Be Proactive, Not Reactive
Too many companies operate in reaction mode, but simply taking the time to plan for future scenarios can make all the difference.
By Greg Kitzmiller
For every action there is an equal and opposite reaction. However, in the nutraceuticals industry there is too much reaction when it comes to developing strategy. Take obesity, for example. In today’s marketplace, many companies are scrambling to change advertising and reduce package size both in the U.S. and E.U. Another example is the new dietary guidelines. Many companies are reacting to these new guidelines by labeling whole grains on cereal packages. Can firms plan for such situations?
While we can never predict the future with certainty many events in business are fairly predictable. Such prediction requires industry experts to use a process called “option planning.” Option planning requires the development of future options for action where action can be taken given a specific occurrence. Let’s take the recently released new USDA Dietary Guidelines. Many experts have been able to follow the public discussion about these guidelines for quite a while. Even though the exact wording of the guidelines has not been known, the likelihood of changes in certain areas seemed quite certain. In fact, many nutrition experts are surprised the guidelines were not more specific in recommending against many fast food type products or certain processed foods. Once potential outcomes are listed it would then be possible to develop strategic options, which could be implemented depending on which outcome actually came into effect.
Optional planning involves outlining possible future scenarios, developing strategic options for each scenario, assigning some probability for each outcome and then lining up resources that can be used if that particular strategic option is implemented. To some, this may sound time consuming or even wasteful. Yet, consider the ramifications if we do not plan for them. What is the cost of lost time with consumers or in meeting regulation in the marketplace by reacting instead of being proactive? What is the monetary cost of reacting? Normally the cost in both time and dollars is much higher when firms react. Last minute changes, product and package development and wasted resources by scurrying at the last minute are often very expensive. By planning in advance we can plan in efficiencies and effectiveness.
Scenario building involves specifically stating and writing what we believe is likely to happen in the future. Often it is possible to hire the very people developing policy to consult on what the outcome of the policy might be—particularly if those people are academic experts. Some firms regularly hold roundtables with small groups of scientists or regulatory experts to try to determine the outcome of possible future scenarios. Once different scenarios are determined it is very useful to assign some probability of each actually happening. We are not betting on horses, so they certainly don’t need to be fully accurate. But by assigning probabilities it is easier to see, which are more likely and require more resources and which might, indeed, be left to deal with if it comes true.
Developing strategic planning for any scenario means a simple action plan that can be implemented if the scenario does happen. This does not include using some business plan software. It entails developing a true plan by laying out what resources are needed, who will do what, what is the most effective, and what is the most efficient way to deal with a possible outcome. Once scenarios are built it becomes much easier to see how the future might pan out.
All of this may sound like a lot of work but future catastrophes can be avoided if companies just take the time to plan. If you take the examples of either dietary guidelines or potential supplement regulations, both have developed slowly enough and with so many inputs that developing scenarios and assessing probabilities really is not difficult. It often comes down to making the time to do so.NW