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Are You Planning for the Right Eventuality

by Hal Levenson on Oct 04, 2012 6:41:30 AM

Temperatures are dropping, leaves are falling, people are shifting their activities indoors, and many businesses are beginning their fall planning cycle. October is often the month when leadership teams assess the situation, reaffirm or revise their corporate vision for the coming year, and decide whether to lock the doors and protect themselves from the goblins of eroding profits or boldly to forge ahead. Companies are planning at this time of year. The question is, “Are you planning for the right eventuality?”

Everyone knows the first risk of planning: If you plan for nothing, you will probably achieve it. (You might be more familiar with “you can aim at nothing and hit it every time”). Relatively few businesses plan for nothing. Yet planning for something is not necessarily a low-risk approach to the future. If you plan for the wrong thing, there is always the risk you will achieve your plan. Aligning all of your resources behind the wrong plan could be devastating.

Bill Jones is President and CEO of Acme Work-around Widgets. For the last twenty-five years, the company’s sales have exploded because they developed and sold a work-around widget for automobile assembly lines. This particular widget allowed old assembly line systems to be slowed just enough to install a part mandated by the EPA.

Acme’s sales have begun to stall. Mr. Jones has the entire R&D department working on a way to automate installation of the part without slowing the assembly line. He believes making the process faster will provide justification for replacing existing work-around widgets still in use. His plan is to price the new widget as low as possible to encourage sales. Acme is entering their planning phase expecting a significant surge in sales and demand, requiring increased production and delivery. In other words, Jones does not recognize a plateau and believes the upswing will continue unabated.

Acme has been focused internally on speed and automation of an existing process. Nobody at Acme noticed a small startup company in the next town that is intentionally flying below the radar and that has begun manufacturing an engine attachment that contains the mandated part, as well as a new microchip that makes the mandated part work more efficiently. Further, adding this attachment occurs as the engine is built. It improves engine efficiency and eliminates the need for the Acme work-around widget for a lower cost than the Acme widget.

This example is obviously overstated. The fact remains, however, that for various reasons, companies can plan for the wrong eventualities. Had Jones recognized that the company was on a plateau, he would have recognized that the only way off the plateau was downward. Because he is planning for the wrong eventuality, Acme will experience a deep dip – possibly one from which the company will not emerge.

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