Are you ready for the storm?

We’re all familiar with preparations for a coming storm.  We stock up on provisions, prepare our home for the weather, and make alternative plans should we be without electricity, be unable to get to work, and a host of other concerns.  Some view an incoming storm with measured prudence and others in a near panic.  Scenes of home improvement stores getting cleaned out of storm-related materials are common as the forecast becomes more accurate.  But do we exercise the same degree of caution when it comes to our business or do we do choose to stick our heads in the sand hoping the approaching weather will turn away and not hit us?

The approaching storm in the aerospace and defense (A&D) community is sequestration, but it goes beyond that.  In hurricane parlance, you could categorize the approaching weather as nothing short of a Category 4 or 5 event with potentially devastating results.  But there’s more to it than just sequestration.  In fact, I would submit that the convergence of issues facing political decision-makers looks more like the conditions depicted in the 1997 book by Sebastian Junger, “The Perfect Storm” where the convergence of conditions created a monster event.  All indicators support conclusions that without a dramatic shift in the political and economic conditions, two or more of these factors will meet at about the same time to create a significant fiscal mess.

With only months left before these issues begin to coalesce and force decisions and actions, some A&D companies continue to ignore the signs believing they can weather the storm with minimal damage or worse believe the whole thing will be averted.  For larger companies, they may surmise that while they may be damaged, their sheer size will allow them to survive.  For mid-size or smaller companies, they may feel helpless in the face of the approaching storm and conclude they just have to take their chances.  In the midst of all this are conflicting forecasts from analysts, political insiders, and anyone with an opinion.  The ensuing confusion makes it even more difficult to make decisions with some only listening to analysis that shows the storm weakening or taking a different track. 

One simple way for A&D companies to exercise prudent preparations without panic and chaos is to spend some time doing some scenario analysis.  The macro conditions are sufficiently understood to identify one of several scenarios that are likely to emerge.  From that point, companies can internalize what impact each scenario might have on their portfolio and what actions would be necessary should that situation unfold.  Using a range of scenarios from positive to catastrophic, companies can conduct sensitivity analysis against which they can compare the fiscal health of their organization.  After careful analysis and prioritization, you can develop a set of watch points or indicators that will allow you to make adjustments as facts emerge and certain storm tracks become more or less likely to unfold.  This disciplined approach has the added benefit of mentally preparing executives to accurately read the weather indicators and make informed decisions as opposed to panic and reacting to every little shift in the wind.

In my experience such scenario analysis is a proven and highly valuable exercise not only in the face of ominous financial weather, but even when the skies are blue and the forecast sunny.  Companies can capitalize more quickly on emergent opportunities when they have invested time to anticipate how changes might affect them.  It makes decision-making more effective when you realize you’ve evaluated a similar pattern before and know with greater certainty what your options are.  In the words of Dwight D. Eisenhower, “In preparing for battle I have always found that plans are useless, but planning is indispensable.”  Use scenario analysis and your ability to be prepared for the approaching storm will improve your ability to not only survive, but thrive regardless of what unfolds.

Connect2Action has extensive experience helping organizations structure and conduct scenario analysis.  With over 30 years experience in A&D, they can assist you in tailoring an approach that will help you and your organization prepare for the approaching storm.  Contact us at:  info@connect2action.com for more information.

Duane Grove is founder of Connect2Action, a strategy execution specialist at the intersection of employee engagement and executive leadership, igniting innovation as a lever to accelerate your growth.  Follow Duane on Twitter @connect2action and connect with him on LinkedIn, Facebook, and Google+.  Learn more by visiting www.connect2action.com.