Silvan Mifsud is director of Advisory at EMCS Tax & Advisory
The world is presently a more complex and interconnected than ever before. Increased globalisation, shifts in consumer preferences, geopolitical instability and countless other factors have made the future largely unpredictable and foggy. Capturing all these relationships in a reliable forecast is impracticable. So the question I am frequently asked is how can we build business strategies and plan in such an environment?
My reply is that before wasting time on building strategies you must make sure that the business has a culture and willingness to adapt based on inbuilt flexibility
Stephen Hawking is famously credited with saying: “Intelligence is the ability to adapt to change.” If it is impossible to predict what is around the corner, then the secret to success is adapting quickly to what appears. The Covid-19 pandemic serves as testimony to the importance of adaptability. In early 2020, almost no company’s strategic plan forecast the impact that the global pandemic would have on business. The most successful companies where those that quickly adapted to the impact that work-from-home orders and other restrictions placed on workers and consumers. Some expanded capacity in response to the sudden surge in demand; others altered their delivery model to serve customers in new and different ways. If Covid-19 has taught us anything it’s the importance of being able to pivot quickly in response to sudden changes in the external environment.
In volatile times, flexibility has enormous value. I find that very few industries have really recognised the value of flexibility in the face of extreme volatility and altered their strategies accordingly. A case in point in the usual sourcing and purchasing strategy. Today, supply chains are being assailed by a host of exogenous factors, like Russia’s invasion of Ukraine and China’s zero-Covid policy. Companies with flexible supply networks, capable of sourcing from multiple suppliers in different regions, have found it easier to cope with these — and other — disruptions. Those with rigid supply chains continue to struggle in the current tumultuous environment.
Let me be clear. I am not saying that business should give up on planning. In an unpredictable world, it might be tempting to throw up your hands and give up on planning altogether. I am speaking about a different type of planning – dynamic planning. Great performance is rarely the result of chance. It requires a direction, even if it isn’t possible to define the exact path. However to cope with extreme volatility in crafting strategy, companies must change the way they approach strategic planning. They must evolve from a static plan and then execute model to a dynamic and continuous approach to strategic decision-making and execution.
As always the bottom line is also leadership. Leaders must be adaptable and prepared to break out of their comfort zones to accept new ideas. Maintaining your flexibility as the world around you changes. Motivating people to expand their knowledge, spark discussion, and welcome originality. To be a leader, you need to be able to adapt to new situations and deviate from your annual plan as necessary. Leadership in today’s uncertain environment necessitates the capacity to adapt quickly to changing circumstances, fresh insights and emerging opportunities.