From PLANT’s print edition: Future proofing

Incorporate uncertainty into your strategic planning.

Use the less visible drivers of change in your marketplace to gain an advantage in the future.

The Harper government’s 2013 budget highlighted the need to put Canadian manufacturers on a more competitive footing. The ability of companies to develop skills, create employment and to succeed in their marketplaces drives economic growth. But as a management leader or business owner, you have experienced how difficult it is to make these lofty, longer-term outcomes a reality.

If you answer “yes” to the following questions, it may be necessary to review how you plan, what you plan for, and how you approach a world of increasing uncertainty:

• Your industry is changing at a pace that has accelerated over the last few years.
• You already perform annual strategic planning and develop a business plan or update existing strategic plans.
• Your strategic plan is built on assumptions strongly grounded in the way things are working now, or used to work in the past. This may be especially true when you use the typical SWOT (strengths, weaknesses, opportunities and threats) model, which relies heavily on known issues rather than uncertainties and possibilities that are some years away.
• Your strategic plan ends up being more operational as the focus soon becomes short and continues to be for the remainder of the year.
• You have a feeling words such as globalization, global shift, business succession, industry consolidation and “new normal” must have an impact on your business, but you’re not sure how to react.
• There are major shifts in consumer behaviour, flows of capital and the expansion and contraction of markets that may have a profound impact on your company, but the visible proof is not yet immediate; and it’s easier to focus on the short-term emphasis on profitability and productivity, for more immediate results.
• Your workforce may be vulnerable to retirements with the loss of key skills and experience that follows, yet you find it hard to attract suitably qualified people and training them is risky, not knowing if they’ll stay.
• You’d like to focus on future opportunities now but uncertainty is frustrating your planning efforts.
• You want to be prepared for the future but have no idea how to connect the long-term vision with short-term priorities.

It’s difficult to keep up with the pace of change. Globalization is forcing all manufacturers to review products, their placement and the value they bring. This environment is creating a dangerous minefield, but also opportunities.

Shorter term, there are significant pressures on profitability and the ability to produce quality products when production costs are high and it becomes increasingly difficult to fill labour requirements. And it’s easier for global competitors such as Chinese manufacturers with the capacity to handle high volumes to serve new markets in geographies such as Brazil, Europe, the Middle East and even North America.
So how should you adjust your framework to address these challenges and respond to opportunities? By incorporating uncertainty into your planning.

Longer-term planning

Planning needs to become more complex, more multi-dimensional and it requires a deeper understanding of the less visible drivers of change and how they interact with each other.

Longer term planning is not just the domain of large, multi-national corporations. Organizations of all sizes must stretch their horizons. Synchronize timelines through a structure that enables operational planning for the ‘now’ to be connected with the strategic planning of the ‘later’ and the visionary planning of the future.

How do you tune the planning process to more fast-paced change? Follow these steps:

1. Integrate long (uncertain, visionary), medium (strategic) and short term (operational) planning into one framework. Even if you’re not able to accurately predict the future, determine, which issues, trends, and changes should be on the corporate radar now. Track changes in these trends and build an environment of anticipatory thinking.

2. Evaluate the leadership’s ability to think about the future. Review the types of discussions held during the past two years. Were they operational or strategic? Willing to work with uncertainty? Able to develop in new directions, or perfect the current situation? If necessary, develop these skills from internal or external sources.

3. Pick a specific timeline that goes beyond your immediate control. Develop a scenario that describes how your industry will look, the trends that will get it there and what will strengthen or weaken those trends. Evaluate where your competition will be during the same timeframe.

4. Develop a continuous strategic planning framework. Build an activity flow for a future strategy. Adapt business plans and strategies for continued growth in certain key areas that include: product development; learning new skills; acquisition of new technology and equipment; product development; and geographic positioning of your product.

5. Consider innovation, both radical and incremental, as a consistent goal. Emphasize longer-term plans, while focusing on shorter term, operational efficiencies. Be prepared for the possibility that future customers may want you to produce something completely different from what you currently do. Value differentiation requires a deep understanding that goes beyond your customers to their customers. Gain insight about the trends your customers see from their customers.

6. Make anticipation part of your culture at all levels. All employees should be part of the organizational intelligence system. Develop critical thinking skills and establish a platform that celebrates consistent feedback and learning. Sometimes the questions are more important than the answers. Celebrate those willing to ask the tough questions.

7. Be realistic about the potential of all your current products. Review your portfolio of products and services, do a life-cycle analysis and evaluate trends in the markets they serve.

8. Be patient. Questioning and learning should continue after identifying a new product or market. This should be embedded within all layers of management. You may make mistakes, but you’ll be better prepared for the future.

Learning about and adapting to the future is a key competitive advantage. Opportunities, demographic trends and global economic shifts are factors that form the bedrock on which a future platform will be built. Accept from the outset your company has to intentionally enter areas where important information will be picked up along the way.

And consider the advice of Dr. Ram Charan, author of Global Tilt, who said, “If you think you have no time to do these things now, you will have plenty of time in the future when business is down.”

Eben Louw, a partner with accounting, tax and advisory firm MNP, is based in Abbotsford, BC, and specializes in manufacturing, strategy and business succession planning.

This article appears in the May/June edition of PLANT.