Thursday, 10 November 2016

How should strategists respond to the US election result?

Yesterday (Wednesday), we learned something very important that we didn't know on Monday. We learned who will be the next resident at the Whitehouse.

You may have hoped for, anticipated, predicted or even expected either this outcome or the alternative outcome, but that is now in the past. Irrelevant. What was a possibility is now a (near) certainty.

As strategists, it is not our job to happy, sad, fearful or even angry at such outcomes. But it is our job to help our clients / employers / stakeholders to understand and respond to such developments in the most constructive way possible.

How can we do that? Here is a 4-step playbook:

Step 1: Update your PESTEL analysis

The first step would be to update your PESTEL analysis, particularly the P element which represents the Political trends, threats and opportunities your business faces (and maybe also the E element which represents the Environmental trends, threats and opportunities).

We know from president-elect Trump's campaign speeches what policies he would like to enact. The probability of those policies being enacted has now increased significantly. Note, that they are still not certain. Trump would not be the first political to fail to deliver on his campaign policy pledges and so our strategies should allow for political failure and compromise. But they are definitely more likely. At the most macro level, these changes are likely to impact free trade, energy and environmental policy, and minority groups' rights / diversity.

Your PESTEL analysis should include the possible macroeconomic consequence of implementing or failing to implement these policies in terms of trade, foreign exchange, GDP growth, employment, interest rates, etc. You should take into account not just direct action by the US government, but also how other US institutions and other nations might respond.

STEP 2: Update your competitor and business model analyses

Having considered these macroeconomic impacts, the second step would be to consider the microeconomic impacts. How might your competitors, suppliers, distributors and customer respond or be impacted by the policies and macroeconomic consequences outlined above. This should cause you to revisit your competitor analysis as well as your business model analysis.

STEP 3: Update your scenarios

Thirdly, your should review your scenario analysis to take into account the macro- and microeconomic insights generated above. It may be that your existing scenarios just need fine-tuning, or you may find that the changes are significant enough to warrant the development of completely new scenarios.

STEP 4: Review your open strategic decisions

The fourth and final step is to re-evaluate, and where necessary change your strategic goals and plans. The plans you have today were based on the analysis you did before this new information became available. It is, therefore appropriate to refresh your decision matrices and re-evaluate your decisions. For example, a European wind-turbine manufacturer with plans to expand into the US may now consider it more prudent to focus its investment elsewhere.

In re-evaluating your strategic goals and plans it is important to consider the sunk costs incurred since the decision was already made. If the European wind-turbine manufacturer has already committed 90% of the investment required to enter the US market, it may still make more economic sense to spend the remaining 10% than to start from scratch in another market.

BONUS: Don't wait for your annual planning cycle

Too much strategic thinking and planning is tethered to organisations' annual planning cycles. You may have just completed yours for 2016. But events of significant strategic importance follow their own timetables. That is why strategy should be a continuous and fluid process. If you wait until your next annual cycle you may find your competitors have stolen a march on you.

The largest economy in the world has elected its next leader. He has made it clear that he plans to change much. This will have consequences for all of us, wherever we are in the world. As strategists, it is our job and our professional responsibility to understand those changes and how to take them into account in helping our clients, employers and other stakeholders. So, let's crack on.

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