This is Part 1 of our two-part series about planning for uncertainty. In this blog article, I talk about long-term uncertainty. Stay tuned for the next installment of the series where I discuss planning for short-term uncertainty.
Uncertainty is a part of doing business. We simply don’t operate in a world of perfect information in economics, in business, or in life for that matter. Sometimes the unknowns are known unknowns (e.g., the price volatility of raw materials in a product), and sometimes the unknowns are true unknowns. The true unknowns are the big ones like climate, geopolitical circumstances, and health crises. Even having a C-Suite leader out sick for a week can throw a wrench into the best-laid plans.
McKinsey has a framework for thinking about uncertainty, and here there are four different levels: (1) a predictable future, (2) alternate futures, (3) a range of futures, and (4) true ambiguity.
With our clients, we like to focus on two different kinds of uncertainty: long-term uncertainty and short-term uncertainty. The strategies we suggest account for what kind of uncertainty we face within this framework. Often, the first part of the work is getting leaders to make time to think about these issues at all.
There are different reasons businesses and leaders often avoid thinking about uncertainty—it’s unpleasant, there are no easy answers, and it takes time away from the day-to-day aspects of doing business. Yet, building a bold and sustainable business means asking the hard questions and laying out the contingency plans you hope you never have to use.
In this blog series, we’ll go over some of our top tips—for strategy and mindset—for approaching long-term and short-term uncertainty.
Let’s start with long-term uncertainty: how should we think about uncertainty? And how should we plan for it? Here, we’ll walk through a few examples of long-term uncertainty to give you a map for the right kinds of questions to ask and the general mindset to have when approaching different kinds of long-range uncertainty.
When you’re asking difficult questions in your business, it can be helpful to ground into the things that you know and that you have control over. These are your first principles. The idea of first principles comes from ancient philosophy—what are the bedrock beliefs and ideas that we build everything else upon?
If you don’t have a value proposition, it’s an important part of long-term planning. What are you here to do? What are your goals and purposes in the business? Having a clear idea of who you are, what you stand for, and what your business does best can help you ground your future planning. Having this written into the DNA of your company and how you communicate about your company gives you something to work with if it becomes time to pivot.
Long-Term Uncertainty: Case Studies
Long-term uncertainty concerns those uncertainties that might stretch a long time into the future without knowing when or how they will resolve. These are the things that pose big existential questions to your firm, or at least bring up existential questions, while you’re busy figuring out what to do. Here, we’ll walk through how we like to think about some case studies in long-term uncertainty.
At the time of writing, it feels like economists have been forecasting an imminent recession for the last five years. It can be hard when we’re all waiting for the other shoe to drop. In general, responding to market conditions, doing market research, and doing regular brand assessments are great ways to make sure you’re staying competitive in any environment.
But let’s say a recession is announced. What do you do? The first question is: What is the best path forward from a long-term growth perspective? Depending on how your company’s finances were panning out in the recent past, one might decide to sell, IPO, take on additional investments, or bootstrap. There’s uncertainty attached to all of these options, and they’re going to depend highly upon several factors.
What doesn’t change across different kinds of companies and different levels of performance is the importance of being in it for the long game. You don’t just want to think about the next five months, but about what moves will serve if different conditions pan out over the next two, five, ten, or 20 years.
Your people are your greatest asset—hopefully, you know this already. And you also probably know that life happens. Yet, when the CEO or CFO walks out the door, or your best graphic artist steps out for a family emergency, it can throw you for a loop.
Planning for this is tricky. In general, I don’t encourage redundancy. That’s a surefire way to create a tighter budget that—most of the time—won’t make sense. Instead, I encourage awareness of what everyone is working on. It’s important to know what everyone is doing; yet, it’s also important to be humble about job creep. Even if you’re the boss, you might not realize just how far your Database Manager has strayed from their original job description. It’s good to be aware of this both for understanding how all of the pieces fit together and for understanding who is responsible for what.
Grasping the strengths and weaknesses of your team can ensure that you can figure out where other folks can step in and take on an entire job, or some parts of it. In some cases, people will be applying skills they’re already using on your team. In other cases, you might get the opportunity to help your team with professional development by teaching them new skills or discovering untapped talent.
Ultimately, having a pulse on your team, avoiding silos, and understanding how everything fits together allows you to best direct your team towards a common goal.
This is a big one and a difficult one. There are more floods, more heat waves, and more wildfires than there used to be. How do we plan for this in our companies? I’ll walk through a few different lines of questioning that can begin to guide your game plan.
