Dwight D. Eisenhower famously proclaimed: “In preparing for battle I have always found that plans are useless, but planning is indispensable.”
None of us can predict the future, and as such we will always be surprised by the next big catastrophe. However, leadership implies, to prepare for future disasters. Both the once we can predict and the events, we do not know of ahead of time.
Known Unknowns
The first big question is, whether or not there is any regularity to the next big thing. For example, I can tell you, that the economy will have another downturn. Thus it is a known risk, and I do not know when it will happen.
On the other hand, there could be a technology change, that is disruptive to the industry. If the developments were beyond the imagination of an expert in the field, it would be an unknown risk.
Both of the types of risks are unknown from there timing, yet for the known one, you can take specific measures, while the other requires a more general approach.
Be Inquisitive
You can move a lot of risks from the unknown to the known category, by asking the right questions. Often we stop too early when asking about someone’s predictions because they make us uncomfortable and challenge our world view. Instead, we should embrace and dissect the other person’s opinion to find the foundation, that builds the basis for the analysis.
Often that gives us a new relevant inside and allows us to prepare for a new event. Something we can plan for is a lot risky than a surprise.
Encourage Development
If you look at the companies, that have failed in recent years, both in retail, Blockbuster, Sears, etc. and in manufacturing and technology, such as Nokia and Myspace, you realize, that all of them have failed to innovate their business model and train their employees continuously. Thus, standing still became their downfall once the competition started to overwhelm them.
In all of these cases, the problem did not start by their employees not wanting to change. It always starts at the top with the management not encouraging development and in some cases, even chocking off change.
Avoid Excessive Leverage
Debt can help you expand the business. It allows you to purchase new machines and improve your revenue flow. However, liabilities are only helpful if there is something to leverage. If you are sitting on unsold goods, producing more of them cheaper might not solve the issue.
If business inadvertently shrinks, no matter whether it is due to a hurricane, a downturn in economics or through unpredictable government actions, debts should not become unservable.
The financial crisis of 2008 has taught one thing, if a company relies too much on debt to finance its cash flow, such as Lehman Brothers, it might find itself in troubled waters, once everyone changes their perspective on the economy. I doubt anyone is planning to turn their company into the next biggest bankruptcy in US history, but too much debt can quickly change a risk into a catastrophe.
Plan for the Known Risks
For any business, a contingency plan for a disruptive event helps prepare for the future. While it is unlikely, that any development will happen as in the prediction, the act of planning might open up options and avenues unknown to the management beforehand. Thus the action of planning, much more than the plan itself is the goal of the project.
Afterall it is much easier to find a creative solution, while the chairs are warm and comfortable, compared to when the building is burning. However, often, we start planning for the fire only when we see the smoke coming through the door.
Take Action
Taking action today to face next days, month, and years risks are essential for being prepared. Opening up new options during a time of crisis is much more comfortable if you know the choices and actions available to you. Thus you can turn a crisis into a chance if you know where to go.