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Growth strategy | Advisory | Force multiplier

Scenario Planning

Nine Things That Can Sink Your Growth Strategy (and Your Company)

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Nine things that can sink your growth strategy

“You may not be able to control the waves of change, but you can build a different boat.”

– General Stanley McChrystal

As any seasoned entrepreneur or senior executive will quickly tell you, there are many things that can sink your growth strategy, and ultimately your company if you are not careful.

While it is almost impossible to predict the future, you can prepare for some of the most common growth challenges. It starts by recognizing factors that could negatively affect the growth trajectory of your organization, and then thinking strategically about your options for responding.

For those organizations, and leaders, who successfully navigated through the nightmare of 2020 there were many such learning opportunities. It was a year unlike any other, and for growth leaders it offered many lessons on how to survive and thrive in a true VUCA environment.

In this article, I will share a few of the more common challenges that I have witnessed.

Learning from the Example of Others

If you are really paying attention as a growth leader, you can learn many valuable lessons by observing the failure of others.

By understanding the elements that contributed to the failure, and identifying if they exist (or could potentially emerge) in your operating environment, you can make plans to prevent these challenges from derailing your organization.

The best part of this strategy? You do not have to endure the pain and suffering yourself!

Nine Common Growth Challenges (and how to avoid them)

Here are nine of the most common growth challenges, and suggestions on how to avoid them in your organization:

  1. No vision – A key element of strategic planning is to define your Envisioned Future. Without a defined vision and long-term goals, your organization will be aimless. During the pandemic, many organizations panicked but ultimately found their footing and a path forward. Some leaders reverted to “survivor mode” and did not uphold their envisioned future, losing sight of where they wanted to go, and likely losing the confidence of their team in the process.
  2. Strategy not aligned with core ideology – Most successful organizations have defined their Core Ideology (mission, values, and purpose.) In the past 12 months, many organizations failed to align their internal and external actions with their stated purpose and values. This misalignment might not show any immediate effect, but it creates a crack in the foundation that will only grow over time. The best growth organizations are consistently true to their purpose and values, in good times and in bad. Many organizations have some form of “honesty” and “integrity” in their stated corporate values…a great question for growth leaders to ask is, “Did our actions align with our values in the past 12 months?”
  3. Neglecting talent – Growth leaders recognize that most problems are ultimately people problems. As a result, they focus on getting the right people on the bus, sitting in the right seats. During the pandemic, many organizations downsized to protect their bottom line. While necessary to some degree, many organizations will discover they cut too far and are now unable to capitalize on a recovery ahead of more strategic competitors who kept their talent intact.
  4. Poor situational awareness – Let’s be honest, almost every organization was completely blindsided by the global pandemic. Very few saw that disruptive force coming. However, by paying better attention to their operating environment and developing better situational awareness, growth leaders can begin to anticipate other potentially disruptive forces.
  5. Lack of a plan – The side benefit to developing greater situational awareness, is that growth leaders can do scenario planning with their teams. While it is okay to be surprised, there is no excuse for being unprepared. Successful growth leaders are always asking questions like, “What is the worst case scenario?” and “How would our organization respond to that?”
  6. Failure to take decisive action – Successful growth leaders have a strong, and consistent, bias for action. During the pandemic, many organizations hunkered down, hitting the pause button on executing their growth strategies. While some slowdown was prudent – and in many cases necessary – to completely stop created a huge loss of momentum, and ultimately sent an inconsistent message to the market. Many of these organizations likely will not recover from the resulting loss of talent and market traction.
  7. Failure to pivot – Closely related to taking decisive action, is knowing when something is not working and it is time for a change. Growth leaders know that sometimes the best way to get through an obstacle is to chart a new course and go around it! They innovate new products or services, enter new markets, or find new ways to position what they are selling. In the startup world this is call a “pivot” and it is a vital life skill for any growth leader. The organization either adapts or dies as a result.
  8. Lack of liquidity – There is an old business finance rule that “cash is King.” In truth, it is King, and Queen, and probably the entire royal court. Liquidity is the fuel for any organization, and without it, the organization will likely fail. The obvious connotation of liquidity is money, but it also applies to people, and capacity. Every growth leader must ensure the organization has the required resources necessary to execute its growth plan.
  9. Failure to communicate – Finally, successful growth leaders are exceptional communicators. They have an open, honest, two-way dialogue with all their constituents – both internally and externally. They do not fall victim to the temptation of putting lipstick on a pig. This clear and consistent communication not only serves as a vehicle to share strategy, it also provides a continuous feedback loop, builds trust, and ultimately helps to sell whatever solutions the organization is providing.

