In Patrick O’Brian’s novels about the Napoleonic Naval Wars, it always struck me as odd that, even in the middle of a battle, all of the ships would stop and take azimuth readings at noon. This critical ceremony and navigational necessity transcended all other priorities.
For my friends locked in conference rooms churning out PowerPoint by the Pound readying this year’s STRAP decks, you are the navigators. It is because of the winds, the swells, the bullets flying, the smoke and the yelling, that we need a correct and timely measure of where we are and where we are going. As navigators, you are not ignoring the acute situation of tariffs and demand, you are using this to help the captain make the right decision about where to go.
The strategy team’s role in the organization is to help make better decisions. We create the options, evaluate each, and make a recommendation based on the evidence within the context of what is happening around us.
Understanding and documenting the Context is the critical first step
Market Context
Customer Context
Ecosystem Context
Company Context
In ‘normal’ market conditions, the Context should generate a small number of options available and the recommendations are usually clear from the data. We are not in normal market conditions. With unknown trade conditions, unknown demand conditions, unknown capital conditions, and a host of unknown unknowns, the strategy team will have to come up with a different move.
Create optionality
Creating optionality is about creating the internal conditions favorable to you no matter the external conditions. For example, using Lean to reduce cost of operations is beneficial no matter the market conditions.
Creating optionality is not the same as creating options. When we create options, we are developing a series of logic conditions; if-then statements about what do when this condition exists. For example, when demand reaches a certain point we will add a new production line. Creating optionality is about developing an organization and processes that is successful regardless of what else happens. For example, restructuring the production line to adapt in real time to demand.
Optionality uses the current crazy conditions to help steer the ship. The winds, swells, bullets, and more are helping you understand what conditions your optionality must be able to withstand. For example, if you are overexposed to a demand drop of 10-15%, what systems and processes need to be adapted? Again, don’t confuse this with options like, “if demand drops below this point, restructure that business.” Your optionality may be to absorb demand drops with flexible supply chains. Or, your optionality may be to offset demand drops in A with demand increase in B. For example, working with an Engineering (EPC) company that serves aluminum foundries, we strengthened the aftermarket support team. When demand for new projects is high, the aftermarket team can help support installations. When the demand for new projects is low, the aftermarket team pulls through parts and service.
How are the current conditions changing your plans? What systems and processes are impacted? E.g., demand is forecast down by as much as 20%, we have engineering resources with nothing to do.
What options are available at various conditions? e.g., demand is down 20% vs demand is up 5%, what changes in that system? Engineers are busy or bored. If they are bored, what else could they do?
Create optionality. When demand is high, engineers are working on customer installation projects. When demand is low, engineers are working on customer retrofits and repairs.
In Patrick O’Brian’s tenth book, Far Side of the Word (also a great movie starring Russel Crowe), Captain Aubrey used a deep fog and an unknown shoreline to his advantage. He created optionality using the adverse conditions to win the battle.
