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“It turns out that an eerie type of chaos can lurk just behind a facade of order – and yet, deep inside the chaos lurks an even eerier type of order.” – Douglas Hofstadter
One of the fundamental characteristics of today’s enterprise environment is change. Today’s rate of change can often be experienced as chaos. All of us are grappling with the implications of technology, demographic changes and the impact of the human race on the planet. And we have an armada of experts that tell us how it will affect us physically, psychologically, socially, and organizationally. The fact and necessity of change needs to be a major consideration in the management of any enterprise. In addition, it is imperative for executives to be competent in introducing, responding to, or coping with fluctuations in the environment.
Before an enterprise can deal effectively with chaos and the always-present change, it needs to craft a situational analysis. It provides a comprehensive view of the system they manage. It also helps with determining its projected future, where it will be if it continues on the current path and be prepared for situation where the unexpected happens. These projections are imperative to understand how the enterprise will be affected unless it changes.
Situational Analysis Content
The situational analysis needs to contain at minimum:
- Flow of business transactions from initial order to final delivery
- Information flow required by underlying business transactions
- Flow of financial resources
- Culture of the enterprise. Differentiating between real culture and externally communicated culture (Policies)
- Conflicts within the enterprise and between the enterprise and other stakeholders
- External Trends and implications to the performance of the enterprise
This situational analyis is a much more in-depth look at the overall health of the enterprise compared to the typical SWOT analysis. In addition, we do recommend enterprises developing an ultimate apocalypse scenario.
Ultimate Apocalypse Scenario
The goal of the ultimate apocalypse scenario is to understand when and how the organizational system will break down if there are no adjustments. We all know that enterprises will eventually intervene and adjust. (Often too late or not early enough.) To be clear, this scenario is very unlikely to happen. But it helps enterprises to understand when and how the system will break down if no changes are implemented.
Fact is, the majority of organizations will not change their course unless they are in a state of crisis. Let’s just have a look at the current state of the U.S. government: For how many years have we heard we need to change fiscal direction? For how many years have we listened to politicians talking about the crisis of entitlements? Only after we stepped away from the brink of the financial abyss, we started to have an intelligent discussion about fiscal policy. Projections about our impending bankruptcy revealed the crisis of of our fiscal policy unless we change our behavior.
The ultimate apocalypse scenario should be communicated through a lively narrative. Humans react favorably to real stories, to vivid images. Just explaining the the federal deficit might reach 50% of GDP doesn’t evoke any emotions. A scenario where nobody will buy our debt and bond vigilantes will run the fiscal policy of the US evokes strong emotions. The ultimate apocalypse scenario provides an enterprise with an opportunity to control and influence a significant part of its future. The goal of the enterprise is to influence the future and not be influenced by the interventions of others.
In Part 5, we will discuss Pie in the Sky planning.