Conclusion

The pandemic has taught us that if you do not take the time to imagine the worst, you might not be prepared when disaster strikes. Bad things come in many shapes and sizes, and they do happen. Even to the best organizations.

By thinking about these common growth strategy challenges ahead of time, growth leaders will have a big head start on how to avoid them. Others in the market might stick their heads in the sand and hope their challenges will go away. But not growth leaders.  They confront adversity head on.

The good news – you can learn from the experience of others and prevent them from happening in your organization.

The bad news – if you ignore them, they can be catastrophic.

-Onward

Get Out of the Building

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“Strategy should evolve out of the mud of the marketplace, not in the antiseptic environment of an ivory tower.” – Al Ries

Leaders of organizations always have the best of intentions when they work with their teams to create strategic plans.

The objective should always be to design a plan that leads to the successful achievement of their long-term goals. Most leaders want to get the planning done quickly so their team can shift focus to executing. This bias to action is not a bad thing, but it can lead to sub-optimal (if not downright dangerous) outcomes if they are not careful during the planning phase.

Many leaders make a critical mistake during this process. They don’t spend enough time gathering and evaluating real-world data that could shape or positively impact the outcome of their strategic plan. Instead, they stay in the boardroom to complete the plan in isolation using old data or opinions instead of validated facts from the real world. As a result, they often are blindsided by unexpected impacts during the subsequent execution phase.

In the context of effective VUCA Strategic Planning the remedy for business leaders and their teams is very simple. To borrow a popular phrase from the world of startups, they need to get out of the building!

The “Get out of the building” Concept

Steve Blank, sometimes referred to as the godfather of modern entrepreneurial practice, popularized the mandate that startup teams must “get out of the building” to validate their ideas. He developed a formal process, called customer development, whereby teams first develop a hypothesis for a new product or service then gather feedback from the market before they build or develop anything.

Although some of this important work can be done using online tools or brainstorming with your team, customer development is primarily done outside the building in front of customers and partners and other stakeholders in the business. The goal is to rapidly test the hypotheses with a series of experiments in order to figure out whether it is correct or not. And, if incorrect, what types of iterations, small changes, or pivots to your business model do you need to make?

In addition to being very useful for validating startup product or service concepts, the same approach should also be used by other go-to-market functions in more established organizations. For example:

  • Marketing – Regular contact with prospects and customers is vital for marketing professionals. These conversations can help them to build and refine buyer personas, test and clarify value propositions, learn new problem/opportunity insights, developing new thought leadership content, create new advertising, etc.
  • Sales – By definition, sales professionals need to be outside the building, either literally or figuratively, having direct sales conversations with buyers. These interactions not only enable them to progress a sales cycle, but also provide insights on important topics like ideal client targeting, objection-response, and closing techniques.

Application to VUCA Strategic Planning

When it comes to developing a VUCA Strategic Plan for the organization, it is essential for leaders and their teams to have the best possible understanding of the market and the business environment they are competing in.

Getting out of the building is a vital path to gaining better data and market intelligence. By talking with prospects, clients, partners, analysts, and even competitors, leaders get gain valuable insights on the market, new trends, and potential VUCA forces that could influence their strategic plans.

In the VUCA Strategic Planning model, Situational Awareness is the process that forces market interaction and feedback to happen. It happens best when leaders and their teams get out of the building and into their operating environment.

A Few Simple Guidelines

When it comes to VUCA Strategic Planning, there are a few simple guidelines that help support the mandate to get out of the building:

  • VUCA Plans are built on a foundation of robust Situational Awareness and comprehensive Scenario Planning. Both are best gained by first-hand observation or conversation in the market.
  • An intelligent opinion is still just a guess. You want to base your plans on validated customer or market data.
  • The dumbest person with a fact trumps anyone, including the most intelligent and experienced person on the team, with an opinion. Get validated data.
  • There are no facts inside the building. Get out of the building!

Conclusion – Get Out of the Building!

Getting out of the building is core activity for startups to prevent them from spending limited time and resources on things the market doesn’t want or need.

The same concept applies to leaders of established organizations and their teams when they develop their VUCA Strategic Plans. It is dangerous to make assumptions, so get out of the building and gather valuable planning data and inputs from your market. Your plans will be the better for it!

