How to deal with chronic uncertainty (like Brexit) in business strategy

I've just read (yet another!) blog post advising business owners on what to do about Brexit. The conclusion: there is so much uncertainty about the outcome that business owners should just ignore it and carry on as if nothing had happened.

I have seldom heard such poor advice!

In the first instance, uncertainty is no excuse for burying your head in the sand. We live in uncertain times, and if it were, no-one would ever do anything. As a discipline, strategy has tried and tested ways of dealing with uncertainty.

Secondly, we now have significantly more information about the future than we had 3 weeks ago. To ignore that information would be myopic and foolish.

So, how does one deal with chronic uncertainty in a structured and proactive manner? Here is a 6-step approach:

1. Get the facts

After a referendum characterised by misinformation, it is important to remain appropriately informed. Key questions include:

What is the legal status of the referendum, and what, if anything could overturn it?
What is the actual process, steps to be taken, and timelines for leaving the EU?
Who are the decision makers and power brokers, in both the UK in Europe, and what are they saying and doing?
What models exist for subsequent engagement with the EU and what do they entail?

Ignorance breeds fear, so get informed.

2. Identify possible outcomes

Following the referendum, there are a number of possible outcomes. At the highest level, these might include:

The UK does not leave the EU.
The UK leaves the EU under favourable terms (so-called Brexit-light).
The UK leaves the EU under unfavourable terms.
The UK leaves the EU, followed by other countries exiting and ultimately, the collapse of the EU itself.
The UK splits, with Scotland remaining a part of the EU and the rest of the UK exiting.

There are, of course many other combinations and permutations which might be worthy of consideration. Whilst it is probably impractical to consider them all, it is important to consider a wide range of possible outcomes.

3. Understand the circumstances and implications of each possible outcome

Within each possible outcome, it is important to develop an understanding of:

What are the future developments and circumstances which might make that outcome more or less likely to emerge, and
What are the implications of that outcome, in general, and for your business specifically.

It is important to develop as vivid a narrative for each possible outcome as is possible. That is, write a plausible story for each outcome a logical chain of actions, events and their consequences. The more vivid the narrative, the more instructive it will be in planning your response.

4. Implement an early warning system

Once you've identified the circumstances which might make it more likely for one outcome to emerge than another, you need to use that as a lens for monitoring developments on an ongoing basis. Make specific people responsible for monitoring specific issues and reporting them to the broader group on a regular basis. Review all of your plans every time there is a major development. Know in advance when you intend to act, and when you intend to sit tight and watch.

Include relevant factors into your competitor analysis (see 7 straight-forward steps to master competitor analysis) to keep one step ahead of the competition.

5. Prepare plans in advance for the most likely outcomes

Don't wait for your early warning system to tell you that something has happened. It's too late to start planning then. Prepare contingency plans for each of the possible outcomes. Add more detail to your plans as events develop and some outcomes become more likely, leaving the plans for the less likely outcomes. You don't need to execute your plans now, but you do want to know in advance who will do what when key outcomes do emerge.

The plans you develop for each of the likely outcomes may be different to the normal plans you'd implement for, say, the implementation of a large system. Plans should emphasise "if this then that" logic, review and decision points and accountabilities, and clear criteria for deciding when to push forward and when to hold back.

You may find that from your plans there emerge some actions which you'd take in the event of many or all outcomes, which expand the options available to you, and/or which are relatively inexpensive to complete. You may then decide to proceed with these "no regrets" actions immediately.

6. Deal with the uncertainty now

The preceding 5 steps deal with planning ahead for what might happen. But there are also things that you could be doing to better cope with the uncertainty right now.

In the case of Brexit, there are at a number of likely immediate considerations:

How are you suppliers, distributors and customers responding? For example, if business partners (especially foreign ones) are less inclined to enter into long-term contracts because of the uncertainty, how could that impact your business and your existing plans for growth or expansion and how will you respond? What could you do to help your partners overcome any such reticence.
A Brexit will inevitably place a huge demand on legal, regulatory, compliance and strategy resources. Do you need need to secure resource in advance, or risk losing out when there is a mad rush at the last minute (as some experienced as the Solvency II deadline approached)? What regulatory or competitive initiatives will be put on hold as regulators and competitors divert resources to deal with their own Brexit plans, and what will you do with the breathing space that might offer?
What are you doing to re-assure your staff, customers and partners that

Chronic uncertainty certainly complicates strategy, but it also offers many opportunities. It is important not to get stunned into inaction, like a deer caught in the headlights. Proactivity remains key to success.

For a confidential conversation about what Brexit might mean for your business, or how to deal with uncertainty in general, please contact me.