By: Dawn Dent, Partner at Oliver Wight EAME, Business Transformation Specialists
“There are a multitude of existing challenges that will continue to affect many industries in 2022. These include material shortages, logistical challenges, Brexit, staff absence largely due to the pandemic and planning in this uncertain environment. The good news is that some solutions are already being delivered. One example is the new €1bn semiconductor fabrication facility opened earlier this year in Germany by Bosch bringing a welcome new source of supply to its own vertical supply chain as well as to customers in the automotive sector. The not so good news is that solutions to many other problems are not yet visible. For example making a call on when air freight and sea freight will return to more normal conditions in terms of availability, reliability and cost is extremely difficult according to recent industry reports. It is difficult to know when attempts to address the problems (for example by converting unused passenger aircraft to carry cargo) will make a difference as passenger numbers and cargo demand arestill fluctuating significantly due to COVID developments.One of the challenges which will affect businesses in 2022 and way beyond is the mounting pressure of Climate Change driving far reaching changes in legislation,regulations and customer behaviour. Many of our clients are seeing new business opportunities in the changes to consumer preferences and choices (e.g a rise in vegetarianism and veganism).
Whilst certain challenges such as the pandemic, supply chain issues and Brexit have consumed business leaders’ energies for many months now, it is time for Executives to empower their teams to take over the execution of the mitigation plans which have largely been put in place. This will allow senior leaders to spend more time to think strategically about the longer term. When planning how to achieve the strategic goals over a medium to long term horizon, we encourage leaders to look beyond the past performance level and the projected performance it implies and instigate a formal and far-reaching review of assumptions(extrinsic and intrinsic)about what will or could happen in their current and future targeted markets over the next few years. Extrinsic assumptions are about things that are happening in the outside world that may affect the business and intrinsic assumptions are about the actions the business is taking and the impact we assume they will have on our business.
What business leaders need to ask themselves
The likely changes driven by Climate Change and the world’s response to it are central to this debate. For leaders to understand how Climate Change is likely to affect their business it is important to gather data and views from a wide variety of sources to answer some key questions such as:
- How is/how will Climate Change affect the drivers of our business?
- Where are the biggest risks for our business?
- What new opportunities could Climate Change or the world’s reaction to it bring?
Changes driven by Climate Change can be gradual and yet far reaching and vary by country or region and this topic has not necessarily been seen as an urgent priority for companies planning processes in recent years. The sooner companies align on assumptions around Climate Change, the sooner they can prepare to mitigate the risks and exploit the opportunities.
In response to Climate Change some companies are already rethinking their strategy and looking at how they can exploit new growth opportunities such as the vegan market or hydrogen powered vehicles and how they can reduce their carbon footprint (egby installing solar panels, wind turbines or more environmentally friendly heating systems). The construction industry is facing significant realignment as governments and local or regional authorities change their policies. Recently there was an announcement that New York is banning natural gas and oil for most new buildings for heating, hot water and cooking. Some company initiatives tick multiple boxes at once. For example, e-commerce which gives retailers as well as companies who are normally further upstream in the supply chain, direct access to consumers 24/7. This can drive faster growth at a lower cost than through physical stores and , depending on the supply chain design, can reduce the company’s carbon footprint.
Oliver Wight advice
Our advice to leadership teams wishing to improve their planning capability when faced with so much uncertainty in 2022 and beyond is threefold:
- Invest in the ‘bench strength’ of your people by providing education on planning best practice. Formal assumptions management and scenario planning are examples of this and can help businesses make decisions in times of uncertainty and risk.
- Put together a core team of these educated people to work on how to apply best practice to your business with specialist help and guidance where required. The team can strengthen your future planning processes using their new knowledge.
- Once you know what good looks like and have decided how you want your planning processes to work in the future, you can think about whether you have the quality of data and systems to support the new way of working. For instance is your data accurate? Do all functions have access to one planning system which the business can use to develop and refine one set of numbers? If you don’t have the data and systems you need, you will now know what you are looking for from any new planning tools.
In our experience, companies who adopt this advice in this sequence deliver far better results than taking a ‘systems first’ approach.”