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Posts Tagged ‘planning’

old-man

In the new normal, data has become the Holy Grail for making business decisions.  Everywhere you look the importance of data comes to the surface.  Marketing programs, websites, hiring practices, social media, finance, sourcing, and manufacturing, to name just a few, all rely heavily on data as a feedstock for decision-making.  Throw this data in to a computer and ‘presto,’ you have your answer.

As the world moves to the age of data scientists, data engineers, data analysts and data architects, I reflect on something I experienced many years ago that I believe remains true today.

I took a course at Massachusetts Institute of Technology in computer simulation of business strategies.  Part of the course was a three-day forecasting competition using the data of a real business.  We set up four groups.  Each group developed their own business strategies and entered the data into the computer system each night.  The next day we reviewed the results and decided on new input for the next run.  It was a financial simulation model that involved using random number generators and distribution functions that mirrored historic company data and performance.  At that time, this type of simulation modeling was very sophisticated.  It was like the data analytics of today.

One group who corralled at the back end of the class room, included an older gentleman (old man).  He didn’t say much but when he did, his questions and comments were measured and well thought-out.  On the final day, when we were comparing our results, he spoke up.  Out of the back of the room came, “It won’t work.”  What?  “Your models won’t work.  I just cut off your raw material supply.”  Silence.  Game over.  Using his 40 plus years of business experience, intuition, and knowledge of the industry, he made a human decision that trumped our models.  It didn’t matter what the data was saying.  I never forgot this experience.

I have built many financial simulation models in my business career and realize that in every fancy algorithm, there is an old man.  I believe he also exists in today’s data analytics.  –  Beware of the old man.

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Radar

Everything that is going to happen to your business is already in the making, so why don’t you see it?

I recently read a somewhat scientific article on why we fail to seek risk, or opportunity. Simply stated, it is how you have developed the ability to process information and act on it. Your body does this naturally just to maintain its survival. Just watch animals, they have to be very good at processing information and acting on it or they won’t survive. What about businesses?

The article’s perspective was mostly biological, my perspective is much simpler. We have become very good at being dismissive of signals that are the early signs of change, both good and bad. Why is that? It is easier. Why spend time on things that don’t seem to impact the here and now. I can’t tell you the number of times I’ve talked to business people who stated that “I didn’t see this coming.” But when you dig into why they didn’t see it, in many cases, the early signs were everywhere.

I learned long ago that very few things just happen. There is a reason for their existence. You don’t have to dwell on every little thing that pops up, but you should hesitate long enough on those signals that sort-of get your attention. Think about them for a minute and ask yourself: What’s going on here? Is it going to impact me or my business? Do I need to get additional information? Should I keep my eyes on this for a while? I remember a regional sales manager dismissing a small foreign entry into a well-established domestic market by saying “it’s nothing.” Three years later they were a major competitor.

The value of this simple process is that it plants a seed in your thinking that becomes invaluable if the signal comes up again in the future; because when it does it most often will be in a different form. It also provides a perspective that challenges the opinion of others in your organization. How do you know that? Why do you think that?

The future is there to find, but you have to be in a constant state of awareness to have the best chance to be part of that future.

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Open

Recently, I was talking to a business owner about his strategic perspective of the future of his growing manufacturing business. As expected, we got into a discussion about how difficult it is to plan with so many uncertainties in Washington (D.C.), coupled with the tendency of our government to over regulate all aspects of our economy. He said, “they are like helicopter parents hovering over our every move waiting to intervene”. The past six years have been some of the most challenging times for businesses, especially small businesses. First the collapse of our economy, followed by a dysfunctional Washington.

Businesses, for the most part, are resilient in times of economic crisis. They get knocked down, shoved to the side, tripped up, mulled over, and sometimes destroyed. But they never stop fighting for their survival. They do without, sacrifice things the rest of us take for granted, and put more of their capital at risk; they do whatever it takes to survive and prosper.

The sad part is that it is not just economic conditions they are fighting. A good part of their effort is dealing with the uncertainties being touted by the town criers of Washington. It is not my purpose to get into a political debate; I’m not looking for who did what. Regardless of why certain things happen in Washington, businesses have to make decisions about how they run their organizations in response to what is happening, or what they think may happen. Business decisions involve resources, which are time, people, and money. This is not a game or political jousting; it’s real. They know that the survival of their business depends on good decision-making.

“So, how do we factor in the multitude of political perspectives on healthcare, immigration, minimum wage, energy, taxes, climate debate, foreign trade, sequestration (debt limit), Middle East, etc., etc., etc. into our decisions, when there is a lack of earnest debate or compromise amongst the parties” he asked. “Where are we headed?” “What should I bet on?”

As we were wrapping up our conversation he said something thought-provoking; “Just give us a fighting chance to run our businesses. We can improve the economy, provide jobs, benefit our communities, and pay our fair share of taxes. All we want is a fighting chance.”

Just give us a fighting chance. – Are you listening Washington?

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Focus

Why is it so hard for people to maintain a focus on those significant issues that are impacting their lives or businesses? Looking back over the years, I can tell you many stories of how people in business rationalized not dealing with the ‘tough stuff.’ While the stories are as varied as the businesses, the eventual outcomes were similar. In most cases it was like a bad cold that never went away, or in some cases got worse. Eventually, they came to believe that having a bad cold was normal. – Why?

A few years ago, there was a CEO of a fairly large third generation business that was struggling with how to recapture the strategic focus of the business; they had lost their energy and just existed in a slumbering market. Revenues and earnings were suffering, morale was down, and customers were looking for something new. The CEO just couldn’t bring himself to focus on this challenge. Financially, the family was doing ok. Fast forward to today – no change. They have come to accept their lot in life but their future is uncertain.

On the other hand there was Jack and Ashley. Jack is in his late twenties, works two jobs and is a full-time student studying business. After high school, Jack wandered in and out of school and different jobs not really thinking about the future. Then one day, he sat down and began mapping out where he was headed and where he thought he wanted to go. He told me that where he was headed scared the bejabbers out of him; he had to do something. So he mapped out where he wanted to end up and began taking steps to get there. That was three years ago and he hasn’t lost his focus.

Ashley is in her mid-thirties, works one job, and is studying to become a Registered Nurse. This young lady had an extremely rough childhood, left home when she was eighteen and has been on her own ever since. After crashing at the bottom, she made the decision to make something of herself. She had a lot of catching up to do in her academic studies, took extra classes, and worked long hours; all while maintaining a full class load. Failing to achieve her goal was not an option. She will graduate in about a year and is already talking about getting her Masters. Her focus is solid.

You might be asking why I used these last two stories to compare to the one about the CEO. Who runs companies? People. It is all about individual decisions. Entities do not make decisions about what to focus on, CEO’s do. If Jack and Ashley had continued down their original path for a few more years, they might not have changed and simply adjusted to their current state. However, both got to the point where they recognized that the pain of not changing was greater than the pain of changing. Thus, they started to focus on a new path to the future, in effect, they developed a plan of action to do whatever it takes to get there. While their plans weren’t formal like you would expect in business they had many of the same attributes; e.g. strategies, actions, progress, setbacks and adjustments.

It doesn’t matter if you are struggling as individual or a business, your mind will not accept what it is not prepared to deal with. This is the point of reality; the point that you realize you must do something. It’s the beginning of focusing, planning and taking actions for a new future. What are you waiting for?

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