What would you do if you knew there would be a major earthquake in China sometime during 2012? Before you say “I would not travel to China in 2012” let me tell you that you are currently in charge of operations of a global trading company that has a large distribution hub in Beijing.
What would you do today or in the next 6 months if you knew that this earthquake could cripple your Asian business? That was the question Dr. Mahender Singh from MIT asked a number of us attending a supply chain conference recently.
After we got through the “how do you know?” questions Dr. Singh asked us to push the I believe button and move on with the exercise. The group decided to get all of our experts together, analyze the problem, suggest alternatives and recommend a solution. We built another distribution center in Australia to handle the load in case the China facility was knocked out.
Well January 1, 2013 came and the predicted earthquake had not happened. You get a call from your CEO stating that your efforts cost the company millions of dollars without a return. Never again would you be trusted. Not a good day ……………
6 months later in July 2013 H1N1 flu pandemic hits China. The entire county is quarantined shutting down trade in and out of the area. Your facility in Beijing is shut down. The distribution center in Australia is not affected however and is able to handle the increased volume. Your company survives and in fact grows by selling to your competitor’s customers that cannot get shipments from China.
Your CEO takes you out to dinner and you get a promotion. If you had not planned for the expected earthquake that never happened you would have not been ready for the unexpected pandemic that did.
Dr. Singh said we need to plan for the known and prepare for the unknown. We are reasonably good at planning for the known. The issue is in many cases we don’t spend the time and the energy to prepare honestly for the unknown. Who would have known that an oil well would explode in the Gulf of Mexico and the resulting spill would foul hundreds of miles of beach and thousand of square miles of fishing grounds. How do you get yourself ready for the future?
The secret according to Dr. Singh is to start with the future, such as the earthquake in China, and bring it back to today. If we know the future what will we do about it today to help get our business ready? As part of your strategic planning exercise create a number of catastrophic scenarios and seriously figure out what you would do.
This was standard practice when I was in the Navy as an officer on a submarine. We would start with the “what ifs” and work backwards to determine the “what do you do”? It took a lot of time and we had many things to do that we thought were much more important. Not doing the exercise was not an option. First we were in the military and we had to do what we were ordered to do. Second we were driving a US warship that was powered with a nuclear reactor. If something happened we had to be perfect. The exercise was successful. We made mistakes, we learned from each other, we were prepared and if any of those unexpected scenarios happened we were ready.
So what can you do to get ready for the future? First, block out time for the exercise. Get away from the hectic day-to-day (i.e. turn off the cell phone) and get your leadership team off site. Dr. Singh asked three questions to help get the discussion started:
- What are your forks in the road (major decisions that need to be made, short, medium and long term)
- What are your hidden assumptions? (what are the sacred cows that no one discusses but should in order to fairly evaluate the future?)
- What are your sensors in the ground? (Facts & trends that may be favorable or unfavorable to your business model)
One last thing. Have fun. Use your innovation and creativity skills. Get to know how your leadership team thinks. Participate fully – it is OK to make mistakes. Think differently – stretch your imagination. Celebrate success.
When the unexpected happens, and it will, you and your team will be ready!
Until next time – all the best!