What’s Coming Next? Maybe You Don’t Have to Know

Managing a business requires some sense for where things are heading but today changes make it virtually impossible to forecast reliably. Even for a short period ahead, the situation gets extremely murky.

Actually, it is a lot worse than that. There is no real way to tell what is coming next because nobody knows.

There are endless hypotheses and prognostications and theories of one kind or another out there. Would I be willing to bet my company on any of these? No way. Nobody really – reliably – knows what’s coming next.

For those who have to somehow manage a business through times of such fundamental uncertainty, this presents a serious problem. Most “solve” the problem by doing pretty much what they have always done in the hope that things will work out, somehow.

But there is a better way.

Well, we can always hope

Hope, or maybe termed more accurately “wishful thinking”, rarely works unless you get lucky. Las Vegas lucky. Sure, a few do win or even win big but the majority pay all of the bills. In business, this is commonly known as slow death. Slow death may be the good news.

Doing nothing new is a form of hope – hoping that things will get better if we can just manage to hang in there long enough. Since it may not be possible to know what is coming, you may feel that not acting differently until you are forced to might just be a sensible approach.

What we did until very recently worked well enough for us so perhaps it will succeed to a decent degree in whatever-is-coming. Stick with what we know and do it well. Let events and situations direct us differently if this becomes necessary.

Not acting differently until you are forced is probably an easy sell to your managers. Acting differently, whatever differently means in practice, is risky.

Letting events manage your business is probably not the best game plan but what are our alternatives?

Picking a Winner

One approach is to pick what you think is a reliable view of what is coming next and to run with it. This is often simply another crapshoot. If you get lucky and win, great. But what are the odds of getting lucky today?

There are many views available as to what is likely to happen over the next few months and maybe even in the distant future a year out. From my reading, these pretty much cover every eventuality so you have lots of choice. Pick one, any one. Do you feel lucky?

Deciding on a “likely” future is nothing like the distant past of a few months ago. In that happy time, things overall were reasonably stable so you could count on a solid baseline of situation elements. Risks were generally at the margin, in details.

Today, almost everything is changing. Hugely. Unpredictably. Worse yet, what worked in past probably won’t work going forward no matter what comes along.

Almost every business today needs to do something different, proactively. But what? We can’t tell what’s coming so we can’t pick a “winner” to use for planning and acting. Maybe just letting the world push us is the best strategy after all?

There turns out to be a solution that appears, on the surface at least, to have some potential for effectively handling the business world of today.

An envelope of futures

If the world is clearly heading in any of too-many directions, plus tending toward places where no one expected, about all you can do is place your business bets across a set of the “most likely” futures. Figuring out “most likely” for your specific business is another matter. A critical one.

You do know a few things about the future that provide a solid starting point. The future started today. What happens next is strongly constrained by today.

In simplest terms, the actual future is most likely to be contained within a cone of possibilities anchored by today. Yes, black swans do happen but you can prepare for them to some degree as outlined below.

Your particular cone of most likely futures can be extrapolated from the today anchor point. Suppose that you describe your business today by three primary factors, such as cash flow, sales, and order pipeline (or store traffic if you are a retailer). You know exactly what each of these factors is today.

Now think about how each factor might change over the next few months under a set assumptions about driving factors. You might simply define these as “Better”, “Stable”, “Weaker”, and “Awful”, each with factor values that fit your description. “Better” is a future that reflects growth or gain from today. “Stable” reflects no significant change. “Weaker” describes a decline of some degree, while “Awful” might be a kind of worst-case picture.

How can you tell which one of these is most likely to occur?

Tracking is the key

Let the future tell you what is most likely to happen as the actual future takes shape. Each of your futures – scenarios in planning jargon – has its own timeline in terms of your primary business factors. Let’s call these tracking factors.

Since the world is moving very quickly right now, you need to have near-real-time data on each tracking factor. Business information systems today make this relatively easy, at least on a weekly basis.

You might be looking ahead a full quarter – maybe 10-15 weeks – so that you can compare your actual tracking data – what has happened – against the corresponding futures tracking projections – what might happen. Sure enough, world will be somewhere within your futures cone unless a black swan messes things up seriously.

This comparison tells you where your business is heading within the context of your set of futures. You may have to adjust your best- and worst-case futures factors as you go along in the event that your business is heading too close to either cone boundary.

This is the world telling you exactly where things are heading in the context of your business. No guessing involved.

