Peter Westlund – What Could Possibly Go Wrong

TRANSCRIPT

Welcome to the #CriticalFewActions™ to improve your business podcast. I’m John Downes, and I’m here to help you cut through the overwhelm and prioritise what matters most to improve your business. Let’s get started and discover the #CriticalFewActions™ that have the biggest impact.
Peter Westlund helps businesses to enhance capabilities that contribute to developing their business so that they and their organisations become much more successful at achieving goals and objectives and improving business performance. One of the key areas that he helps his clients explore, among others, is the practice of scenario planning.
What’s likely to happen, and what are feasible if unexpected events or conditions that might occur, and how might they deal with them, such as I don’t know, inflation, interest rates, global pandemics, and a sudden, sharp increase in demand? Peter Welcome.
Well, thank you, John, it’s nice to be here with you talking about scenario planning today. And really important that scenario planning does have a fit, a strong fit, and a role to play in strategy and implementation.
Absolutely. So, Peter, how did you get involved in scenario planning, and what is scenario planning? in
Well, scenario planning is a strategic approach that really helps us face change in, the face of uncertainty, and in many ways, scenario planning is a key plank for developing strategy as a strategy implementation plan using scenario planning has been a core part of my business for a while.
However, it was also an important part of my early corporate career. And I recall in the early two thousand, a committed, competitor announcing that they were going to enter our sector of the building products industry. And they said, well, you can buy direct from the factory without the glitz and glamour of sales.
And we knew then that meant a serious erosion of our profit margins. So the senior management team worked through a scenario planning exercise to identify that it would probably cost us about 20 million in lost margin,
Well,
and decided to run a series of projects across every aspect of the business The first identify initiatives And then implement them.
And I’m pleased to say that the program was very successful. We generated a bit over 20 million and in many ways resulted in some critical strategic improvements to the way the business was run. And more recently in the 2021 CEO masterclass, I ran for WA Northern Territory. One of the sessions was on scenario planning and it fitted in really well, for those, participants in dealing with the impacts of COVID-19 at that time on their strategy and, implementation plans.
Yeah, well, certainly it wasn’t a good time to be a futurist because I don’t think anyone anticipated that was going to be on the, that the global pandemic was going to be on the books for the coming year. But yes, scenario planning was absolutely vital and in some ways reactive. Necessary, for us in, business development approaches at that stage.
Critical thing here, as with strategic planning, it commences with thinking. So it’s about scenario thinking being the primary piece. It’s about obtaining a clearer vision of the future.
Which is to overcome thinking limitations, and, develop multiple, views of what the future is likely to be. There’s a need to understand the dots on the horizon that you know are coming ever closer, perceiving what they hold in store for the business. Thinking about what we could or should do about them and taking action before it’s too late to do so.
It might be my example of the competitor announcing it’s entering into the market, or it may be some new technology that substantially replaces our industrialised process for meeting customer needs, which our client, interestingly has recently faced. So, John, it’s about dealing with the change.
In the face of uncertainty. You cannot afford to become paralyzed by not knowing what’s happening in your strategic environment and what decisions need to be made. I guess that almost everyone’s heard about VUCA, V U C A. It’s an acronym for an environment in which strategy needs to be considered in a volatile, uncertain, complex, and ambiguous world.
Let me just explain that a little bit. In a volatile world, strategy is impacted by rapid shifts in key variables. An example for today, for instance, is what’s happening with interest rates. Who knows where they’re going to go to, and then who knows where they’re going to come back to? In an uncertain world, likelihood and consequence are not able to be easily measured. I’m from the iron ore state of WA, as you know, and China’s growth rate is a constant concern for the WA economy, which is largely based around iron ore exports. A complex world, interaction effects are difficult to anticipate, so a good example of that right now is what’s the energy market going to look like with fossil fuels, coal, wind, solar, and pumped hydro all coming into the mix.
It’s going to be very complex for somebody who is trying to manage their energy costs. And their energy sources, and in an ambiguous world, there’s a lack of clarity about the meaning of events. And a prime example of that right now is just what’s going on in the Ukraine and the war in Ukraine—you know, what’s going to be the future.
There, what’s really going to happen? So it’s about making sense of the world. The nature of change means that predicting events is impossible and likely to be very dangerous, John, and results in a lack of flexibility. So scenario thinking and planning are about considering issues that are not on the business agenda.
