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A survey conducted by PricewaterhouseCoopers reveals that a mere 27% of CEOs around the world are confident that we will see an improvement in the global economy in 2016; this has fallen by 10% from the previous year, and a staggering 20% the year before. But what exactly are CEOs frightened of, and what can be done to lessen these worries? Here are the top three fears and how to tackle them.
1. Global Unrest
China is now the world’s largest economy, with the Middle East not far behind; economic instability and political unrest in these regions are leaving CEOs around the world concerned, to say the least. Will the effects cause ripples or waves across the globe? Furthermore, the looming EU referendum, scheduled for 23rd June 2016, will undoubtedly impact the global economy if Britain decides to stay or go. Membership of the EU has been undeniably beneficial in generating trade; what will a ‘Brexit’ mean for business?
Bookies are taking bets now, but who’s to predict which decision the country will make, or what will occur on the world stage in the future. So what can smart CEOs do? To combat an increasingly volatile global market, the best weapon is a demand plan you can trust.
An optimised global supply chain, creating clarity and promoting collaboration is a must and this begins with a credible demand plan. Regrettably, too many companies view the demand plan as merely a forecast of what might happen, when it should be the fundamental driver for business growth. Equally it is commonplace for leaders to consign demand management to just a supply chain process, when it should in fact be owned by those in the organisation who best understand the customer, and the patterns of consumption – i.e. sales and marketing. I guess that this doesn’t surprise me because most marketing people aren’t taught how to capture their views of the future or the impact of their efforts within the framework of a demand plan. Maybe this is a gap for our educational bodies to address?
Effective demand management for segmented markets allows the business to use situational analysis to help model different scenarios and design a resilient demand plan for the most likely outcome whatever happens over the next 12 months and beyond.
2. Internal Fears
Of course, we can’t discuss CEO worries without taking a look inside the business; after all, you can’t begin to tackle external problems without putting your own house in order first. Many of the companies Oliver Wight has worked with over the past year have expressed concerns about a lack of honesty within their business, with different departments unaware of their responsibilities and reluctant to take ownership, and unwilling to communicate with other teams.
The truth is key. Telling the truth is difficult and the organisation’s leadership has to create an environment that allows people to do so. Why? Because it typically leads to 10% to 15% growth. The truth allows people to proactively manage gaps far enough out to make a difference. This type of cultural change is not easy task and it starts at the top.
People are key to change; if they aren’t engaged with the strategy of the business, or don’t understand their role and the importance within it, they will be reluctant to take ownership and change is certain to fail. By empowering your teams and demostating that their actions will result in benefits for the entire organisation, then real business transformation can be achieved.
3. Preparing for the Future
Focusing on thriving, rather than surviving, must be every business’ ultimate goal. Although the PricewaterhouseCooper study suggests that CEOs are nervous for the year ahead, it’s also true that business owners have weathered worse; the financial crisis was good practice.
One way to get more confident about the future is to improve your ability to predict it. Integrated Business Planning is a common sense process for aligning and optimising the company plans on a month-month basis. IBP ensures early focus on any potential gaps in business performance – it allows business leaders to predict over the 36 month horizon and respond positively to changing conditions, in plenty of time.
The problem is that the motivation for implementing IBP is almost always to merely improve processes rather than transform the business. Of course improving processes isn’t particularly interesting for business leaders, so again the responsibility for design of the process typically passes to supply chain, where the focus is inevitably on controlling inventory, schedule adherence and so on, rather than increased revenues and profitability, thus setting the ambition too low..
Unsurprising then that in a recent Oliver Wight poll, 23% of managers said that improved forecast accuracy was the biggest benefit of their Integrated Business Planning process compared to just 7% for revenue growth.
It’s only when the financial returns start to come, that the leadership begins to see the true benefits of IBP are way beyond those originally specified, by which time the opportunity to gain most from the process has been missed. We often hear executives say, “when we signed up we didn’t realise we’d have to get so involved”. Leaders have to connect with IBP to get the true value from it,
At Oliver Wight we have established a list of priorities for leaders in achieving success in implementing Integrated Business Planning, and ultimately the business:
1. Make a performance choice and set the ambition
2. Set priorities for the business
3. Measurement - predictive rather than retrospective performance
4. Change the focus from ‘process measurement’ to ‘business outcome’
5. Establish performance goals
By incorporating these into the company ethos and eliminating the concerns of today’s leaders by implementing a robust integrated business planning process, it will free up time to ensure the strategic objectives are the key drivers and focus, and your organisation will be prepared for almost anything thrown its way in 2016.