You may have no idea why things are heading this way but you can at least count on momentum keeping the underlying drivers doing whatever it is that they may be doing. Nice if you can explain the drivers but it is not necessary. You truly don’t have to know.

Now for the tricky part: action

Action plans that favor your current tracked path would be a top priority. No big bets however until the trend here seems well-established. The game until then is a set of baby-steps that implement your favored action plan incrementally, to the degree possible. Nothing that can’t be halted or back-tracked in the event of a sudden unexpected change in path.

As your favored direction becomes proven, you can begin to add resources and extensions. You may also want to place some small side bets on nearby path tracks, such as opening up a new location or introducing a new product. These also would be handled incrementally to the extent possible, with an exit plan or redirect plan ready to go if the world misbehaves.

Black swans happen

Okay, so how do you plan for the unforeseeable and unexpected black swan events or situations? The answer here is diversity. You need to have sufficient diversity in your business such that a catastrophic hit in any component cannot cause the business as a whole to fail.

Quite often, diversity is achieved by a constant flow of innovations.

Innovations are vital not just to survival in the black swan occurrences but also to growth even in the most difficult of business environments. Your current business can’t be too concentrated in any small set of customers, markets, technologies, or products. Diversifying innovations should be pursued in any area of high sales concentration.

Market diversity, for example, may help reduce the dependence on any one market but if the markets are vulnerable to competition or technology, you need innovations – new stuff.

“Most Likely” Scenarios

Crystal ball time. Almost no business is large enough or rich enough to pursue more than a few possible futures. Obviously, your choice will be immediately narrowed to those approachable by what you know and what your available resources can support. This is step one: what do you know how to do and what resources do you have available to pursue some related scenarios?

If you are a regional distributor of office supplies, the likely disappearance of many traditional offices will be a huge threat. Much of what you know how to do today may not be applicable to a world of employees working mostly at home.

Your set of most-likely scenarios might include, for example:

• a slow but steady return to perhaps 75% of prior sales
• a downturn stabilizing at some lower level, such as 50%
• a worst-case situation in which your market becomes unsustainable

These cover pretty much everything that might occur outside of a black swan visit. Below is a simple picture of what a regional retailer’s scenario plans might look like for two store groups: strong (high-performing) stores and weak (low-performing) stores. A baseline period (actuals) shows a steady period of sales for both groups (green box) followed by a sudden drop over a period of five weeks (red box). Three scenarios are shown for each store group (dashed lines). Actual performance is shown in black.

Pretty clearly, the strong stores real world seems to be tracking somewhere between the best case (green) and mid-case (yellow) scenarios while the weak stores group seems to be headed toward the worst case (red) scenario.

The tracking approach illustrated above should tell you a lot about the general direction of things that affect your business directly. You may not know much about why but you can at least plan and act with some confidence. But there is an extension to this tracking approach: testing.

Testing to learn

If you can figure out a few “most likely” future scenarios, then you can start learning about which one or ones may actually be in play. Taking small steps in each to see what happens can be a low risk but potentially invaluable way of letting the world tell you what it is up to.

Your design of testing steps is vitally important to obtaining results that tell you about each situation. This can be very different from piloting a business idea.

Testing to learn is highly purposeful and carefully directed. You aim tests at business areas that seem important for your near-term future. Actions have to be designed to generate useful information. The actions may be business initiatives as well but the learning content has to be fundamental.

Outcomes must be documented and analyzed. What has been learned needs to be stated and extended to a what-next point. This is a vital business process that so few companies follow today.

Bottom line:

Managing a business during times of great uncertainty and rapid change requires some very different practices than those that worked well in a stable world. You have to plan within a set of possible futures, defined in terms of your business. You may not have a good idea of what is driving your business environment and you almost certainly can’t predict with confidence its direction but you can plan and act confidently by tracking as just outlined, taking small steps to test the direction, and diversifying your business.

Related Reading

Executive search consultant AESC offers a fairly detailed picture of what they see coming next: “THE NOW, THE NEXT, AND THE NEW NORMAL”. Their main points of guidance include: (1) Be prepared; (2) Go digital; (3) Remote work works; (4) Cash is (still) king; (5) Be agile; (6) Supply chains are fragile; (7) Know who’s next; (8) Collaborate; (9) Innovate; (10) Bend, not break; (11) Mental health is health; (12) Be humble. Probably something useful in there for any business.

The World Economic Forum not surprisingly has something interesting to say about what’s coming next: “There’s nothing new about the ‘new normal’. Here’s why”. It begins with: