Industryweek 14324 Strategic Thinking

Strategic Thinking In The Face of Uncertainty

Dec. 2, 2016
How to ensure your strategic thinking is optimized in spite of unpredictable world events.

Wow. Talk about uncertainty.

Brexit. Trump. Over 20 major countries with unsettled leadership. How’s a business owner supposed to make good strategic decisions under these circumstances?

First, remember there is a big difference between what has happened, what will definitively happen, and what might happen.

One client with operations in England and sales in over 80 countries smartly reacted to the Brexit vote with a “wait and see” attitude. Another one said that a British acquisition target demanded a higher sales price following the Brexit vote. Given that we know absolutely nothing about how that complex legal decision will be executed, any adjustments would be born from guesses, not facts.

Similarly, we’ve already learned that policy proclamations from Trump may quickly become low priorities. Strategy founded on his platform, like those Brexit-based, is currently fool’s gold. Guesses, not facts.

International socio-economic-political uncertainty has become a way of life for all of us. It offers short-term opportunism, but little more. Patience is a virtue when considering these extrinsic challenges.

Second, distinguish between short term and long term factors.

Brexit will likely have an impact that lasts for over 10 years, longer unless the British request and are granted readmission soon after implementation begins. Trump will make policy decisions that can be reversed by the next president, just as he vows to reverse many of Obama’s programs.

The Trump decision that will have persisting impact is that of Supreme Court Justices. He can fill at least one, and likely a few more positions. But really, just how much does the makeup of the SCOTUS impact your business?

When manufacturers first focused on outsourcing and moving operations to the Far East for labor savings, most entered the decision-making process understanding that the politics and economics of that region could easily change significantly within five years. Anyone who made the decision to produce there without a ready exit plan and a quick expected payback was simply not thinking strategically in the first place. They were opportunistic. Unfortunately, those choices are negatively impacting the supply of skilled labor in North America now. Clever grasping of low hanging fruit can have unexpected ramifications.

Third, identify factors that will significantly impact your industry and your business regardless of fluid political leadership, tariffs, trade pacts, and labor laws.

For manufacturers globally, the elements of operations that survival requires include agility, automation, data, speed, and energy.

  • Agility is the capability to adjust volumes and mix, and drive changing competition quickly and profitably. Consider what craft breweries have done to the operations of major brands.
  • Automation facilitates safety, quality, cost and speed advances. Additive manufacturing (3-D printing) has transitioned from prototype to volume production.
  • Data: The ability to generate, capture, analyze and share data that provides valuable information is becoming a required core competency.  ERP, EDI, RFID and barcoding are ancient technologies. Industry 4.0, also known as the Internet of Things (IoT) is embedded in large companies--and they are beginning to require it of suppliers.
  • Speed demands will not be relaxed regardless of political changes. The expectation has been set and will intensify, just as did prior demands for quality. Amazon is only 20 years old, and evolves its business model continuously. Google is developing IT infrastructure capabilities that make our current lack of patience for answers seem antiquated.
  • Energy: Manufacturing will always employ energy. The requirements, source, storage, and total costs are evolving. The ability to understand and leverage power management will be evermore critical. I have clients with windmills, others with solar generation capabilities, and still others focused on dramatic reductions in usage. While most of us hope for less expensive renewable options, we all want a range of battery sizes and technologies that reliably hold power. Companies like Johnson Controls, Bosch and Tesla have numerous battery research labs and partner with international universities and government agencies to solve this vexing challenge. Samsung is certainly hoping the battery challenge is resolved.

So how should you ensure your strategic thinking is optimized in an era of uncertainty?

Simple. Look for the things that are certain, and that will matter over time. I’ve provided five that impact you, now and in the future. Ensure that your vision, strategy, and capabilities in those arenas are always top priorities. Then, and only then, add near-term opportunistic strategic alternatives to the mix.

It’s easy to react to every headline. Don’t do it. Absolutely stay abreast of advances around and in your industry. And create your own. Certainly, consider opportunities to gain market share. But don’t waste precious resources on brawling battles that are not strategic to the war you intend to win.

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