It’s about developing adaptive, uh, Organisational learning skills. It’s about closing the loop of perception, thinking in action, perceiving what’s happening in our strategic environment, and thinking about what that means for us. And taking action before it’s too late. Are you looking to pinpoint the areas that will make the biggest impact on your business? Check out the Organisation Performance and Value Diagnostic. This powerful tool lets you evaluate your business on multiple facets and provides email reminders to keep you on track. Head over to www.CriticalFewActions.com.au and get started now./ b
So if we’re, if we’re coping with a VUCA environment,
and we don’t actually know what’s going to happen, why do scenario planning? Surely it’s easy just to stick our head in the sand. So what are the benefits that the businesses are likely to achieve?
One of the key things about working with scenarios is that you have a better, you and your business has a better tolerance for, the VUCA world for volatility, for uncertainty, for complexity, and ambiguity, and your ability to deal with the changes that need to be made. The power of scenario thinking is that it challenges management thinking.
To develop a more holistic understanding beyond a business, as usual mindset, and that delivers greater potential for breakthroughs in thinking that can be translated into action, resulting in a competitive advantage for the business scenario planning is really about rehearsing the future, allowing you to walk through the battlefield before the battle commences. One of the key benefits is overcoming the limits of managerial thinking. Have a think about this. To what extent does your strategic thinking rely on previously successful formulas? Thinking limitations can result in blind spots leading to a business that’s misaligned with its environment and its stakeholders, particularly customers. Inappropriate models prevent managers from sensing problems. Delay changes in strategy and lead to action that is ineffective in a new business environment. Then, at an organisational level, the group thinks of management teams as a constant danger. It results in the suppression of ideas critical of the direction that the management team is presently moving.
The pitfalls are an incomplete consideration of alternative causes of action and a real failure to consider the risks. Of the preferred decisions. You tend to overlook those risks because you, like the comfort of the way you’re proceeding. This failure to consider alternative viewpoints is characteristic of a business, as usual approach, and can lead to a lack of consistency in the purpose of the business because you end up with some disjointed views about, which way the business should go amongst the senior management team. And John, in our strategic CEO masterclasses, we’re strong on purpose and vision. Why we exist, how we deliver on this. And what we deliver. So the objective of developing scenarios is to challenge the prevailing organisational and individual mindsets. The outcomes include perhaps a confirmation that the overall strategy is okay.
Or that we really need some new capabilities to be added to our organisation. A recognition perhaps that none of the business options are robust enough and contingency planning against unfavorable futures is required. And particularly a sensitivity to early warning signs of desirable. Or unfavorable future outcomes.
So, you know, just thinking about that and talking about your Experience earlier on, the scenario thinking that you went through no doubt uncovered a whole raft of ideas that you were able to initiate that actually saved you effectively that $20 million in margin, but it would have also actually identified that some of those, regardless of whether a new competitor was coming into the market, could have been applied to business going forward as well, I’m sure.
Well, yes. and as I say, we did a root-and-branch review of every aspect of the business, right? From administration through marketing, production, distribution, sales, et cetera, and we had a contracting business as well. And the really interesting thing is that we identified ways of marketing the product better.
We identified ways of, manufacturing and producing the product better. We sent a team to the U S to look at, the manufacturing capability that was being used in the U S of our product range. So every aspect of the business was looked over with a fine tooth comb, and in every aspect of the business, we were able to either reduce costs, improve productivity, and so therefore costs per product reduced, and, increase margin.
And one of the, one of the areas that I spent some time working on was the market. And to customers, and we looked at what we were doing when the competitor came out and said, Look, there’s none of this glitz and glamour of sales; come to the factory door and we’ll load it on your truck and you can drive away, and what we were doing was we were certainly loading it on their truck and they would drive away, but what we were doing is a whole host of different. Activities, we would strap, we would pack, we would look, we would put things on pallets, we’d wrap it up in plastic, we do all of these different things.
And not charge for them. And so, as part of the marketing approach, what we identified was a FIFA service, if you like. So, if you wanted to put some product on a pallet and you wanted it strapped and, uh, covered in plastic, then we developed a charging rate for all of that. So that was one way off, increasing the margin.
So, I just want to be clear about looking at absolutely every aspect of the business there.
Absolutely. So, Peter, tell us about your approach to scenario planning.
Well,
through a bit of a client example, perhaps?
