Bain Han Weiwen: Two correct, help CEOs improve their forecasting capabilities

At present, the global epidemic is still in the midst of a rebound, which has brought various challenges to the operation of enterprises. Compared with the beginning of the epidemic, the current new normal of epidemic prevention and control has put forward higher requirements for the management team. Employees and clients are less tolerant of the management team's responsiveness and efficiency, and investors are increasingly demanding of the management team, leaving the management team with less and less time to learn and adapt to new changes.

In past columns, I have mentioned that the CEO's agenda has been completely overturned, especially when the global epidemic situation is still uncertain, and this "long dance" (from lockdown to mass production of vaccines) requires CEOs and their core teams to be able to allocate resources rationally, and to balance management to continuously improve the "predictive", "adaptable" and "corporate resilience" of the company.

How to "predict the future" may be a sexier topic for many than adaptability and resilience. However, in Bane's view, the goal of the forecast is not to predict exactly what details, but to plan ahead for the "worst scenario" as much as possible.

So, how do we make predictions? Bain suggests that CEOs can think "rightly":

1) Have we found the right future scenario?

2) Have we assigned the correct likelihood to the different scenarios described above?

From the cases of leading companies, we found that they deduce a variety of potential scenarios and use them as a reference when making investment decisions. They also get a full picture of information by listening to frontline employees, customers, and other diverse actors. This approach was the standard routine of decades ago, but after decades of relatively stable development, some companies, and even many industries, have forgotten the importance of scenario planning.

In today's Chinese market, strong local new forces are emerging, and if they want to make good predictions in the local market, this requires multinational companies to further delegate the power of new business experimentation and business construction to the local level.

In addition, with the acceleration of digitalization and automation, enterprises can easily be eliminated once they fall behind. Unclear customer propositions, solutions that fail to satisfy customers, channels that don't deliver value, and redundant middle management, headquarters/regional coordinators, and the "middle way" within the company are all stumbling blocks to lean, faster action, more effective investments, and more rapid responses.

In response to the above problems, Bain suggested that CEOs can take the following three major actions to continuously improve their forecasting capabilities.

<h2>Action 1: Optimize decision-making patterns</h2>

The pragmatic, agile decision-making model not only strengthens the CEO's control over major decisions, but also plays a role in quickly penetrating the organizational hierarchy and integrating the required talents and resources. In this regard, THE CEO can balance the line between the senior management team and the business function line based on the transformation and operation of the business, with a phased decision-making model.

Take a fast food chain, for example. Prior to the pandemic, the company designed a new model of decision-making: the executive team focused on "corporate transformation" decisions (such as international expansion or acquisitions) and cultural and talent issues; day-to-day "business management" decisions (such as new store locations, etc.) were delegated to subordinate teams.

During the pandemic, the company's executive team established three cross-functional teams, each focused on different work content, and led by a manager who was one level lower than the executive. The first team was responsible for making decisions related to the pandemic, studying changes in customer needs, and understanding the challenges faced by store managers and employees. The second team is responsible for studying how to get out of the crisis in the coming year and learn the lessons of special periods. The third team is responsible for evaluating strategic opportunities, planning development prospects for the next 1-3 years, and studying how to adjust long-term plans and investments.

Under the new decision-making model, the company quickly adapted to changes in customer dining patterns between epidemics by empowering cross-functional teams, adding family packages to menus, adjusting prices, expanding delivery services, and launching services such as curbside meal pick-up services, in-car ordering and dining, enabling the company to promote major innovations while strictly controlling its budget. After a brief downturn in the early days of the pandemic, the company's sales and sales rebounded strongly.

<h2>Action Two: Use new tools to deduce scenarios</h2>

With the rapid and proliferation of new technologies in recent years, how CEOs use these new tools to deduce scenarios is key to optimizing their predictive capabilities.

Take, for example, an electricity manufacturer. Under the epidemic, the company's senior management team expected sales to decline, so they focused on cost reduction and efficiency improvement and supply chain optimization. At the same time, the newly developed digital transformation dashboard monitors progress to calculate the impact of the epidemic on sales and the expected cost savings. On this basis, we delve into the expected profit growth of each initiative, the material and labor cost savings, and the estimated timeline for achieving savings.

With the Digital Transformation Dashboard, the company calculated the expected impact of traditional methods that could take a week in one day, creating a targeted contingency plan to ensure that goals are met. As a result, excellent tools help companies identify potential obstacles in a timely manner and empower the decision-making process.

<h2>Action 3: Borrow external forces to improve the level of leanness</h2>

In the new normal of the epidemic, CEOs must be good at predicting and meeting the different needs of customers "quickly and accurately" with the help of internal and external platforms and resources.

Take, for example, a global food company. The company plans to launch a new breakfast product, facing two major problems: First, how to let consumers know about this new product? Second, how do you convince them to try?

Bain found that in addition to holding in-store tastings, the company also partnered with influencers to hold remote home tastings. Subsequently, fans of influencers spontaneously spread the word on social media, where brand managers track consumer impressions, engagement, and more. After analysis, the company circled busy moms as its target audience group, and carried out a series of accurate marketing promotions around the e-commerce and social networking sites commonly used by this group.

<h2>epilogue</h2>

In fact, projections account for at most one third of scenario planning. WHAT CEOs need to think further about is how scenario planning can be further refined into decisions related to resilience and corporate resilience.

In most cases, neither the board nor stakeholders will be praised for the FACT that the CEO accurately predicted a black swan event. They will ask the CEO and management team to think positively and fully consider the possibility of various black swan events.

Predictability, adaptability, and organizational resilience require CEOs to invest 100 percent of their money, time, and effort. I want to reiterate that no business can be perfect in one aspect. Only by balancing and weighing the pros and cons according to the company's own situation in management is the way to win.

About the Author

Mr. Han Weiwen is the President of Bain & Company Greater China, a member of the Global Board of Directors, and has more than 20 years of extensive management consulting experience. Over the years, he has led teams to develop sustainable development strategies for leading companies at home and abroad, helping them to improve overall performance, organizational effectiveness, process management and management capabilities. Mr. Han is committed to the development of private enterprises in China, and has written books on the themes of founder spirit, private enterprise governance structure, and organizational specialization. Mr. Han is often invited to speak at important conferences and industry forums such as the World Economic Forum, the Fortune Global Forum, the Lujiazui Forum, etc., and his views are often quoted by mainstream international and domestic financial media and professional media. Han Weiwen is a writer for Forbes China and expresses opinions only on behalf of individuals.