Unlock the editor’s summary for free
Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
How can companies plan in advance when it seems that tomorrow you cannot look like anything like today? It is the question that hangs on the boards of joints as business leaders fight with a flood of challenges, from the interruption of AI and geopolitical tensions to the rates and fluctuations of the financial market promoted by how the president of the United States is on social networks. The feeling of greater uncertainty is palpable.
The companies of the American airlines are withdrawing the financial orientation of the whole year, while the Automobile manufacturer Ford suspended the completion of forecasts in their perspective, citing “substantial risks of the industry.” From Unilever to HSBC, corporations have to carry out explicit warnings about unpredictable policies and uncertainty about interest rates and consumer confidence.
In this climate, it is not surprising that the tools used to evaluate corporate strategies are under scrutiny. For decades, scenarios planning has helped organizations to draw a variety of futures based on variables that include economic changes, technological jumps and regulatory changes. Pioneer In Shell, which anticipated the 1973 oil clash, stage planning has been a basic corporate element since then.
But as the boxer Mike Tyson said: “Everyone has a plan until they are beaten in the face.” Or as a president of the United Kingdom Board told me: “The only scenario that everyone seems to have forgotten is the one that all scenarios are wrong.”
Today’s degree of uncertainty could be familiar to those executives looking for their Covid plays books. But the situation is now possibly more complex with risks evolving daily. It is not just the whip of the tumult of the changes in the policies of the Trump administration and the rapid reversions.
Even if some agreements are secured to relieve commercial tensions, a new corporate scenario is emerging as the globalization that supported growth in the last 40 years threatens the most mercantilist forces.
Technological advances that allow information to flow rapidly through deadlines and geographies also means agitation through the bruises of the world feels close, amplified and overwhelming.
“Some things are quantitatively and qualitatively different this time,” says Martin Reeves in the group of experts from the Henderson Institute of BCG. The crises are multi-facetedMore and more political and “there is continuous uncertainty. In recent years we have just seen one thing after another.”
It is a common chorus among business leaders who are in a way of waiting and seeing. But wait too long and companies lose impulse, become less innovative and enter a paralysis of the state of decision. Act too soon and companies can make expensive decisions that require setback.
Daria Krivonos, executive director of the Institute of Futuro Studies of Copenhagen, says that there is a high degree of “illusions” in most companies at the highest levels. “Everyone is looking for certainty and wants to land in a model for the future,” she says.
Krivonos adds that, instead of identifying the best standard cases, the worst case and the base cases, companies must analyze micro scenarios that are directly relevant to the business, stress tests each separate assumption.
But stage planning was never trying to predict the future, it is about training it for it. Asking “What happens yes?” It has clear benefits. David Niles, CEO of Council Advisors, tells his clients that “it is not about obtaining the correct forecast, it is about having a series of ready plays, so when the unexpected happens, it is not frozen.”
It is one thing to imagine future alternatives, but another to know when to change course. In the short term, leaders must buy time.
Simon Freakley, from the management consulting firm, Alixpartners, recommends “without regrets” movements to ensure supply chains, operations, cash and customers sources, such as scrutinizing liquidity and working capital, refining prices and forecasts, focusing on the best clients and segments, and being alert to risks such as cyber security.
Beyond these immediate steps, companies must think a lot about their organizational abilities to find advantages. A financial director recently told me: “In this environment, it is easier to identify risks than seeing opportunities.” If companies focus only on downward protection, they can lose rise in times of interruption.
The objective of stage planning is not just to survive a crisis after another. It will also become the type of organization that can adapt and grow regardless of what is just around the corner.
anjli.raval@ft.com