-Onward

Scenario Planning in a VUCA World

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“I try to follow this advice: Anticipate as many problems as you can so that when a crisis does occur, you are able to deal with it calmly and rationally.” – Tom Steyer

It is a common mistake for leadership teams to view strategic plans as a linear path to a defined future, with the expectation of no distractions or complications along the way.

We all know that is simply not how life, or business, works.

As the famous German General, Helmuth von Moltke, said: “No battle plan survives contact with the enemy.”

My business corollary: No strategic plan survives contact with the market.

Once you have established the vision and long-term goals for your organization, and chosen a strategy, you need to develop a strategic plan to guide your team in getting it done. There is one important additional step, which many leaders neglect – you should consider a range of potential future conditions, and your possible responses, so that you are prepared to act quickly if something disruptive hits you.

This consideration and preparation for potential future contingencies is called scenario planning.

It is the human condition to want to control our present, and one way to do that is to try to predict the future. Scenario planning is not intended to predict the future, but rather to future-proof your strategic plans. Scenario planning enhances your VUCA Strategic Plan so that you have back-up plans and a playbook to take quick and decisive action when confronted with VUCA forces. The concept is to prepare enough in advance that you are not completely blindsided and rendered helpless, no matter what is thrown at you.

Defining Scenario Planning

Scenario planning (also known as scenario thinking or scenario analysis) is a strategic planning method that organizations can use to deal with uncertainty, and to make their long-term plans more flexible and robust.

It is definitely not a new concept.

The great Roman Stoic philosopher, Seneca, popularized the idea over 2,000 years ago. He called it premeditatio malorum (or, “premeditation of evils”), and regularly employed the technique to optimize his own life. For example, before taking a trip Seneca would consider everything that could possibly go wrong or prevent him from reaching his destination – the ship might hit a reef, encounter a storm, be delayed in some port, or the captain might get sick – and then he would think about his possible reactions to each situation. By regularly doing this exercise, he was always prepared for any disruption.

Scenario planning is the formal process of asking and answering “what if” questions in order to identify alternative scenarios, and then planning your response to the potential VUCA disruptions that could derail your strategy or impede your ability to achieve your intended objectives.

In practical terms, scenario planning simply means taking the time to think through everything that could impact a particular plan. This is most often in the form of what could wrong, or negative impacts, but to be fair it should also consider the potential response to positive impacts.

This methodical level of inquiry and planning is very common in the specialized branches of the military, such as Special Forces and the US Air Force, where they conduct “what if?” drills before every mission to ensure understanding of potential threats and corresponding reactions.

NASA astronaut, Captain Scott Kelly, when asked about the planning that goes into space exploration, and how he deals with potential risks, explained that one strategy for mitigating crises is to think like an engineer – Even during high-stress times, always consider and plan for worst-case scenarios. He said NASA taught him to constantly ask and think about, “What’s the next worst thing that can happen? And, then, what is the next worst thing that could happen after that?”

Where Scenarios Fit in the VUCA Strategic Planning Framework

In the VUCA Strategic Planning framework, your Core Ideology and Envisioned Future, combined with robust Situational Awareness detailing the current state of the organization and its operating environment, create the springboard for strategy development:

  • Core Ideology – Defining the mission, values, and purpose of the organization. These elements describe why the organization exists and what it stands for. They form the “true North” guideposts for making strategic decisions and are the foundation for any VUCA plan.
  • Envisioned Future – Defining a clear vision of what the organization aspires to become or achieve and your long-term goals. These elements explain the desired “future state” of the organization, and the long-term goals you and your team are working towards achieving in order to get there.
  • Situational Awareness – A thorough analysis of the environment in which the organization operates. Situational awareness involves knowing where you are (“current state”) and being aware of what is happening in your environment (internal and external perspective) in order to better understand how information, events, and one’s own actions will impact both immediate and future outcomes.

Next, leaders should consider strategic options that will enable the organization to bridge the gap between the current state and the desired future state while factoring in the operating environment as revealed by the situational analysis:

  • Strategy – Defining the approach that will guide individuals and teams on “how” to achieve the short-term objectives that move the organization from its starting point towards achieving its long-term goals. Strategy plays a vital role in VUCA strategic planning. It is quite literally the vehicle that will help the organization bridge the “gap” between where it is today (its current state) and where it wants to be in the future (desired future state).
  • Strategy Decision – Once a strategy has been formulated, leaders must then decide: Is it the right strategy to help the organization achieve its long-term goals? If the decision is to move ahead with executing a chosen strategy then it is time to commit, and proceed with creating a complete Strategic Plan designed to ensure the successful execution of it.

