How to turn uncertainty to your advantage
I recently ran a seminar for manufacturing CEOs on Strategic Futures, and inevitably the discussion turned towards Brexit. Almost everyone in the room had supply chains running across the EU, both inwards and outwards, and many had concerns for their current employees and future recruits.
As we worked through the process together, it turned out that, although Brexit is probably the most front-of-mind, it’s only one of about five major trends and events they need to be planning for. What was most surprising though, was despite how much it dominated their concerns, very few of the businesses represented had actually worked up serious plans for a cliff-edge Brexit scenario.
Just a few weeks after the referendum, I remember meeting with the co-founders of one client, who were starting on plans to relocate a large portion of their operations to southern Europe and had already arranged meetings for potential partners and premises. I asked if they really needed to move so early, and they explained that the costs were marginal, but the risk of WTO tariffs both in and out of the UK, however unlikely, would cripple their business. They also thought that going early would give them a better deal and more time to build capacity, and in any event, it fit with their longer-term expansion strategy.
Since then I’ve worked with a number of other clients on scenario plans that include a hard Brexit. None of them have such clear-cut cases, but each has a financial model, clear lead times, decision points, and contingencies for different outcomes. Several of them, having looked at how exposed some of their competitors will be, have also drafted aggressive marketing and sales campaigns to relieve them of their customers, should circumstances create that opportunity.
Whether a soft, hard, or cliff-edge Brexit is most likely, depends entirely on who you listen to. Ask any three political analysts and you’ll get at least eight different opinions, and in any event, negotiations are likely to go down to the wire. But the fact is that any major trend or event in your industry, that has the potential to severely impact you and your competitive environment, should be worked through as a strategic scenario to understand exactly what threats, and more importantly, what opportunities it could create, if you positioned yourself to take full advantage.
What you will find by working with scenarios, is that not only will there be key points in time when you’ll have to make some big decisions, but there will be a number of actions that make obvious sense to do anyway, irrespective of which scenario transpires. Whether it’s on-shoring your sourcing, off-shoring your assembly, opening a sales office in Dublin or relocating your warehouse from Rotherham to Rotterdam, if you haven’t worked up a Brexit plan by now, you could be in some serious trouble in 12 months’ time.
Of course, you might decide that Brexit won’t have a huge impact, either for you or your customers. You might have other, more impactful trends on your radar, like digitisation and artificial intelligence, market consolidation or aggressive new competition, nationalism, ethical consumerism or driverless, automated logistics. And for each of them, scenario thinking will yield great insights and ideas.
Whatever waves of change have the potential to disrupt and destroy, also have the potential to create a wealth of opportunities for your business. But only if you’re ready for them, and position yourself to win. Nobody can predict the future, but we can pick out scenarios, work up plans, and be ready to adapt as the future unfolds.
As the famous sportswriter Hugh Keough observed a century ago, “The race is not always to the swift, nor the battle to the strong; but that is the way to bet.”