Moving any business forward requires conviction, even in turbulent conditions. But you don’t succeed in those conditions on conviction alone.
Moving any business forward requires conviction, even in turbulent conditions. But you don’t succeed in those conditions on conviction alone.
The Japanese central bank has implemented negative interest rates. Oil prices are at lows not seen in years, knocking stock prices off their perch. The Middle East is in war-torn turmoil as Europe struggles with the overflow of its refugees. And it’s an election year in the U.S.
Other than that, why would you question your sales forecast for 2016-2017?
What we can assuredly predict is volatility. That means we must position our businesses to quickly and effectively change course multiple times, and we must know when to act.
Moving any business forward requires conviction, even in turbulent conditions. Conviction, however, does not mean disregard for the possibilities. Bad decisions are never appropriate. If you can’t swim, don’t dive into the deep end. But even if you can, you never want to dive into the shallow end. If you’re not sure of the depth, get data. Never swim alone. And before you get wet, confirm that the water is the best of alternative paths.
Succeeding in volatile times is really no different than during stable periods.
Decisions
Ford’s recent decision to close its Indonesian and Japanese operations reflects rational stop-loss to the prior horrible decision to put them there. None of the reasons given for poor performance in those markets is news. While demographics and economics suggested many car buyers, nothing suggested they would buy Fords. And they didn’t.
Every business makes bad decisions. The responsibility of leadership is to limit their number and impact, and to learn lessons when they happen.
Signing long-term contracts with volume guarantees is risky in the best of times. After all, the best of times don’t last forever. A long-term contract specifying a percentage of demand is more flexible. If you need to scale your supply chain either up or down, understand and document the variables involved in reversing course with minimal pain to all parties.
This is not pushing risk onto others. This is not a lack of conviction. It is sharing important information to enable risk management by all.
The Gambler tells us:”If you’re gonna play the game, boy, you gotta learn to play it right.”
Preparing for Change
Regardless of the volatility you suspect, always identify the assumptions that are most critical to the success of a decision, and those most likely to be wrong. It may be riskier to do nothing than to make the change you are considering, so be sure to include that possibility as well.
Identify trigger points for those key assumptions, at which time you will reassess your decision. You can choose to limit your investment, or to double down.
If you don’t recognize the critical assumptions or the trigger points, invest more in understanding the options and potential outcomes. When a trigger point is reached, stick with facts, not hopes. I’ve seen too many companies discount triggers because they simply wanted too much to believe.
Once in a rare while we get totally blindsided, but it’s much more common to find that an important assumption was misguided.
So whether you are nervous about this next year, or confident, listen to the Gambler. Learn to play it right.
As published on American City Business Journals