The strategic planning process culminates in the creation of a VUCA Strategic Plan:

  • VUCA Strategic Plan – A clear time and resource based plan, that details the strategy and actions by which the organization intends to reach its Envisioned Future.

As a vital enhancement to their VUCA Strategic Plan, leadership teams should also do scenario planning:

  • Scenario Planning – Identify the potential VUCA impacts that could derail your primary strategy or impede your ability to achieve the defined objectives, and action plan your response to them. Because almost no plan goes as expected, by answering “what if” across a comprehensive set of possible future scenarios your team will be better prepared to quickly react and make decisions when a disruption happens.

Relevance and Value for Leaders

In this new world full of VUCA uncertainty, strategy (and strategic plans) should not be considered as “locked” or etched in stone. You, your team, and your organization must always be ready to pivot quickly as internal or external conditions change. This agile approach to strategy development and execution is the best way to grow your organization and succeed in the marketplace. Therefore, your scenarios should reflect a wide range of probabilities, from highly possible to very remote.

Why is this so important to do as part of the VUCA Strategic Planning process? Because the best time to think about a potential impact, and your ideal response, is before it hits. Not after.

In the words of noted venture capitalist, Bill Gurley, “It’s always better to make decisions calmly and with plenty of forethought than to be forced into critically difficult decisions very quickly.”

Two additional benefits leaders can gain from scenario planning:

  • Scenario planning can help organizations fight the common biases of overconfidence and tunnel vision that often surface in strategic planning and decision-making. How? Assembling a comprehensive set of scenarios can provide clues about what trends or uncertainties might be important drivers for change in the future, and how those drivers might impact the organization. Leaders who choose to use their imaginations and expand their worldview will see a wider range of possible futures and thus much better prepared to take advantage of the unexpected opportunities, or deal with unexpected setbacks, that will come along.
  • The exercise of thinking about future scenarios, and putting contingency plans together, helps to reduce some of the common fear and uncertainty around change. As your leadership team gets more comfortable with a potential future that looks different from today, they will be more open to talking about it and seeking data/information that might support or challenge it instead of burying their heads in the sands of denial.

Best Practices

I will cover more detail on scenario planning and a formalized process to do it, in future articles, but here are a few best practices to get started:

  • Develop a range of scenarios, from highly possible to very remote. As recent history has proven, complete wild-card scenarios, like COVID-19, can happen. They are low probability, but high impact events. And when they surface, they hit very quickly with devastating effect if you are not prepared.
  • A common format to consider using when compiling your potential scenarios is to plot them along two axis: Probability vs Potential Impact. You want to spend proportionally more time considering the high probability and high potential impact scenarios.
  • How many scenarios should you develop? Well, the honest answer is “it depends!” – There is no right answer, and it should be whatever it takes to cover your most realistic set of scenarios, with the bookends of best and worst case. At a minimum, I always counsel clients to have at least 3 scenarios: realistic, best case, worst case.
  • It is useful to give each scenario a descriptive and memorable name. In the heat of the moment, this will help the team in the field to recognize and remember the salient points of each.
  • As you are developing your scenarios, identify the “early warning signals” for each one. This will enable you, and your team, to clearly recognize when events in specific scenarios are taking place, and then take the appropriate action.
  • When updating your VUCA Strategic Plan with scenarios, try to identify strategies that are useful across most if not all possible scenarios, given what you know about how the future might develop.
  • Scenario planning should not be a one-time, static exercise. It is a core component of your on-going Situational Awareness process, where you should be constantly scanning your operating environment for new or changed factors, and considering their potential to disrupt your strategic plans.

Conclusion

Today’s uncertain and unpredictable business environment is not a time for over-optimism or pessimism. It is a time to be realistic.

Strategy used to be about predicting a desired future, then planning for that future. Now it requires considering a range of possible future conditions, and how they might potentially positively or negatively impact the organization’s strategic plan.

Because almost no plan develops as expected, we must always plan for contingencies. For leaders of organizations in this new VUCA environment that means preparing for a very wide range of potential scenarios, and more importantly, having specific action plans for each. This includes contemplating what will happen if your primary strategic plan turns out to be completely wrong and you need to quickly pivot.

Scenario planning ensures that leadership teams are prepared for failure and ready for success – No matter what VUCA forces they encounter.

-Onward…