Serious preparation for the future is not the strongest feature of our business. What to say about the preparation in the difficult conditions of absolute uncertainty – at a time when forecasts are different and no one can predict how and when events will develop.
Perhaps all of these are a great reason to arm yourself with tools such as scripting and financial modeling. If in the cinematography world, a script is a “cinema plan that sooner or later will be released”, then in business, it is “a way of analyzing a complex environment in which there are many important and influential trends and events”.
Scripts in cinema tell fascinating stories with a certain number of actors in a certain place of action that develop, following certain storylines. In business, everything is not less, but sometimes, more interesting.
Analysis and planning
Let’s start by analyzing the environment and identifying the main points of its interaction with your organization (suppliers, contractors, clients, borrowers, competitors, legislation), which will become key parties, the main characters used in different scenarios.
Then we plan at least three variants of possible behavior or change for each and proceed to the most creative part – combinations of key characters and formation of scenarios. This activity is a great way for management to pump in a group their ability to perform systematic analysis, a comprehensive vision of problems, and to group behaviors or changes using logical principles. All this will help us to create several directions of developments.
The minimum that should result from this creativity are the most and least favorable scenarios for the company. However, if the inspiration has allowed you to get a few more options, try not to have more than four. Try to lauch the verification phase – where after the pause in the work additional checks are carried out for the logic and consistency, as well as the plausibility of the events identified in the scenario.
So, the scenarios are completely ready, but in business, the main is the numbers, and for them major rewards are received. Therefore, it is time to determine how each option will affect the outcome. The model itself will allow you to “digitize” each proposed change and see how it will affect the company’s operations. The business model inputs (prices, volumes, exchange rates that will be the main ones for calculation) will be the key to increasing the flexibility of the business, as well as to quickly calculate the impact of changes on the results.
Modeling the future, we implement the principle of “warned – armed”, allowing ourselves to think in advance of countermeasures or precautionary measures before the situation worsens, thus minimizing, and possibly avoiding some of the negative consequences.
From idea to implementation
With the scripts in hands and their “digitization”, we proceed to the most interesting stage – the filming. In our case, it is the development and implementation of a set of measures that the organization will take, based on the input data received. However, if the filmmaker implements only one scenario, then businessmen find themselves in a situation where there are several possible scenarios and only one will have to be chosen depending on external factors, which no one knows about in the beginning.
Depending on the situation and management style / features of the company, you can:
• prepare for the most likely scenario or choose a set of measures that will have a positive impact on the company in any event;
• minimize losses and try to get the minimum winnings in any situation, the main goal is to maintain positions;
• provide flexibility by constantly monitoring the changing situation and modifying the action plan in accordance with the changes that have taken place;
• proactive position – where a company decides to use all its resources to increase the likelihood of its most favorable scenario.
Flexibility and motivation are crucial
There is no need to choose just one approach; perhaps the right option is to combine several at a time. By defining and implementing a set of universal measures, you can simultaneously set yourself the task of staying flexible with regular monitoring of key factors, as well as taking a proactive position and trying to influence some components of your scenario.
What will be the quality of your film depends not only on the market or macroeconomics, but you. The main thing at the moment of implementation is not to miss the organizational, coordination and motivational components. Remember to make sure that for each task the executor is selected, the actions of all the performers are coordinated and do not resemble the tale of “swan, cancer and pike” and all are sufficiently motivated to achieve maximum results.