As a highly uncertain and rapidly evolving crisis, covid-19 is laying bare everyday business priorities like improvement, optimisation and transformation. Over the past weeks, most businesses have moved from interest to concern to full-blown crisis management as the full extent and likely duration of the pandemic’s associated economic shutdown has become clearer. Many executives, particularly in non-operational positions, are already beginning to look beyond ensuring near-term resilience towards positioning to take advantage of opportunities through the rebound.
Large scale exogenous events, far from being an aberration, are actually the normal state when one takes a long-term perspective. In just the last 20 years we have had numerous unexpected industry-shaping events, in each instance revealing the most adept executive teams that could navigate the crisis and position their businesses for the inevitable opportunities on the upswing. Cultivating this capability is at the core of high performing businesses, alongside the bookends of optimisation and competitive advantage. If nothing else, covid-19 provides an opportunity to learn.
Searching history for insight on how to plan through this particular crisis is difficult, although there are parallels. It has been over 100 years since the last pandemic of comparable size, the Spanish Influenza from 1918 to 1920. The other global events since, in which the economic impact was secondary to navigating the main event, have been the two world wars.
Among the many differences between this crisis and those is the sheer global integration of finance, trade, communications and governance that has emerged since. In the past the world suffered through such crises from slow and incomplete information and communication. Today, if anything, we suffer from the opposite problem – how to make decisions in a far more integrated, and thus complex, world when we are overwhelmed with information and opinionated expert forecasts?
Application of data and analytics is critical to take the emotion and bias out of the business’ response. Obviously, understanding and interpreting the ‘right’ data is key. Unlike in years past, well-established and proven technology exists to do this, and in particular to integrate across timeframes. As the timeframe extends, so does uncertainty and our reliance upon our own insight, logic and intuition to bridge the gap between the short, medium and long-term forecasting horizons.
Every resources business has teams looking at the short-term and long-term market, teams making short term operational decisions and teams making longer term capacity decisions. Co-ordination between these teams tends to be poorly integrated, due mainly to the specific hierarchies, technical skillsets required for each task. It is not an accident that businesses set up like this – it is aimed at optimising systems for steady state operations and goes a long way in explaining why most businesses cannot react quickly to major shocks. As most understand intuitively however, it is in the integration of these forecasts and decisions that most of the value in resources is made and lost.
In this way, forecasting is similar to most digital technologies, its effectiveness is heavily dependent upon its integration with people, in this case analysts and decision makers. Fundamental ingredients for success in forecasting and repositioning is the same as in all major corporate moves – overcome the functionalisation of decision-making, move beyond steady-state assumptions to scenario planning, and adopt a positive psychology to believe we can innovate and adapt. The technology and process to support executives exists, the big step required is mainly mental.
The covid-19 crisis is a pressing case study in how businesses should be looking forward and positioning the business through the application and adaptation of such a methodology.
Our suggested high-level approach is like all effective approaches, quite simple in construct, but nuanced in application:
- Build a multi-disciplinary, high capability team (incl. experts)
- Source and apply short-term forecasting technology
- Create longer-term scenarios, using forecasting to detect signposts
- Assemble and test portfolio of high value issue/ opportunity decisions (ST to LT)
- Establish and adapt internal forecasting and decision methodology