Managing Uncertainty: Three Key Strategies

A recent survey by Whiteark found that people in business were more concerned about uncertainty than any other issue.  This is understandable given the shocks of the past year, including extensive, tragic bushfires, the COVID-19 pandemic, an economic recession, and electoral mayhem in our most important ally, USA.

When business executives are confronted by increased uncertainty, many seek to cut costs – both operational and marketing – which is usually not an optimum strategy.

We seem to experience major shocks about once a decade and there are smaller unexpected disruptions more frequently.  I have listed the major such events that I can remember in Appendix 1.  As in 2019-20 there are times when we have to cope with more than one disruptive factor.  Other potential catastrophes and their impacts are listed in Appendix 2.

Can we predict shocks such as these, and so prepare?  If not, how can we survive such shocks?  Why do some companies get stronger during a period of uncertainty?  Before addressing these questions, it important to consider the types of uncertainty that we may encounter.

Types of uncertainty

Reports that say there's -- that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things that we know that we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns, the ones we don't know we don't know.

Donald Rumsfeld (then US Defense Secretary) in February 2002, speaking about the lack of evidence linking the government of Iraq with the supply of weapons of mass destruction to terrorist groups.

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

— Mark Twain

It is a shame that Donald Rumsfeld was not more familiar with Mark Twain’s writing as he may have realised that there are two types of known knowns.  One is true known knowns and the other is fallacious known knowns.  The latter often stems from a false assumption or theory that has become a strong belief (had he known about the latter category, perhaps Rumsfeld may have referred to it as unknown knowns).

Economist Frank Knight, in 1921, defined risk as a quantity which can be measured while uncertainty is not measurable.  That is, we can compute the likelihood of a risk event occurring in a given year (perhaps on the basis of past frequency of occurrence) but uncertainty does not have a known probability distribution.

There may be some factors or events which are impossible to imagine and so these are completely uncertain.  This is most likely because they have never happened before.  They are the “Black Swans” of Nassim Nicholas Taleb or the unknown unknowns of Donald Rumsfeld.   Taleb, in his books Fooled by Randomness and The Black Swan, describes Black Swan events as having three characteristics.  The first is that nothing in the past could have convincingly pointed to its possibility.  Secondly, the event has an extreme impact.  Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the event – retrospectively making it appear to have been predictable even though it wasn’t predicted.  Technological developments can be Black Swans when it comes to long-term forecasting – for example, it would have been very difficult for someone in 1945 to imagine that in less than 60 years  there would be cheap, very small and powerful personal computers with high bandwidth links to billions of others.

There are some events which we know can happen but we don’t know where or when and how severe their impact could be.  These could include extreme weather events (such as hurricane Katrina) and other natural events such as volcanic eruptions, earthquakes, tsunamis, large solar flares, collisions with large meteors or comets.  Then there are disease pandemics and terrorist acts.  While these are highly uncertain, we know they can happen and may be able to take some precautions – such is improving the levee banks for New Orleans, constructing resilient buildings in earthquake prone areas, developing tsunami and volcanic eruption warning systems, and developing new medicines.

Financial markets and consumer markets can also suffer from events which we know can happen, but we can’t predict their timing or likely severity.

Then there are changes which are slow moving and there is little uncertainty about their impact – and yet we take little or no precautionary action.  The only uncertainty is when we will act.  Examples of this type of change are provided in Appendix 3.

Can we predict shocks and so prepare for them?

Yes, we can predict some types of shock and we can have some idea of their likelihood.  The following is from the editorial of The Australian Financial Review of 4 July 2011.

“Imagine this. The year is 2017 and a virulent strain of H5N1 avian flu has jumped from poultry to humans in the crowded southern Chinese city of Guangzhou. The virus quickly spreads across the porous border into Hong Kong, then sweeps rapidly through the rest of Asia. The World Health Organisation declares the outbreak a pandemic as governments around the globe break open their vaccine stockpiles in an effort to protect their citizens from the deadly virus. But the measures taken by health authorities do little to stop the spread of the virus. The pandemic ends up killing more than 50 million people around the world, transport and trade systems grind to a halt, and the global economy tips into a recession more severe than that caused by the financial crisis of 2008-10.”

The 2020 pandemic occurred three years after that posited in this scenario.  It was not avian flu, but a corona virus – although it did transmit from an animal and probably started in China.  As at 30 November 2020, 1.46 million people have died rather than 50 million but 63 million are known to have been infected.  The current global recession is indeed more severe than that of the financial crisis of 2008-10.

The scenario cited by the Financial Review was from an OECD report at the time, which identified and described several other potential shocks.

The current pandemic has been described by some as a one in a hundred year event by reference to the so-called Spanish flu of 2018.  It is not!  There was a deadly flu pandemic in 1957-58 which killed more than a million people worldwide (Asian flu).  The Hong Kong flu pandemic of 1968 also killed more than one million.  In the past 17 years there have two earlier deadly corona viruses – SARS (severe acute respiratory syndrome) in 2003 and MERS (middle east respiratory syndrome) in 2012.  They petered out, but should have served as a warning.

Despite these warnings we were unprepared for the pandemic.  We did not have enough supplies of personal protective equipment and sanitiser.  There had been no pandemic rehearsal for over a decade.

Managing uncertainty means that we should treat how we managed this pandemic as a dress rehearsal and learn from the experience.  There will be another pandemic and it could be soon.

It was possible to predict a severe economic slowdown in 2008-09, but people in power at the time did not want to see the signals.  In mid-2007, I was able to predict the slowdown in Australia and to warn my clients.  I realised that three shocks could occur together in about mid-2008 and that the combined impact would be a significant slowdown.  One was the sub-prime home loan boom in the USA, which was likely to slow their economy when the bubble burst.  Another was the Reserve Bank of Australia’s interest rate policy.  They had been lifting interest rates since 2002 in an effort to quell inflation.  I knew they would go to far and so they did, lifting interest rates in August and November 2007 and in February and March 2008.  By the end of 2004, the proportion of household disposable income which was consumed by interest payments exceeded the 9.7% record set on the eve of the recession of the early 1990’s.  By mid-2007, the burden was 11.7% and yet the Reserve Bank piled on the misery, lifting the burden to 13.3% on the eve of the GFC!  They obviously did not see it coming.  The third predictable impact was associated with the Beijing Olympics in August 2008.  I had visited Beijing in April 2007 and witnessed the huge construction boom as the whole city was reconstructed – not just sporting facilities.  A metro with 500 underground stations, whole villages demolished and replaced with apartment towers – all built using steel made from Australia’s iron ore!  It had to come to a shuddering halt before mid-2008.

The Reserve Bank of Australia did not see the GFC coming, but they were not alone in that.

Legendary US Federal Reserve Chairman Alan Greenspan said in 2008 "I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms”.  He regretted his earlier opposition to regulatory curbs on financial derivatives which left banks facing billions of dollars worth of liabilities.

The danger signs for Australia were there as I have described above, but the experts in charge of monetary policy and financial regulation were oblivious to them.  All it took was good general knowledge and imagination to develop the scenario.  Both of these skills are important in anticipating shocks.

The 2019-20 bushfires were of unprecedented ferocity, but they were predicted long in advance (see Appendix 4).  Adequate preparation was lacking, despite the predictions.

Preparing for uncertainty  

We can prepare for uncertainty by using two techniques: scenarios and peripheral vision.

Scenarios are plausible futures, like those described above for a pandemic and a significant economic slowdown.  They must be accompanied by plans for managing should they eventuate.   Developing a set of scenarios can increase resilience.  The aim is to develop plans which can succeed across a range of scenarios.  We do not attach a likelihood to each scenario because we are dealing with uncertainty but we may be able to discern which scenario is most likely as time goes on, based on a range of indicators.

Peter Schwartz wrote the early guide to scenario development, “The art of the long view” (Currency Doubleday, 1991).  He lists eight steps in the development of scenarios:

1. Identify the focal point or key decision.  This will increase the relevance of the scenarios.

2. Identify the key factors – what will the decision makers need to know when making choices?

3. List the driving forces that influence the key factors.

4. Rank the driving forces by their levels of importance and uncertainty.  This will focus the analysis on issues which are both highly important and uncertain.

5. Select scenario logics – a diverse set of plots spanning the range of plausible outcomes.

6. Fleshing out the scenarios – develop the narratives associated with each scenario.

7. Implications for each scenario – what are the opportunities and vulnerabilities revealed by the scenarios and how should strategy be adapted?

8. Selection of leading indicators and signposts – which can reveal, as time progresses, which  scenario is closest to the course of events as they unfold.

The intended outcome is plans which are robust across a wide range of uncertainty.  The individual scenarios should be rehearsed so that implementation of strategy adaptation is smooth and efficient.

Peripheral vision

The biggest dangers to a company are the ones you don’t see coming.  Understanding these threats – and anticipating opportunities – requires strong peripheral vision.
George S Day and J. H. Schoemaker in “Scanning the Periphery”, Harvard Business Review, November 2005.

Scanning the periphery is all about answering the question “what don’t we know that might matter”.  Often management reports are quite internally focused – on the business and the market in which they operate.  But demographic change, technological change, regulatory change, environmental change, amongst others can cause major disruptions to a business which are not anticipated.

