Navigating Corporate Turbulence: Strategies for Detecting and Managing Uncertainty (Full Transcript)

Speaker 1: I wrote a book called Chaotix with a co-author, and we did it for the recent financial meltdown. It was an effort to ask why do companies miss things that are happening, and why do they panic when they happen, and how can they manage uncertainty better, because I believe there's an increase of turbulence. The new normality is one of heightened turbulence, that is bumps, unexpected things. All right, so two kinds of turbulence, detectable and undetectable. You should be at least responsible for detectable. That means somewhere in the world, some things are happening you should know about. They are threats to your continuation as a company. It could be a technology that's being developed in some garage. It could be some new competitor whose costs are much less, and he's going to charge less. For that, we say, please evolve your business intelligence system into even a larger idea called an early warning system. But then there's undetectable turbulence, which there's no sign of it coming. In fact, it's probably a very low probability, but all kinds of things could happen, a flying car, a hydrogen car, whatever. We want companies to also go through the exercise of preparing at least a dismal scenario, and throw into it everything bad that could happen. And ask, is that company built on sand, or does it have still a sound foundation? It forces the company to examine its basic assumptions behind its operations and its very being. It will stretch the mind. It will lead to out-of-box thinking, and those are worthwhile payoffs to see yourself. They should be seeing themselves in the mirror of disaster, and even though they could disbelieve most of it, what would they do? But I want another scenario. I want an optimistic scenario. I want, if several good things happen, what would they be doing in response to that, and how could they create those good things to happen? We deal with those questions. Early warning systems, scenario planning. We also deal with flexible budgeting. If I'm correct about more and more bumps and turbulence, you've got to change your, if not your objectives, your tactics. You've got to raise and lower budgets, adjust them so that you're not left in the lurch. And we have an interesting approach. We take each business function, marketing, manufacturing, purchasing, finance, and so on, and we have a picture with three columns. Let's take marketing. Column one, things you could cut if things got, if times got bad. Column two, things you shouldn't touch. They're basic. You're so good at service, you can't cut service. Column three, things you should probably increase. Even though you're cutting some parts of your budget, there's other parts of the marketing budget that should be increased. We do that for the other functions as well, to suggest that slashing budgets is an indiscriminate and panicky way to really meet a meltdown.