Location-specific climate change: Does it make sense to build a HQ in New Orleans? Or should we move back to northern Louisiana? What climate needs does your facility have (e.g., are there a lot of computers?)? What are the risks to your infrastructure? Do hotter summers or colder winters pose a risk to materials you might be transporting? Is water scarcity something that you need to be thinking about?
Disaster Preparedness: If the worst happens, are you insured against flood damage, wildfires, or whatever is most likely to affect your area? What kind of resources do you need to make sure you can support your employees if a disaster happens at work, or even in the general area? What will you need to reach out to employees? Will operations continue, and if so, how?
Communication: How will you communicate with your employees and customers if something happens? How will you communicate with key stakeholders and investors? How important will it be to communicate quickly? Do you have emergency contacts with important partners or plans that can be quickly enacted across different locations if coordination is necessary?
Global strife: It’s crucial to think about how disasters and climate issues will affect populations globally. Map out where your supply chains are so you can quantify the potential risks to materials, investments, economics, and of course, the human toll.
Climate change presents some of the biggest unknowns we have—there are predictions, but we never know in what state or town disaster might strike. Ultimately, we are all on one planet. Animals are adapting (see: all the beach closures due to sharks!), and we have to make sure we do the same.
When it comes to long-term strategy, some unknowns are—thankfully—a little closer to the business-as-usual that we know and love than climate change. For example, you might set a goal to increase brand awareness in 2024. This is long-term uncertainty because it has the potential to change the course of your business, and because if you’re doing a brand pivot you have no idea how it might be received by customers. What might your strategy be in this case?
By the end of 2023, take stock of where your brand is. What does the market look like, and how do you want your brand to be perceived within your market? What does this mean in terms of customer perception, digital awareness, website hits, inbound inquiries, social media followers, and so on? Figure out what your most important metrics are and begin with the baseline info that you do know.
By the beginning of 2024, you want to figure out how to get data for the metrics you don’t know and figure out which metrics you most want to target in 2024. You can’t target too many at a time or else you won’t know what worked or why. If you want more inbound calls, you might do more LinkedIn advertising or more website content regularly. If you want more website hits, you might invest in an SEO overhaul.
Finally, throughout 2024, you would want to keep sight of what you’re trying to accomplish. What outcomes do you want, and what do you have today? Once you set SMART goals, you can put plans together and reassess quarterly to see how things are evolving and continue reassessing to get you to where you want to be in the market.
The 20 Mile Analogy
So much long-term planning is about deciding that you’re in it for the long game. That decision means you adopt a certain mindset and a certain willingness to dive deeply and boldly into uncomfortable and difficult questions.
Jim Collins has an incredible analogy for this process in his book Great By Choice. Imagine you and others are about to embark on a 3,000-mile foot race from San Diego, CA to the tip of Maine. One person decides to push as hard as they can and travel 40 miles the first day, then they are exhausted and need to rest. In fact, they need to rest the next day too. You, on the other hand, set out to do 20 miles a day, every day, no matter what. Whether the 20 miles takes you 12 hours or four hours, it doesn’t matter.
You might be able to guess who wins the race. The runner that was sprinting and recovering didn’t win. When you plan and can keep steady progress and stay on track with your plans, you give yourself space to maneuver. Any marathon runner knows that one mile can feel different from day to day. But if you set yourself on a plan, you at least won’t be trying to achieve 40 miles in a day, but just 20.
As with business goals, long-term planning requires breaking large goals into smaller goals. That climate change conversation across your entire company probably won’t happen in a day—and that’s okay. More broadly speaking, making sure that you have a steady and sustainable business plan means that you won’t be as swayed by waves of uncertainty.
There are no perfect choices. In a crisis, we can’t afford to be perfectionists. Looking at reality and moving beyond the “what-ifs” allow us to take small actions and make the necessary plans that can buoy us through a hard period. Take your steps, measure your progress, and eventually, you might realize you’ve already gone 120 miles.
Long-range strategy planning is hard, but it can work. With the right mindset shifts and a willingness to ask hard questions, you can create a sustainable business plan that addresses business-as-usual alongside potential long-term challenges. The steadier you are on the day-to-day, the steadier you will be during a crisis.
Finally, action begets action. Taking the first small step means that you can then look back, 20 paces later, and see how far your team has gone. This, in turn, inspires more action and ensures that we’re not waiting for life to happen to us. Creating bold, sustainable, and competitive companies today means going beyond the status quo. Ask the hard questions. Take the uncertain step. Look into the future with unflinching eyes.
Keep an eye out for the next part of this blog series on strategizing for short-term uncertainty. And if you want any assistance with this from a team of experts, don’t hesitate to reach out to us for a consult.
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