Peripheral vision involves scanning the broad business and social environments for weak signals of potential change and analysing the implications.  This should be a continuous process.  Unfortunately, this activity can be seen as “nice to know” rather than “need to know” and investment in it can be seen as discretionary.  The global financial crisis which emerged in 2008 was not predicted by economists primarily because of groupthink and a failure of imagination.  Perhaps they had not invested enough in scanning the periphery.

Scanning is sometimes referred to as STEEP analysis (Social, Technological, Economic, Environmental, Political) and also has other acronyms such as PESTEL. 

Scanning the periphery differs from scenario analysis in an important way.  Scenarios start with a focus on the key decisions to be made and then identifies and qualifies influential factors.  Scanning starts with the broad business environment and then evaluates how future trends may influence the business.  I recommend that both approaches be employed as they provide complementary insights, which increases preparedness.

How can we survive during a period of uncertainty?

Some organisations lapse into pessimism and crisis mode.  They cut costs across the board, including marketing, and so hand market share to more optimistic competitors.  If the market is shrinking this is devastating and recovery is very difficult.

A study published by Harvard Business Review in March 2010 studied business responses during the three previous recessions to identify the most successful strategies.  It was found that the best performing businesses cut costs mainly by improving operational efficiency rather than by slashing the number of employees.  They also invested in growth. They developed new business opportunities by making significantly greater investments than their rivals in R&D and marketing, and they invested in assets such as plant and machinery to improve productivity.

During the current pandemic and recession governments and some businesses developed near real-time data so that strategy decisions were not based on out-of-date data.  Fortnightly data from the Australian Tax Office on payrolls was used to gauge employment and payrolls, banks provided data on consumer spending via debit and credit card records, the Australian Bureau of Statistics and private agencies conducted more frequent surveys to measure the mood and expectations of consumers and business managers.  Health departments provided daily updates on coronavirus infections.  Mobility data was provided by Google and Apple.

This is also referred to as “fast data”.  It is not only near real time, it is also more granular in respect to location, type of business and consumer demographic.

This regular flow of timely data allowed government economists, health officials, and businesses to adjust forecasts and strategy frequently – to be more agile.

Fast data is essential during periods of uncertainty and our experience in developing information systems over the past year and interpreting fast data will stand us in good stead for the next shock, when it comes.

Can we get stronger during a period of uncertainty?

Harvey Norman sales soared during the pandemic, and so did profits and dividends.  Gerry Harvey said it was the best sales growth he had experienced in 60 years of being in retail. “It started off with freezers and then it went to whitegoods and computers, then to televisions and then to furniture and bedding.  This performance was not by design, but was a consequence of working from home and compulsory cocooning during the pandemic.  Harvey Norman took advantage by strong investment in advertising from the outset.

Other retailers to prosper during the recession have been JB Hi-Fi, Bunnings, Kogan.com, and Temple & Webster.

During the global financial crisis most major brands of vehicles cut advertising investment significantly – because they were pessimistic about recent and expected future new vehicle sales.  One brand kept advertising and so significantly boosted share of voice and market share.  They have held on to that extra share ever since while one of the big brands then, Holden, have now exited the market.  That optimistic brand was Hyundai.

Nassim Nicholas Taleb, of Black Swan fame, recently wrote a book called Antifragile.  The theme is that resilience is not the opposite of fragile.  Something fragile breaks under stress, while something resilient does not: but something which is antifragile gets stronger under stress.  Hyundai during the global financial crisis is a good example of antifragility.

These successes reinforce the findings described in the Harvard Business Review article mentioned above.  Investment in growth during an economic slowdown, while also improving operational efficiency, is the best strategy for prospering during periods of uncertainty.

Key strategies for managing uncertainty

1.     Anticipate.  Use scenarios to construct a set of plausible futures complete with appropriate plans for each.  Rehearse the plans and use peripheral vision to be ready to respond quickly.  

2.     Respond.  A strategy which is a mix of improving operational efficiency and investing in growth through increasing market share or creating new opportunity is needed to survive and prosper during a period of uncertainty.

3.     Monitor and adapt.  Develop a “fast data” capability to increase agility as uncertainty develops, peaks, and ebbs.

Article written by Charlie Nelson, Director Foreseechange

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Looking to prepare and plan for uncertainty? Let us help.

Whiteark is not your average consulting firm, we have first-hand experience in delivering transformation programs for private equity and other organisations with a focus on people just as much as financial outcomes. We understand that execution is the hardest part, and so we roll our sleeves up and work with you to ensure we can deliver the required outcomes for the business. Our co-founders have a combined experience of over 50 years’ working as Executives in organisations delivering outcomes for shareholders. Reach out for a no obligation conversation on how we can help you. Contact us on whiteark@whiteark.com.au

Appendix

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Appendix 1: disruptive shocks over the past 50 years

This list is intended to illustrate the range of shocks rather than being comprehensive.

