Big Important Things – risk and opportunity identification

30 11 2007

“Big Important Things” (BITs),  are local, regional, national or international circumstances or events that cannot be controlled or prevented, that have a significant effect on current and future business practices.

One should always keep in mind the impact of the “Big Important Things” (BITs) on the supply chain, customers, the competition and your industry.

Those involved in strategy and planning must understand how BITs create enormous risks and opportunities.

One can only react to BITs, they cannot be created or eliminated by an organization.

BITs would include, but not be limited to:

  • Natural and man made disasters – hurricanes, fires, earthquakes, explosions, flooding.
  • Massive economic changes – depression, recession, inflation, currency devaluation, massive layoffs
  • War and Terrorism – security measures, logistics, international trade limitations
  • Government policies – trade barriers, laws and regulations, economic sanctions, embargoes
  • New technologies, – trends and tendencies inside and outside of the industry
  • Environmental or health issues – contamination, unsafe products, epidemics
  • Legal issues – pending or current lawsuits, documentation and reporting, legal precedents
  • Significant global changes in demand or supply – shortages, increased demand
  • Energy costs – trends and tendencies

Contingency plans should be created, worst-case and best-case scenarios developed, and efforts made to lower the risk profile or strategically position the company to take advantage of possible changes in the business environment.

How to use BITs to identify areas of risk and opportunity 

  1. Analyze each of the following elements independently;  strategic raw materials, suppliers, logistics, major customers, the competition, your company, and finally your industry (local, national and internationally).
  2. What is the probability that a BIT would affect each element (impossible, low, medium, high, inevitable) and when (short-medium-long term)?  “My supplier is the only manufacturer in North America of the widgets we need, they are located on the western Florida coast and annually are affected to some degree my hurricanes and flooding.  There is a high probability that a major hurricane will hit them in the short to medium term.”
  3. Use a “what if” line of questioning for those high risk or high impact areas.  “What if a major hurricane hit my supplier and disrupted their production?
  4. What are possible scenarios to reduce your risk, or take advantage of the opportunity.  “Do I have alternative suppliers in place, extra inventory, insurance, how can I protect my customers, who else will this affect and how?
  5. Review this process at least twice a year to take into account changes in the probability of the BITs and modify the contingency plans or strategies accordingly.

Related Links

Analyze and Plan Using 7 Simple Questions

How to Systematically Analyze Any Situation for Better Decision Making

9 Steps to Better Decisions

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The 3 Y’s – help for difficult decisions

29 06 2007

An organization’s management and leadership team is responsible for making timely decisions, supplying and applying resources when required, in order to efficiently reach known or perceived goals and objectives.

In order to make these decisions; research, information and analysis of the pertinent information is required.

Here is where management bogs down or leadership can make serious misjudgements.

  • Poor incomplete analysis or lack of the critical information required to assess the risks, obtain the required resources or understand the probable benefits.
  • Lack of understanding of the changes or resources that the decision will provoke.
  • Making the decision too early, or too late.

A quick and useful trick is to apply the “3 Y’s” to assist when faced with a difficult decision.

The “3 Y’s”

  • Why Me?
  • Why Now?
  • Why Not?

The First Why – Why Me?

  • Who is requesting that I make the decision? Why?
  • Is this in my area of responsibility? Why?
  • Is this my area of expertise, do I know what I’m doing? Why?
  • Do I have enough key information to make the decision? Why?
  • Can I obtain more information, in how much time and at what cost? Why?
  • Do I understand the analysis of the data and the conclusions? Why?

The Second Why – Why Now?

  • Does this need to be done or decided now? Why?
  • Is it in response to an emergency, part of “normal” operations or a change in strategy and objectives? Why?
  • Who depends upon this decision or is affected by it? Why?
  • Should the involved parties be informed of how the decision will affect them? Why?

The Third Why – Why Not?

  • What happens if I don’t make the decision? Why?
  • Are there other options, solutions, or alternatives? Why?
  • Do I think this is the best solution or decision available? Why?
  • Do I fully understand the short term and long term effects on resources, customers, work systems, goals and objectives that this decision will provoke? Why?
  • Who are the internal or external “experts”, what is their recommendation? Why?
  • How far am I putting the organization at risk with this decision? Why?
  • Are there metrics to measure or contingency plans in place in case this does not go as planned? Why?

By reacting and making difficult decisions without reflecting on the WHY we miss identifying the real problems and issues.

We miss solutions and strategies.

We miss opportunities to unify and support the organization.

We find ourselves responding to symptoms and not solving or responding to the core issues.

Related Links

Can’t make a decision

9 steps to better decisions