Well, so, so, so talking about process, so clearly, the starting point is to get a very good understanding of the business, and typically, where we use is that business model canvas and, and use that business model canvas to get an understanding of the business as is, and that’s the same nine variables we use in our strategic masterclasses. Then we need to identify every issue known to be having a critical impact on the business, especially where there’s uncertainty over what the impact will be over time. So, we use an external environmental analysis. So, we have a look at the market forces, what’s changing in the market, the market that we’re selling our product to, the key trends, technology trends, legal trends, regulatory trends, et cetera.
Some of the industry forces—there might be some mergers and acquisitions within the industry. So, what’s the force—in the industry? Are there new technologies also occurring there? And then also the macroeconomic forces, all of those things that have that major impact.

So, these cover all of the environmental factors. So, and that’s a really important understanding of what is happening and acting upon the existing business model. The next stage then is to interview the key management team and the thought leaders. And we do this in a particular way, in a way which is probably a little bit unusual.
So, that so normally what you probably do is ask, okay, so what happened in the past? What’s important and happening now? What do you want to happen in the future? We actually reverse that. So, we start thinking about the future. So, I getting an understanding of, you know, the thought leaders, and the management team’s view of the future, given that external environment that we’ve just been through.
Then we have a conversation about, well, what’s the present situation? What are the pain points that you’re experiencing presently? And basically, and also taking into account the benefit of the information we obtained from, the discussion around future and external environment.
And then finally, we move to a discussion of the organisation’s recent history. So, we’re going back in time. And so, in that way, what’s driving this process, of course, is the future, not the past. In other words, it’s not business as usual. It’s, what we’re going to need to do to improve the performance of the business.
And then, having gathered that information, we then sit down, arrange workshops to test the driving forces, the impact and uncertainty, and scope out the scenarios. And the end state, that is to be reached, where we want to get to, in other words, as a result of the work that we’re doing.
A good client example is that, I had a client recently, in fact, it’s probably a couple of years ago now, wanted to create a stewardship program for the hazardous waste created through its customer’s purchase. Of the product, it manufactured for the mining industry.
So it was producing a product, which, the customer would then use in a process. and as a consequence of that, the material, the waste material was hazardous. And what was happening there is most of the clients, the customers, I should say, were holding that product in store because it was too expensive to get rid of, and it was becoming a bit of a pain for them.
There were, you know, in some cases, there were warehouses full of this product just sitting there. So the client’s initial assessment was that the client needed to engage a business development professional to market a stewardship program in which the client would offer to take back the hazardous waste for a fee and arrange for it to be permanently
isolated in a recognised facility. So, I wanted to get my head around this, the waste industry, but particularly the hazardous waste industry. And I spent some, quite a bit of time there talking to professionals in that industry and learned there was a bigger need than just what we were talking about.
And that there was really an opportunity. For us to establish a hazardous waste management business, which would be independent of the client’s existing business.
Right.
So we undertook a two-day external environment analysis. To have a look at, forces and trends affecting the hazardous waste management industry.
We developed a strategic plan to establish the business and that followed the client’s, consideration of the personnel required and the skill sets that we would need to work with. And, then, we engaged. A couple of very skilled people who worked in the hazardous waste field, for some years to take us through to a stage where the business was at MVP, a minimum viable product, and then, the client said, yep, it all looks good, and press the button. So today, and we’re, almost two, or three years on, today the business has a licensed facility taking a range of hazardous waste products for processing, treatment, and or permanent isolation, depending on the nature of the hazardous waste.
And is establishing relationships, and this is a really interesting part of it, we’re establishing relationships with existing waste management partners to provide the services that they are unable to deliver. And that’s really interesting because we thought that what they would do is come out and try and smash us. They see us as a partner. And we’re developing some really good relationships there and taking care of some of the hazardous wastes that they are not able to take care of. In addition, there’s a whole bunch of technologies that are not presently available in Australia that we’re exploring to widen the scope of the hazardous waste to be dealt with. Interestingly, John, the principal business is expected to be wound down in the expectation that the hazardous waste management business will become a much more sustainable and profitable business.
That is effectively completely reinvented their business model and their strategic future.
Absolutely. Yep. and as I say, the existing business model was being challenged by new technologies. And there was no way that we would have been able to convert the existing business model, to the technologies that were being used. And this is a much, much more, higher, well, so much higher potential business. For them, and so, uh, it’s looking really good for that
that’s fantastic. On the flip side of that, what can go wrong with scenario planning?