Appendix 2: potential disruptive shocks

Every year, the World Economic Forum brings out a risks report.  Prominent on the 2020 list were a cyber attack, extreme weather, natural disasters, and human-made environmental disasters.

In 2020 Australian population growth has slumped due to a fall in net migration.  Could there be a significant decline in fertility to continue slow population growth?  It has been speculated that fertility will fall because young adults will be reluctant to bring children into a world where COVID-19 is still a threat in the short-term and climate change is a threat in the medium-term.  The recession also has the potential to cause a temporary decline in fertility due to concerns about unemployment.  Australia’s fertility has been running at around 1.8 births per woman and other countries such as Italy and Japan have lower fertility of around 1.3.  This topic has been researched by foreseechange and current indications are that a significant decline in fertility for an extended period is unlikely but cannot be ruled out.  This research is ongoing.

Solar flares are a hazard for electronic communications.  The last major disruption was the Carrington event in 1859, in the days of the telegraph.  A huge solar flare followed by a large coronal mass ejection struck Earth and induced huge currents into wires causing extensive and costly damage.  Lesser events struck in 1921 and in 1989, the latter causing a huge blackout in Canada.  In 2012, there was an event of similar magnitude to the 1859 Carrington event which passed through Earth’s orbit – fortunately, the planet was in a different quadrant of its orbit.  A repeat of the Carrington event today would severely disrupt all forms of communication, power transmission, GPS and other navigation, and damage pipelines.  The recovery time has been estimated at four to 10 years and the cost at up to $2 trillion in the first year.

In 1908, a large comet or asteroid caused a major explosion over Siberia (the Tunguska event).  The energy released was up to 1,000 times greater than the atomic bomb dropped on Hiroshima in 1945.  Fortunately the area was sparsely populated, but such an impact on a major city would be catastrophic on an unprecedented scale.

A major volcanic eruption is capable of blocking sunlight over large areas for extended periods, creating severely cold conditions.  This can reduce food production and cause illness, as well as curtailing air travel.  There have been several such events in history and they may happen about once every 1,000 to 2,000 years.

Appendix 3: slow and steady disruptions

There are changes which are slow, but steady and seemingly irrevocable – because we do too little to manage the consequences and risks.  This procrastination has current and future financial and human costs.

One of these is the ageing population, combined with still increasing lifespans.  The baby boom of 1946 to 1964 was followed by a baby bust in the 1970’s as women became more able to control their fertility.  This meant that there would be a large generation reaching the traditional retirement age around 2011, followed by a smaller generation than would have previously been expected.  This future problem was evident before 1980.  The predictable consequences were increased funding to pay age pensions, increased demand for health and aged care facilities, and a need to encourage people aged over 65 to keep working.

In the 1990’s a compulsory superannuation scheme was set up and every other predictable need was also put off.  We have not caught up with the needed infrastructure and services yet and there are too many people over 65 who want to keep working but who cannot secure a job.

Another is climate change.  The countries of the world gathered in Rio di Janeiro in 1992 and agreed to take action to reduce the risk of dangerous climate change.  In the 28 years since, the concentration of carbon dioxide in the atmosphere has continued increasing at the same rate.  Temperatures in Australia and much of the world continue to increase.  Sea levels are increasing at a faster rate.

Appendix 4: predicting extreme bushfire conditions in 2019-20

Twelve years ago, economist Ross Garnaut made a prophecy that has devastatingly come true.

In the 2008 Garnaut Climate Change Review, which examined the scientific evidence around the impacts of climate change on Australia and its economy, he predicted that without adequate action, the nation would face a more frequent and intense fire season by 2020.

ABC News, 8 January 2020

I, too, provided warnings.  In July 2011, I wrote to the Victorian water minister predicting severe drought in the period 2017 to 2022.  The prediction was applicable to much of south eastern Australia.  The reply, In September 2011, said that the driver of drought which I proposed was not considered by mainstream climate scientists to have a plausible mechanism.  The reply said that planning processes are designed to cope with variability including severe drought.

In January 2019, I again wrote to the Victorian water minister saying that my prediction had come true and that it was time my predictions were taken seriously.  I included a copy of the previous correspondence.  It was a different water minister and a government of a different political party, but the reply was almost a carbon copy:  the government works with Australia’s most experienced and respected researchers and planning processes are designed to cope with a wide range of climate futures including prolonged drought.  Only months later the many victims of the terrible bushfires would disagree with that statement!

Twenty-three former fire and emergency leaders say they tried for months to warn Prime Minister Scott Morrison, beginning in April 2019, that Australia needed more water-bombers to tackle bigger, faster and hotter bushfires.  They were not able to get a hearing.

The catastrophic bushfire conditions were caused by both extremely low rainfall and record high temperatures.  This combination of conditions was unprecedented, but predicted.  The charts on the following page show how severe the conditions were in the three years 2017 to 2019. 

