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Volume 2.5 Table Of Contents
- Balance history with reality to keep moving forward
- Trend Watch: Forecasts based upon history are running into problems
- Digging Deeper: Be on the lookout for overlooked information sources
- Ask the Business Performance Expert:
Balance history with reality to keep moving forward
As the business climate continues to evolve in unprecedented ways, many leaders are facing the challenge of closing gaps between their yearly predictions for performance and what is happening in reality (See “Trend Watch”). While understanding history can provide us with valuable insights, it’s no longer enough to help us predict the future. The most powerful way to keep moving forward is to balance data from the past with staying attuned to a variety of factors in your organization’s reality. This approach enables you take control of issues at their earliest stages, regain momentum, and make it more likely that your company will be able to deliver on what you promise (See “Digging Deeper”).
The hardest part of staying attuned to reality is knowing where to look. Use the following three guidelines to help you uncover information that might otherwise be overlooked.
Look beyond the apparent challenge: It’s easy to get sidetracked by immediately visible issues and believe that you have all the information necessary to make decisions about the fit of an opportunity (such as a merger or alliance) or the reason for a persistent problem (such as unexpectedly low sales). However, there’s always more to the story. For example, one company found that their problem with unexpectedly low sales had more to do with quality issues than with changes in customer needs or with the competency of their sales force, as they originally thought). Probing for less apparent underlying issues provides additional insight that can make a significant difference in determining the most effective and efficient way to address a problem or whether an opportunity actually would generate a reasonable return on investment.
Include a variety of perspectives: Since everyone perceives the world differently, the fastest and most effective way to uncover more of your organization’s reality is to tap into the views of groups and individuals who can provide input on the challenge you face. Depending upon the industry and your objectives, this may include (but is not limited to) customers, employee groups, suppliers, outsource providers, alliance partners, community groups, and government regulators. The more diverse the input, the greater the chance that you can discover important issues that might otherwise remain undetected.
Use qualitative as well as quantitative data: While financial and market data are essential factors for setting expectations, it’s equally important to consider the impact that qualitative issues, such as stakeholder buy-in and cultural issues, can have on predicting top and bottom line results. For example, a company that was in the middle of a major organizational transformation overlooked the impact that the upheaval would have on morale and ultimately on the organization’s productivity. Due to excessive conflict between product development teams and higher than expected turnover, the company missed a critical product launch date. As a result, this created a gap between the earnings forecast and actual business results. Factoring in both quantitative and qualitative issues can provide you with a more complete picture of the extent to which your organization will be able to hit performance targets.
Trend Watch: Forecasts based upon history are running into problems
According to numerous reports, animation studios Pixar and DreamWorks are both experiencing unexpected drops in earnings. In retrospect, company executives and analysts are attributing the problem to a sudden change in customers’ historical buying patterns for DVDs, along with retailers’ new, less tolerant return policies. At this time, both companies are further investigating causes behind the surprising turn of events. However, they will benefit from looking for the continuous stream of subtle, incremental changes in the present as well as explanations for past events before they make new earning predictions.
Even in “business as usual” mode, small but steady changes are continuously reshaping your business environment. Because they happen so gradually, many people overlook or underestimate their impact.
These changes include small shifts in customer preferences, minor changes in the workforce, upstart competitors, modifications in government regulations, variations in business models, and new technology. Taken individually, none of these issues might signal danger. However, taken collectively, they can have a major impact upon business results.
While it’s tempting to believe that this example is unique, the reality is that companies in every industry are vulnerable to unexpected shifts in historical patterns. Therefore, even when everything seems to be going well for your organization, it’s vital to step back from time to time to determine which signs indicate danger and which don’t. Balancing past results along with your organization’s current reality will provide you with a stronger base not only for forecasting the future, but also for achieving the results you want in the present as well.
Digging Deeper: Be on the lookout for overlooked information sources
It’s common practice to repeatedly depend upon the same information sources to confirm a trend or to gather data about a challenge. However, going beyond traditional sources to draw connections between seemingly “irrelevant” sources will enable you to more accurately address issues and shape expectations going forward. There’s an untapped wealth of information in your organization if you know where to look for it.
For instance, I’ve found a lot of information about an organization’s culture, which impacts employee buy-in and the organization’s ability to meet objectives surfaces in training sessions. When handled in a confidential manner, this and other human resource information can serve as a valuable and efficient source of knowledge to help you more accurately shape expectations and address often overlooked issues.
Another source of often-overlooked information resides with suppliers, outsource providers, and alliance partners. In fact, the more dependent you are upon third party relationships to execute your plans, the more important it is to stay attuned to your partners’ strategic objectives along with their competitive landscape and their organizational issues.
For example, one company experienced an unexpected setback as their outsource provider ran into merger integration issues. In this case, staying attuned to issues that were “unrelated” to their agreement could have helped the company better analyze risk and minimize productivity problems at an earlier stage.
When you go beyond traditional information sources to gather information, the additional level of insight will help you to more accurately gauge the business environment and the factors that will advance and block your efforts. In this way, you can more accurately shape expectations and get more of the results you want.
Ask the Business Performance Expert:
Q: We’ve
just identified what we believe to be the cause
of a discrepancy between earnings predictions
and actual business results. How can we regain
credibility with our various stakeholders as we
move forward?
A: Recognize that employees,
analysts, customers, and other stakeholders will
be evaluating not just what you say but how you
communicate your messages. The more that you understand
the needs of these different groups, the more
you can provide the information they need in a
way and with a frequency that will enable them
to internalize your message. By staying attuned
to what stakeholders say as well as what they
do, you can monitor your progress and determine
what else you might need to do win back their
trust.
Quote: “In the middle of difficulty lies opportunity”
--Albert Einstein