Almost all decisions are made under conditions of uncertainty. The planning models that served us so well in the past are proving to be less effective in an era of globalised supply-demand chains, shortening product life cycles and structural shift in the world economy. In the past, when markets and technologies did not change with anything like the speed that we see today, our planning horizons could extend 5, 10 or more years ahead. We do not enjoy the same comfortable position today.
It is impossible to eliminate uncertainty. We have to work out how to minimise it.
Therefore we need a more flexible approach to planning. Of course we still need to have a view as to where we are ultimately headed, but this has to be revised more frequently than in the past, when a robust plan would remain robust over a fairly predictable and long period. Nowadays we have to be able to adjust more quickly to situations that can change unpredictably and often rapidly. This has brought about a revision of thinking at a number of levels and has given rise to questions that can have a profound impact on the strategy of our organisations.
How far ahead can you plan your route if your visibility is restricted and the minimum time-period to success of your initiative is longer than your clear line of sight? We first need to consider the following influences on this decision.
- Competitive advantage is becoming more difficult to sustain.
- Business is becoming a competition between business models, not simply between the product/service elements.
- Knowledge is disseminated more evenly and more quickly than in the past.
- Powerful software can more readily convert basic data into decision-supporting intelligence.
- Organisations are beginning to resemble the fighter aircraft – constantly changing shape in response to rapidly changing competitive conditions.
Therefore the focus in strategy and organisation is now moving towards agility.
Agility is the capability of an organisation to anticipate or respond to change in the equilibrium conditions of a business as it works towards fulfilling its key objectives. Acceleration of the process of change and development compels us to think in a different way about strategy, operations and organisational structure, with the following main consequences.
- Hierarchical structures cannot respond fast enough in today’s business environment.
- Data-oriented analytics are no longer effective: cognitive analytics, based on artificial intelligence, are needed.
- Managerial roles are less defined and are in a constant state of flux.
- Competitive advantage is a series of temporary phenomena that are replaced when no longer viable.
- Leveraging external (supply chain) resources adds to capability and agility.
- Strategic planning is getting devolved lower in the organisation.
What this means in our quest to deal effectively with increasing uncertainty is as follows. The top management team needs to abandon highly prescriptive planning models and move to a more experimental approach in which decisions to set and change direction are made by people who are closest to the point of impact of those decisions. In this environment the principal role of a strategic plan is to set priorities for the general direction of the company and, especially, determining the hurdle criteria for project selection within an overall goal of achieving and sustaining profitable growth. Within this guiding framework component parts of a business need to develop and change content and detail to the extent and with the speed necessary to establish and sustain competitive advantage. The linkage between strategic planning and operational/project planning remains close, but we are beginning to see the end of long strategic “plans” containing of page after page of operational detail. We see also the beginnings of a new concept of “the organisation”, where collaborative relationships enable prime players to create extended or virtual organisations that cope effectively with change in underlying market dynamics.
In other words, we may not be able to deal perfectly with uncertainty. However a focus on achieving and enhancing agility will put us in the best position to be one of leading performers in a business rather than a follower. It is substantially to do with an emerging Pareto distribution of profit – in an increasing number of business sectors the substantial majority of the total available profit is earned by the top few players. These will be the most agile players: agility is emerging as the principal core competence of the successful organisation in the 21st century.
Clearly this has major implications for every aspect of running a business and creating tomorrow’s organisation out of today’s organisation. My brief note on this major topic is intended to start a discussion. Further contributions are welcome. Let’s hope that this helps to build an exchange of ideas between our clients, instructors and delegates.
Copyright © Dr. John Daniel Park 2016