Chart 1 shows the annual rainfall in the Murray Darling Basin, along with the rolling three year average.  The average over the period 2017 to 2019 was the lowest ever recorded three year period, consistent with my 2011 prediction.  Chart 2 shows the mean temperature  and the three year average.  The three year average temperature over the period 2017 to 2019 was the highest on record by a huge margin.  Even more severe conditions may be less than 20 years away!

Chart 1

Chart 2

Article written by Charlie Nelson, Director Foreseechange

Resetting Your Digital Strategy

COVID-19 has caused disruption for all businesses across Australia, whether it be positive or negative. One of the impacts that has been positive is that it has sparked digital acceleration for many companies and industries.

Companies have been forced to scramble, improvise, and embrace new ways of operating within weeks instead of what would normally take years. It is now clearer than ever that our future is digital. The key enabler for this acceleration in digital adoption is the increased connection to technology for businesses and consumers.

It is now time to reset your digital strategy for post COVID and explore new opportunities that a time of immense change inevitably elicits. You should review things that have worked well for you during the pandemic and avoid regressing to former ways of operating.

Below are 5 areas you should focus on when revisiting your digital strategy:

1. Priorities

2. Customer

3. Innovative Ideas

4. Digital Roadmap

5. Increasing Focus and Agility

Priorities

Have you begun to pivot your priorities to meet the demands of this digital world? Are the core objectives and assumptions that informed your strategy still relevant? Consumers have changed their media habits and purchasing behaviours with an increase in mobile usage, a surge in the percentage of consumers shopping online for groceries, and the amount of consumers now tackling home improvement projects. You need to explore the market opportunity as there are high chances there will be new markets to enter and new customers to engage; or possibly what used to be a small component of your business pre-covid, is now one of the biggest contributors. It is time to pivot and reset your goals and priorities in a way that responds to the new reality with digital channels at the core.

Customers

Your customer journeys that were relevant pre-covid are now most likely incorrect or redundant so you need to explore what matters to your customer in this new reality. You need to revisit your customers’ attitudes, needs, motivations and behaviour as it relates to your business. The more you understand your customer the better you will able to market to them, create products and services that meet their needs, gain a competitive advantage, proactively identify shifts in purchasing intent and behaviour, and increase your chances for success. Ultimately you will be more equipped to identify, understand, analyse and retain your customers as you focus on enhancing your customer experience. Companies that develop a comprehensive voice of customer research and strategy have seen significant reductions in customer service costs and have had much higher customer retention rates. Despite the financial downturn, now is the time to boost your digital customer experience since digital is now the primary channel for many.

Innovative Ideas

Mass digitisation and disruption has meant consumers and businesses are more open and willing to adopt new approaches to doing things. This is the time for businesses to pilot innovative ideas and delivery models. At a time when traditional strategies have been upended, COVID has encouraged leaders and businesses to pivot quickly and explore new things and assess new approaches, value streams and delivery models.

Digital Roadmap

When resetting your digital strategy, you need to ask yourself the question, is my digital roadmap solving the right challenges? You need to review digitisation across your entire organisation – How are you interacting with your customers? How are different departments doing their jobs now? How are you launching new products? Nurturing relationships with prospects? It is time to evaluate the approaches that are working, those that can/need to be scaled, where optimisation is required, and what requires a complete overhaul. Re-prioritise your technology investments or develop a newly inspired digital roadmap with clear priorities and fresh insights. As part of your review audit and rate your digital capabilities, infrastructure, and experience to measure how you stack up against your competitors and where urgency is greatest.

Increasing Focus and Agility

COVID has been a catalyst for change and we have seen how quickly companies can pivot during these unprecedent times. Are you able to lift your focus and agility? Your organisation could benefit from having greater clarity of focus and alignment of strategic objectives to reduce silos, empower collaboration and agility, and inspire your top talent.

As you begin to reset your digital strategy, make sure you revisit your priorities, customer journey and experience, innovative ideas, digital roadmap and increasing focus and agility.

Looking to reset your own digital strategy? 

Let us help. To learn more about how to reset your digital strategy contact us on whiteark@whiteark.com.au

Tracking the success of your strategy

A strategic plan is critical to driving alignment across your organisation; it provides clarity, direction and focus. But how do you know if your company is headed in the right direction, moving towards achieving your goals, delivering your strategic plan? The answer is… measurement.

During the process of building a strategic plan, you set strategic goals; outcomes that the company attempts to reach when crafting a strategic plan. In order to work towards achieving these goals it is important to measure key performance metrics that indicate whether you are on track to achieving your goals.

There are many options for performance metrics, and choosing the right ones can be challenging, but it’s crucial to decide carefully because these metrics will be the focus of effort in your company to help reach the most valuable goals. Tracking the wrong metrics is almost as bad as tracking nothing at all and can lead to poor decision making, along with a waste time and money collecting information that is not going to benefit the business.

