Decision-making under uncertainty: Why strategic planning is still crucial
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Posted by: Lucid Content Team
An estimated 67% of strategic plans fail (and that’s before the world was upended by a pandemic). So you might be thinking, “What’s the point of planning if everything could change in a day and the plan is likely to fail anyway?”
But this mindset can be paralyzing to organizations moving through a crisis.
Decision-making under uncertainty can seem overwhelming and even impossible at times. But without a plan in place, you are essentially rudderless and end up letting circumstances run your business, rather than acting strategically to move forward through and in spite of unknowns.
In other words, strategy under uncertainty is critical for coming out the other side successfully.
In this article, we’ll discuss why businesses should still engage in strategic planning despite the uncertainties of tomorrow, next month, or even next year, and what you need to do for best results.
Why you may be tempted to “see how things go”
During uncertain times, it can be tempting to just wait and see what happens before making any major business decisions and plans. After all, what if you make a decision one day only for that choice to be irrelevant or counterproductive the next?
And it makes sense. With the fate of many businesses resting precariously during this pandemic, planning can feel foolhardy if not downright dangerous. So perhaps it’s safer to simply hunker down and wait for the storm to pass.
But this wait-and-see approach can be a costly mistake...
Why you should continue to plan
Now more than ever, it’s important for businesses to continue planning for the future, even if that means having to be flexible with your plans.
Employees need purpose and direction, and of course, they also want to keep their jobs. That means the business needs to do well. But in order to navigate uncertainty, you have to be willing to adapt. Those who stand still risk getting left behind, while companies that develop resilience and flexibility amidst change are better able to weather the storms.
In other words, businesses still need to plan, even if those decisions look different from the “traditional” way of strategic planning.
How strategic planning may look different right now
Most businesses have some sort of plan or strategy in place—even if it’s vague. But those plans often go out the window when crisis hits or long-term uncertainty changes the game.
When this happens, you need to go back to the drawing board.
Consider these questions:
- How do you acquire new customers in uncertainty?
- How can you retain existing customers?
- What is needed to remain competitive in today’s remote world?
- Do you need to change your product roadmap?
- How can your company be more empathetic (e.g., Can you afford to discount your product to small businesses?)?
- Should you adopt Agile processes so you can pivot and respond to market changes quickly?
- How are you assessing risk vs. opportunity?
Times of uncertainty bring new challenges, questions, and opportunities. What worked during more stable time periods won’t necessarily apply now.
That’s where scenario-based planning comes into play.
Traditional vs. scenario-based strategic planning
Strategic planning is all about plotting how your company will move from point A to point B. Traditional strategic planning assumes that tomorrow will look similar to today, with a few contingency plans as a backup.
The basic process follows:
- Gather data and info about the current state of the business and its environment (including financials, competitors, technology, etc.).
- Conduct a SWOT analysis.
- Identify achievable goals and plan a strategy around those, including a timeline and roadmap.
- Factor in any contingencies based on foreseeable risks or threats.
Traditional planning assumes a certain degree of certainty about the future and plans around those knowns.
On the other hand, scenario planning creates strategies built around uncertainties.
The goal (and advantage) of scenario planning is to mitigate the two most common weaknesses of traditional planning: overprediction and underprediction of the business’s future. As the Harvard Business Review explains, the danger of underestimating uncertainty is that it “can lead to strategies that neither defend against the threats nor take advantage of the opportunities that higher levels of uncertainty may provide.”
Scenario planning follows this basic process:
- Define the issue you want to plan for (e.g., “Should we invest in a new technology?” or “What will the market look like for our product in six months?”).
- Brainstorm future scenarios within a set timeframe (e.g., six months, one year, two years, etc.), listing key factors, trends, and drivers that could affect your central focus.
- Identify and prioritize critical uncertainties that could impact the future.
- Narrow down your future options to two to five scenarios.
- Develop your scenarios.
- Evaluate your scenarios for weaknesses.
Once you have a handful of scenarios plotted out, you can test your strategy against those hypothetical futures. This approach helps you evaluate the integrity of your strategy so you can fill in the holes or rework your plans.
3 tips for strategic planning during uncertain times
No matter what approach you take to strategic planning, use the following best practices to ensure better decision-making under uncertainty.
1. Plan with your vision in mind
Times of crisis, change, or upheaval can create confusion and panic. This can cause organizations and leaders to move reactively rather than proactively. But reacting to problems instead of planning for them can lead to disjointed policies and misalignment with your mission, culture, and goals.
In other words, without a clear focus on your organizational vision, your decisions will be directionless, and your organization will suffer for it.
To prevent this great unmooring, revisit your company vision and mission. Keep in mind that “revisit” doesn’t mean you must rewrite your vision, but it does give you a chance to review why you do what you do and make sure that that mission still applies.
Then you can move forward strategically with that vision to guide and ground your decisions.
2. Focus on what you do know
Consider “What is our current reality? What hasn’t changed? What can we predict with a high degree of certainty?”
During times of change, it’s easy to focus only on what isn’t certain. But even in the midst of an evolving pandemic, there are certainties you can rely on and build around.
For instance, we don’t know when a coronavirus vaccine will be widely available. But we do know that the remote work trend is likely to last into 2021 and that the rate of remote work probably won’t drop to pre-pandemic levels. Those knowns can help you as you draft a roadmap for your operations and work processes.
3. Follow the 3 T’s
Big, evolving crises like the pandemic require immediate attention and adaptable plans. So how can you start making good (and quick) decisions now?
Follow the 3 Ts:
- Triage: Review your existing plans to find what still works, find what has changed, and weed out strategies and assumptions that no longer apply. Then develop a quick and dirty framework that is flexible and adaptable to guide your decision-making in the short term. The triage stage is all about plugging the holes in the boat so you can figure out how to right the ship.
- Train: Identify the skills your team needs to manage and work through this new environment. Then begin filling those gaps through prioritization, training, development, and change management.
- Transform: With the holes plugged temporarily, turn your attention to robust scenario planning. The crises of today will have a long-term impact on the future, so it’s important to plan ahead accordingly so you are prepared to meet tomorrow’s challenges.
Decision-making under uncertainty can be overwhelming and paralyzing if you don’t have a framework and strategy in place to guide you. Fortunately, it’s never too late to start planning. Whether you’re starting from scratch or adapting old strategies to new realities, the work you do today to prepare for tomorrow will benefit you and your business.
See how Lucidchart can help you through the strategic planning process, especially when it comes time to take action.Read now
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