Well, there’s a need to debate to develop a driving force for change. And, you and I both know that we’re, you’re often dealing with, lots of forces that, restrain or resist, change, and, support business as usual. So overcoming management thinking that coping strategies will be effective in resolving the VUCA environment is a key thing.
So that’s one area where things could come unglued. There is a need to act and do so promptly before it’s too late. So there’s no point, coming in when the damage is already being done. This is a planning, this is a thinking exercise, it’s a planning exercise. We need time to be able to think and plan before, the tsunami hits us. Involving thought leaders and other remarkable people within the business who hold differing views and perspectives is really important and quite often, they might, they might be excluded. So I’m always looking for somebody, who really has a different perspective on the business. And they may not even be in the senior leadership team, but you want to bring them into the process, right, because they’ve got some good ideas and they challenge the existing thinking. A failure to follow through and trust the process to deliver the outcomes, getting halfway through, and then abandoning the process is probably not a smart thing to do. And then, uh, monitoring the early forces and trend indicators. So we’ve. We’ve done the scenario thinking we’ve done the scenario planning, but we need to keep monitoring just what’s happening in those forces and trend indicators and identify any changes in these that impact what we’re trying to solve.
And we might need to change. Some of the plans that we’re drawing up and then developing an action plan, which again is from the future to the present milestones, right? So, we’re not reaching out, we are actually coming from, okay, where we want to be, and then how are we going to get there?
So, identification of the milestones that we’re going to have to hit, how we’re going to measure those milestones. And, what the other goals are. So that’s, there’s some of the things that, I’ve couched those in the positive. I don’t, I prefer to talk in the positive, but those are the things that need, you need to look at.
Those, six or so things you need to look at to make sure that things don’t go wrong, in this process.
The, I guess it helps when there’s a catalyst for change. Because I guess. in the very early days of, for example, say, COVID-19, a lot of people were saying, look, it’s just immediate beta. And we’re quite happy to put their head in the sand. It’s not really going to make an impact on us.
And then within six weeks, we’re in various states of lockdown, whether it was personal or statewide. And all of a sudden, it was a very real scenario. and it was that which actually then created the agents for change. And people became very reactive, responsive, and some of them became also quite strategic.
In the case of your organisation where they were going to have a competitor who was just going to sell straight out to the factory without the glitz and glam. You had a known entity that was coming at you. And I guess, part of the question is not so much, not only, okay, well how do we actually take the time out for doing.
Scenario thinking and thinking about what, what’s likely to happen or what might happen or what might come at it, but also the issue of, okay, well, how do you get commitment from, shareholders and the executives, to back a plan, to take on board these VUCA scenarios?
Yeah, so I think the really important thing here is to create a climate in the organisation. So this is the responsibility, from right at the top of the, of the board. Through the senior management team, the CEO, that makes the organisation one that is a learning organisation, and that is adaptive. And what I mean by that is that it includes reflecting on the actions that we’re taking, and not just, From a scenario planning point of view, but from, a daily, weekly, and annual, action plan. So, reflecting on those actions and the experiences and the expected outcomes that we thought might occur as a result of, those actions and adjusting those actions based on this.
So, so that reflection process really is really important. If you can can create that climate in your organisation where we’re continually learning and thinking about, okay, what are the things that are really impacting on the business? And how do we respond to the impacts that they are having on the business?
I think that’s a really important piece, and it’s a culture piece. So it’s not going to happen, on a Monday morning meeting, and then by Friday, we’re all, doing the necessary reflection and thinking about it. It’s a cultural piece. The second thing I think that needs to be encouraged is diverse opinion.
So if somebody’s got a diverse opinion in your organisation, Which kind of runs counter to your thoughts as the CEO, then just don’t dismiss it because it might be the real gem that, prevents you from falling, into a bit of a hole. So, encouraging those diverse opinions, and having conversations about them.
So exploring opportunities for strategic conversations about the virtual world. Don’t just, don’t hide it. Don’t just. Leave it to the CEO, don’t leave it to the senior management team, but get those people who are thought leaders in the organisation exploring. Those strategic conversations about, you know what it is, volatility, uncertainty, complexity, and ambiguity.
And I think then you are establishing a really good culture so that when it comes along to getting your scenario thinking and planning ready, you’re already in the right culture to be able to do that. Right? And that, that I think is, those two points I think are really critical.
Yeah, because change resistance is the one thing you can pretty well guarantee with any change in an organisation. And if you’ve created a culture where it is more change-ready and change-hungry and change-accepting, then you’re off to a very good start.