When deciding on the right metrics for tracking your strategy’s success, there are a few guiding principles:

Align your metrics to your strategic objectives

Your metrics should be clearly tied to your strategic objectives and move your employees toward the actions you want. Metrics will consider all areas of the business to ensure all departments have clarity on how they impact the overall company goal.

Keep it simple

Don’t overload staff with too many KPIs to track.

Maintain up-to-date data

Be sure your measures include the latest data and are reported on regularly, as this is the key to making them a source of feedback on efforts and an early warning system for problems.

Use dashboards

Be sure to present data clearly using easy to understand visuals. Performance dashboards are an excellent tool for tracking key metrics. Your dashboard metrics should make it impossible to hide from failure.

Review metrics

You should review your metrics to discuss the progress of your strategic plan, and to ensure your choice of measures are the right ones - providing useful information and stimulating the best results.

A well-designed set of KPIs should provide a clear indication of current levels of performance and help your people make better decisions that bring the business closer to achieving its strategic objectives.

The right metrics will:

• Help you identify how your business is currently performing

• Tell you what to focus on

• Provide direction and alignment across the organisation

• Help with decision making

• Drive desired performance results

• Ultimately achieve your strategic goals

Looking to track your own success?

Let us help. To learn more about how to build your strategy contact us on whiteark@whiteark.com.au

Key things to consider when resetting your strategy post COVID-19

The COVID-19 pandemic has created unprecedented disruptions for a range of industries and business that will influence the ways in which companies operate in the future. 

As businesses shift from response to recovery phase, they need to build resilience, and we believe the key things to consider when resetting your strategy are:

• Be nimble – foster an agile approach to strategy setting

• Digital transformation

• Data and Analytics – enabling smarter, data-driven decisions

• Rebalancing of activities

BE NIMBLE

Agile decision making and strategy setting during a highly disruptive environment will result in greater performance and create a lead over the competition. Companies should consider making a deliberate effort to look beyond the immediate challenges and issues that have arisen as a result of the pandemic and not only plan for the recovery period but also to renew their long-term plan for the “new normal”. There are three key phases to resetting your strategy during a disruptive environment.

Respond. During the initial phase of disruption focus immediate actions on keeping essential business functions operating.

Recover. Move focus to stabilising operations in a more organised and coordinated effort by creating a plan to restore to a scalable state and identifying capabilities that are required to strengthen, refactor, reopen, rehire, rebudget and resupply.

Renew. Shift focus to longer term strategy and durable execution by learning to conduct operations processes and workflows in new, repeatable, scalable ways and then take the learnings and patterns from prior phases to establish the new strategic plan.

Businesses should (if they haven’t already) create a minimum viable strategy and use adaptive tools and techniques to iterate as the new normal emerges. Leaders need to act now because the acceleration of trends are already underway, and businesses need to be faster, bolder, and more agile than ever before to succeed. Strategic planning should become a continual activity so businesses can respond quickly to unavoidable changes.

DIGITAL TRANSFORMATION

Prior to COVID-19 digitisation was an area of interest for a lot of companies, but the impact of the pandemic has forced companies to adopt sooner - accelerating digitisation. All industries are impacted by the evolution of technology in some way and to avoid being left behind, companies must consider digital transformation when resetting their strategic plan. Consumers and customers have begun to alter their buying patterns and shift to digital channels, products, and services. In this context, businesses need to rethink their business model and how digitisation can enhance their customer experiences, value propositions, go-to-market strategies, and operations.

The benefits of digital transformation include:  

• Simplification of business processes

• Reduce operating costs

• Business growth

• Enhance digital innovations

• Accelerate speed to market

• Enhance productivity

DATA AND ANALYTICS

The use of data and analytics should be considered when resetting your strategy, as it will become an essential navigation tool, enabling smarter, data-driven decisions in a timely manner. Those who embed artificial intelligence and analytics across the company will be in a superior position to divulge the value waiting to be unlocked. The use of data and analytics will need to be recalibrated to reflect the post-COVID-19 reality, this will involve validating models, creating new data sets, and enhancing modelling techniques.

REBALANCING OF ACTIVITIES

As part of resetting your strategy, you should also consider the rebalancing of activities between those that are performed in-house and those that are outsourced, with a focus on capitalising productivity and preventing any potential disruptions to supply chain.

Looking to build your own post-Covid strategy?

Let us help. To learn more about how to build your recovery strategy in this new landscape, contact us on whiteark@whiteark.com.au

Data Strategy

Data is a valuable resource but often businesses find it challenging to unlock that value, due to the sheer amount of data available - as well as the challenges which come with collecting, organising, interpreting and activating it.

