out, make that your new business strategy, and consider putting them in charge.

Work your senior management and Board hard. They have learned how to do business based on the conditions that occurred in the past. Many will have little ability to deal with the rapid changes in technology and marketplace occurring now and could insist on staying the course when they shouldn’t. A good example here in Australia was the utter failure of the Fairfax media group to come to grips with internet based competition.

While business common sense is hard won over many years, your leadership team may no longer understand the business and economic environment they are applying that common sense to.

You will need to educate them, and dare I say it, you will need to plan to replace them as the business changes. If they don’t get it they shouldn’t stay in the role. Having grey haired figures on the Board may make bankers and pension fund investors happy, but it may also be the seed that kills your company.

Scenario planning is another good option. Have a think about what would happen if things dramatically changed for your market or your business. What could you do about it? Can you plan for some of those things now? Work out where you are most fragile and look to fix that if you can.

There are no easy answers and much of the above goes against human nature- which is to not admit anything is wrong until it has happened, but it is worth at least planning for some time to think about that which can’t be planned for.