Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

How to prepare for the unknown future

by
24th Jun 2013
Save content
Have you found this content useful? Use the button above to save it to your profile.

Mark Lee interviews Stephen Harvard Davis who believes that business owners should stop trying to plan too far ahead and focus instead on the future they don’t yet know.

ML:  Stephen, you work with restructured teams to make them more productive. Last time we spoke you explained how accountants can avoid mistakes when recruiting partners into the firm. Recently I’ve heard you talk about how businesses should be preparing for the future they don’t yet know. What does this mean and why should accountants be interested?

SHD: We’ve all noticed that corporate history is littered with examples of businesses caught flat-footed by changes that they failed to appreciate before it was too late. The rate of science, technology and connectivity is accelerating at such a pace that news from another country, competitor or customer can have immediate implications for us. This speed of change means that our old planning and analysis tools may be insufficient to keep pace with those shifts.

ML: Are you saying that business plans and budgets are no longer effective tools?

SHD: No, planning remains vital. But long-term plans can strangle a business because they create inbuilt inflexibility.  The Soviet Union used to have five-year plans and look what happened to that. All people, all governments and all businesses are connected. People often refer to the ‘butterfly effect’, where a butterfly’s wings can create tiny changes in the atmosphere that may ultimately change the path of a tornado. That analogy is now more of a reality than ever before. Things change too quickly to be able to look too far ahead. Even a year is too long for a business to predict how it will be affected by a changing world.

ML: What does this mean for accountants?

SHD: Accountants should be at the forefront of creating systems that can help their clients dance in the fires of today whilst having a clear focus on the future.

ML: What examples would you give?

SHD: There are many but two will suffice. The first goes back to the final four months of 2008 when the world’s stock exchanges were battered by what the deputy governor of the Bank of England called “Possibly the worst financial crisis of its kind in human history”.  It took only four months for the crisis to develop and be realised and we are still living with the affects.

More recently there is the social unrest in Brazil, a powerful tiger economy with a growing and prosperous middle class and now with riots in most of its major cities. The start of the unrest is put down to a rise in the cost of a bus ticket and obviously there are other underlying problems, but this demonstrates how one decision can lead to massive turbulence.

ML: It seems to me that you’re warning of the danger of creating long-term plans and focusing on being agile and able to change and adapt at short notice.

SHD: I think there’s more to it than that. For instance I’ve heard you explain that many accountants simply adapt as and when the need to do so becomes irreversible. I feel that the accountant’s role should be more pivotal than that.

ML: Maybe, but in many cases accountants are well aware of external influences that will require them to adapt but they prefer to defer the time at which they take the leap. Why is this not a reasonable approach for their business clients?

SHD: Firstly I’m not sure that all accountants are aware of all those external factors. They may survive more through the ability to quickly adapt when caught by surprise due to the relative simplicity of their business model. Their clients' businesses will often be far more complex.

ML: What sort of things are you talking about here Stephen?

SHD: Most organisations view change as an anomaly, an exceptional event. There are no sensory systems in place to watch for it because most companies rely on continuity and stability and that can make them almost wilfully blind to what’s going on around them. In many businesses those that see the writing on the wall first have no authority to do anything about it and those that have authority, don’t notice it.

I usually spend a whole day with groups of business leaders and their key advisors looking at the sources of turbulence that could impact their businesses. We also identify strategies that can keep them in the driving seat. One approach is to seek out independent advice and the second is the more formal collection of data that indicates future trends. 
 

ML: Could accountants be the source of that independent advice?

SHD: Absolutely. One difficulty that most business leaders and entrepreneurs face is finding an independent voice with credibility and wide business knowledge that they have the confidence to listen to. Their accountant is best placed to offer that independent voice and as a result I think should be viewed as a commercial partner; one that’s able to help a business restructure the way it plans for the future we don’t yet know.

ML: Interesting, and what about the collection of data?

SHD: There are a number of mistakes that businesses make when collecting data and which can cause misallocation of resources. An example is client surveys. These are useful but there is a tendency to survey the wrong people. Too often only the best and most loyal clients are surveyed.

These tend to be clients with the greatest resource allocated to them and feedback from these clients is usually positive. However, the client that is attracted to purchase from a competitor is the small-spend client most influenced by trend, fashion, price and service. When enough small-spend clients, who also tend to be early adopters, have departed the larger ones will then follow, but it’s then too late for the business to react effectively.

ML: So how do you suggest that accountants can help their business clients plan for the future?

SHD: In most organisations noticing change and trends is not in anyone’s job description. Even when strategic planners are involved they usually concentrate on mindless budget calculations so far into the future that they are, in fact, fortune telling. Accountants can help restructure the way that a business plans for the future, particularly the future we don’t yet know about.

Accountants, as commercial partners, should be pivotal in realising that business restructure.

ML: Thank you Stephen. I will be interested to see what the readers on AccountingWEB think of this approach.

Mark Lee is consultant practice editor of AccountingWEB and writes the BookMarkLee blog. This and his ebooks are for accountants who want to stand out and be more successful in practice, online and in life. He is also Chairman of the Tax Advice Network of independent tax experts

Stephen Harvard Davis has been advising businesses on their team restructures for over fifteen years. His latest event for business owners and advisers is on the topic of ‘Preparing for the future you don’t yet know’.

He can be contacted at [email protected] or by phone: 01727 838321

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.