Our Insights
July 30, 2024
Kerry Dimmer, Aprio Group Consultant
In the context of economic upheaval, SA businesses need to revise their strategic plans, and adjust based on their measure and understanding of ‘uncertainty’.
Hedge, bet, or wait-and-see? asks a McKinsey-sponsored Harvard Business Review report, ‘Strategy Under Uncertainty’. Stating the obvious, the majority of SA businesses have been juggling these three options for some years now, be that because of the effects of the Covid era, the debilitating energy crisis, the political landscape, lack of investor confidence, high inflation and interest rates, logistical nightmares, and other industry-specific challenges.
The more risk-averse tend to hedge their bets; the risk-tolerant are prepared to gamble accepting there may be a certain level of loss; and those who wait-and-see, well, they are still waiting.
Decision-making paralysis has been particularly evident in the management of the country and its critical parastatals over the past decade. This has permeated the business and trade environment significantly, clearly evidenced by the exit of some 24 companies from the JSE last year, and another three when the ZARx closed.
Warren Buffet argued, in 2013, that when the immediate future is uncertain, people tend to focus on the myriad of uncertainties that exist, or ignore them. This is dangerous, for like a rabbit frozen in the headlights, the hit could be fatal. The answer is to move, but which way?
Traditional strategic planning has always been the ‘safe route’ to weather storms, but requires significant effort for minimal reward and can be a barrier to good decision-making.
What is proving rewarding, however, is real-time strategic ‘nimble and agile’ planning, something that is favoured by a number of Fortune 500 companies, and NGOs. It’s a flexible, fluid approach that enables the agility to act on challenges and opportunities as they arise; not ‘if’ nor ‘when’ they arise. It requires decision-makers to make on-the-spot decisions based on any number of future scenarios.
Another approach is ‘appreciative inquiry’. This is an extremely focused concept that reveals stories of success, not necessarily facts (Discovery), and transforms them into a compelling question of what might be (the Dream). Compelling ideas from the Dream are used to determine immediate team-based action (Design), followed by sustainability of these levels (Destiny). This concept is ultimately about the power of people within an organisation to manifest change and can also be effectively used to address internal challenges.
Most businesses recognise they need to make some sort of paradigm shift in the way they plan for growth. Shifts are, however, risky because there are unknowns within unknowns, which makes future scenario planning an endless journey. Besides, no amount of analysis is sufficient to predict the future.
What is certain is that while traditional strategy may have some merit, it is in current times and by nature, focused too far ahead. Preparing to mitigate risk based on potential future disruptors requires immediate agility and adaptability, even if we may not even have a clear idea of how events will impact us today, let alone tomorrow.
The bottom line? Businesses must tailor their strategies to match the level of uncertainty they feel in their market and position themselves to move quickly out of the headlights.
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