Research shows that 54% of organisations still struggle to provide stakeholders with data that can inform their decisions.

A data strategy can assist businesses with overcoming these challenges and accessing the value of their data while efficiently using their resources.

DATA STRATEGY

• Unlocks the power of your data

• Helps you to harness the volume of data, which is always increasing

• Improves data management across the entire company

• Assists with efficient resource allocation

Decision-Ready Data

Decision-Ready Data is critical to informing business decisions and deciding on strategic direction. However, research shows that although organisations have been building analytics and insight capabilities, over 54% of organisations still struggle to provide stakeholders with data that can actually inform their decisions.

Common Data Quality Challenges include:

Accuracy, comprehensiveness, completeness, centralisation, source of truth.

Common People, Process & Technology Limitations include:

Process design, platform/technology, capacity, agility/execution speed, lack of automation, analytical capability, organisation alignment, prioritisation.

A data strategy can assist businesses with overcoming these challenges and access the value of their data while efficiently using their resources.

Importance of having a Data Strategy

1. Data Strategy Helps Unlock the Power of Data

2. Volume of Data Is Increasing - 90% of the data in the world became available in the last 3 years.

3. Data Strategy Improves Data Management Across the Entire Organisation

4. Data Strategy Helps You Use Resources Efficiently

Data strategy is a central, integrated concept that articulates how data will enable and inspire business strategy.

Essential Data Strategy Principles

Integrating Data and Eliminating Silos

• Makes data more accessible and fosters collaboration between different departments

• Helps people get data more efficiently and can enable new data-driven projects

Streamlining Data Collection and Sharing

• Having established procedures means you can collect more data more efficiently, and that the data you collect will likely be higher-quality

• It also keeps your information consistent and well-organised, which makes it easier to use and helps you derive value from it

Setting Clear Goals and Objectives for Data Management and Use

• Your goals will drive your data strategy and activities and help you improve how you handle data

Making Data More Visible and Accessible

• It’s crucial that you find a way to store data so people can quickly find and access the information they need without having to create copies of it themselves.

Making Data More Actionable and Easily Shared

• Putting your data in a consistent, usable format will reduce the number of steps employees need to take before they can use it and make it easy to share within the company

Establishing Clear Processes for Data Management – Data Governance Model

• Data governance refers to setting rules and standards for how individuals and groups within an organisation manage data. The goal of data governance is to make data easier to access, use and share to achieve broach broader business goals

• The key goals of a governance model should be clearly defined to ensure success:

  ⊹ Avoid siloed decision-making

  ⊹ Use synergies between business units to improve data assets

  ⊹ Provide business units with support and resources to prioritise data challenges resolution

  ⊹ Support the management of key initiatives across business units

Establishing Guidelines for Data Analysis and Application

• Define guidelines for how employees should analyse and use data

Get hooked on data

You don’t need to be a big fish to make the most of your data. You just have to start somewhere.

If you’ve read a few of my articles, you’ll know I’m passionate about the importance of data and analytics to drive good business decisions both strategic and operational.  Not everyone is doing this, which means there are lots of exciting opportunities for many businesses to unlock. 

Knowledge is power

The organisations that have mastered data analysis have reaped the benefits. Just look at the big players like Netflix and Amazon. Their ability to meet the viewing and buying needs of their many audiences has propelled them into household names. But you don’t need to be a big fish to make the most of your data. You just have to start somewhere.

The 80/20 rule

This rule is relevant for data, analytics and insights. You don’t need to have all the data and the data doesn’t need to be perfectly clean, but it’s imperative you use what you have to take a step in the right direction.

From my experience the following are practical steps to start enhancing your data, analytics and insights capability easily.

Practical steps you can use

Seek out the people in your organisation who are interested in data and analytics.

Normally you will find them in finance or IT.

Give these individuals or teams a specific question to answer each week.

For example – tell me more about the customers that are leaving us:

• Profile

• Demographics

• How long have they been a customer

• Claims history

• Payment/credit history

• Customer service complaints/customer experience scores 

Get them to present this to the relevant Executive.

Ask them to detail what they’ve learnt and what would they do differently.

Now it’s time to think about your data strategy

As you start to build momentum, write a list of all the strategic and operational questions you want to answer.  This should create a pipeline of questions that can be investigated leading to recommendations to the Executives on how these insights should change strategy and operations. 

The changes should then be tracked and monitored through your regular key metrics reporting to understand how these shifts have positively impacted business results.

Need a data champion to kick things off?

From finding the data champions within your business, to identifying the key data outputs best suited to help your business grow into a smarter, stronger operator, reach out to me. My expert experience, passion for data analytics and team of data and marketing professionals may be just the kick-start your company needs to grow with data.

More data equals more opportunity?

A good data strategy will help you look at your business to identify outputs that will help you deliver.