Yeah, I think so. Absolutely. And, my role in this is then to help facilitate that process, you know, to, obviously be their consultant and facilitator of the thinking and the planning and the strategic process. And that’s the stuff that I do. Really do enjoy doing.
Absolutely. Peter, if I’m leading an organisation, how do I get scenario planning ready? Absolutely. Is it simply a matter of starting to have those conversations or is there more to it than that? What’s going to help me be successful?
So, so talking about some critical actions, I think that CEOs could take, and we use this model, I think is, scanning for the dots on the horizon. You recall that, you know, in my opening discussion, I talked about the dots on the horizon. And, so looking for them, quickly perceiving the approaching new realities before they hit you, and be alert to important new developments and trends.
So, so perhaps you’ve got to broaden your horizon, to be able to do that. The second thing I think is making sense of the new realities earlier. Don’t ignore them in the hope that you’ll be able to cope or that they will simply wash over you and, it’ll be business as usual. I mean, I’m absolutely certain that there is no business.
Now, that is, is the same as it was before COVID 19 hit,
Of course.
You know, so we’ve all adjusted. And one of the ways in which we’ve adjusted is that we are thinking about how we cope with these sorts of things that kind of come out of left field, and smash us. And we weren’t prepared. None of us were prepared.
I mean, my own consulting business, I was working with two at-risk industries. One was, doing a major project for a restaurant and bar. And I was also working, on a major merger, for an indigenous training organisation. Now, I remember the date. This was March the 25th, 26th. Both those businesses were shut down immediately. And so, for me, that was the end of those two consulting assignments. Like that. Snap. Gone. And, so, so we need to be aware that, as we’re running our business that we had plans in place to cope with those, sort of, sudden new realities of this world and, you know, that I can kind of happen anytime.
I mean, look at what’s happened recently with the floods, flood damage, around the nation, enormous impacts on those communities. That had been affected. And, how do you cope with that? Very difficult, but I’m sure that those businesses that have been severely impacted will have thinking about plans, to make sure that it doesn’t happen to them again.
Totally. Peter, how do you help in this process? I’m looking to get started on the scenario planning. How do you help me get started?
Okay, so, so obviously, my role is as a consultant and as a facilitator of the process. So, what I would do is. Be sitting down with the CEO with the management team and talking about what their concerns are, and then, developing a process where we can go about identifying some of the trends and the forces that, they are really concerned about, and outlining the process for undertaking the scenario planning. So that, would, that’s my role, to be consultant to them and to be a facilitator of that scenario thinking and planning process. And to take them on that journey, so that at the, at the end of the process, they’ve got a much clearer view of, how to deal with, that uncertainty that, is, out there and likely to have any serious impact on them.
Good, good. Peter, that’s been really helpful and really reflective.
So, if I’m a CEO that’s looking to start scenario planning in the organisation, what #CriticalFewActions™ should I start doing tomorrow if I do nothing else?
Well, yes. So, as I said before, I think the key thing is, Get your eyes up and scan for the dots on the horizon.
Scan for the dots.
Look for the things that are coming at you and they’re only written, and look quite small right now, but they are developing. So be, alert to those. And then, try to make, some sense.
Of what these dots are likely to, impact your business, right?
At least make some sense of them early, and recognise that, yeah, some of them you’re going to be able to cope with. There’s no doubt about that, right? But the big ones you’re probably not going to be able to cope with. It won’t be business as usual.
And so there’s a need then to really sit down and do some thinking and say, well, okay, There’s this new technology that’s coming along, which is going to batter us about a bit, how are we going to handle that? What are we going to need to do? And, uh, what’s our business going to look like after we’ve made all of those changes?
And how are we going to get there? Navigate that process from where we are now to where we will need to be. Given, the changing technology or economic environment or whatever other forces or trends are adversely going to impact your business.
Yeah. Good. Good. All right. Well, hey, that’s been really enlightening. I think that scenario thinking that really crucial initial stage and also thinking from the future backwards, as opposed to from where we are now forward to essential elements that every business should be taking the time out to invest in.
It’s been really good to have this discussion. Peter, thanks for your time.
Thank you very much, John. It’s been a pleasure to have this conversation with you.
Excellent.
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Transcript Ep 15 E Peter Westlund – What could possibly go wrong.txt

Displaying Transcript Ep 15 E Peter Westlund – What could possibly go wrong.txt.