More data, more opportunity
In 2020 we’re in an amazing position to understand our customers and business functions like never before. And it all comes down to the sheer volume of data at our fingertips.

It starts with strategy
Whether it’s via cash flow reporting or CRM segmentation, every organisation holds a significant amount of customer, member, consumer and employee data. But analysing this can seem like a giant task. Where to start? What’s important and what’s not? That’s where a data strategy comes into play.

Which data matters most?
A data strategy will look at your business objectives then explore data outputs that will help you achieve these. For example, if you’re moving away from a product led approach to a more customer focused organisation, data based on your key customer segments - which are growing, which are profitable and how to mobilise the organisation around this, will form the basis of your data strategy. If, on the other hand, your business strategy is focussed around transitioning from an office based salesforce to a mobile model, important data outputs could include facilities and cost driver analysis.

A clear focus cuts through data clutter
So to get it right, you need to start from the beginning. Once you can define your business strategy, you can define the data points you should be exploring and how to utilise this data to understand and then change the way you drive your business.

Data strategy health check
At a top level, you can get a clear idea if you’re using data effectively by answering the following questions. If you’re unsure, you may need a hand with your data strategy.

• What products/services are profitable?

• What customers are profitable?

• What customers are likely to leave you?

• What is the profitability of your business units?

An accurate understanding of these questions leads to:

• Improved customer experience

• A more tailored customer approach, ultimately results in higher revenue

• An ability to optimise the cost base

• Utilise your spend data to understand, forecast and optimise the costs in the organisation

• Increased productivity across the value chain

• Improve the sales and service approach to drive efficiency in key business processes.

Bringing in a data expert

Data is measurable and accountable, allowing you to optimise your strategy and operations through real insights and clear direction. It can just be a bit of a handful to determine what data you should be investigating and how. If you need advice on where to start reach out to Jo Hands or an expert from our data team on whiteark@whiteark.com.au

Digital Transformation. Are you ready?

You can’t afford to wait for this pandemic to be over, so what are you doing to future proof now.

People have an amazing capacity to forget. To revert to their old behaviours. And that might have been the case if COVID had come and gone quickly. But it’s not going anywhere, and we all know by now - this time it’s going to be different.

The question on everyone’s minds is not ‘when will this be over?’, it’s ‘what will the new normal look like?’

As business leaders, however, we don’t have the luxury of being able to sit on the sidelines and watch. We need to anticipate the market. Analyse data and look into the future. Of course nobody knows for sure what the ‘new normal’ will look like, but it doesn’t mean we can’t prepare nonetheless.

“There are decades where nothing happens; and there are weeks where decades happen.”

— Vladimir Ilyich Lenin

What’s apparent all around us, however, is that the already-fast digital transformation of organisations, has accelerated to a furious pace.

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B2B

In the B2B space adoption of zoom, teams, slack, trello, webex and other digital tools has gone through the roof. And in the background of all that, there are projects frantically going on to protect the security of a dispersed workforce, and to move instantly redundant legacy systems to the cloud.

B2C

In the B2C space the changes are even more obvious, and they happened immediately. If you didn’t have an effective online presence before, you’ve either been playing catch-up, or you’re already out of business. What people have been buying has changed too.

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McKinsey surveyed consumer sentiment and behaviour across 45 countries, and on 8th July published their results*. One of the consistent themes, worldwide, was a shift to more mindful shopping. In the US, for example, 31% of people surveyed are changing to less expensive products to save money, and 21% are researching the brand, and product before making a purchase.

And they’re not researching those brands standing in aisle 7 with a mask on. They’re at home, searching online and then getting their groceries delivered to the door.

And that kind of capability doesn’t just happen overnight. So the businesses that were prepared, and ready for the world to go digital have not only survived, they’ve thrived.

To gain a little insight into Australian organisations’ digital preparedness for COVID, we spoke to Rube Sayed, General Manager of a Sydney-based Managed IT Services company, Datcom Cloud.

“For some of our clients it was a seamless transition. They were already 100% in the cloud. Phone, apps, security all in place – and they just got on with it. For many, however, they had to rush through projects that would normally take a year or so, into months. We’ve had to expand our workforce by about 20% to deal with it all.”

— Jo Hands, Director Whiteark

So while you might need a crystal ball to know what’s going to happen in the future (in 2020 – who can tell) you certainly don’t need one to be prepared.

If there’s a digital transformation project you still haven’t gotten around to yet.

Don’t wait. Give me call, or reach out on LinkedIn. And I can help.

As the saying goes, you don’t just stumble across luck, it’s what happens when preparation meets opportunity.

So ask yourself, are you just ready? Or are you COVID-Ready…..

* McKinsey Ref: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/a-global-view-of-how-consumer-behavior-is-changing-amid-covid-19#