Sometimes an attitude of “failure is not an option” can be counter-productive. Certainly there are moments, like Apollo 13’s crippling explosion in space, at which individuals and teams must step up with super-human strengths to make things happen. There are other cases where controlled failures can be managed – especially if you have contingency, back-up plans ready. Protecting against the downside frees you and your team to focus on the upside.

The Panama Canal has two contingencies to keep ships from rupturing the gates to the locks in the canal. First there is a chain across the lock between the ship and the gates, keeping the ships from bumping into the gates. Second there are two gates at each end of the lock. If a ship were to damage the first gate, the second would hold.

In contrast, there is no back up plan to deal with ships sinking in the lake ships must pass through on their journey across Panama as part of their canal journey.

The difference is that a ruptured lock gate could destroy the entire canal. A sunken ship in the lake would be a minor inconvenience. In either case, controlled failure is an option. In one case there’s a back up plan. In the other case, no one cares.

This is why single point forecasts are so dangerous. A single point forecast is another way of saying “failure is not an option” and can lead to forecasting debacles like what happened to ConAgra year before last. Range forecasts allow for conversations about scenarios – and what must be done to mitigate the risks posed by those scenarios.

In hindsight it’s easy to see that Disney should have had a contingency plan in place in case there were issues with Thomas Staggs stepping into the CEO role. There were.

Metabolix CEO Rick Eno knew his firm was in trouble the instant their key partner cancelled their relationship. He knew all along that he should have had a contingency plan or “optionality.” They just didn’t have the resources to do so.

What if?

Asking “what if?” opens the door to consideration of different scenarios. Of course everything is going to play out exactly as we planned. Of course the weather will cooperate. Of course other entities are going to what they committed do on or ahead of schedule. But let’s consider what we might do if one of the things doesn’t actually happen exactly as we’d hoped.

This has been a missing piece of our current best thinking on strategic planning. I’d like to suggest fixing that:

The Six-Step Strategic Planning Process

The following six-step process will allow you to create a complete and robust strategic plan. We are not suggesting that this is the only way to do this. But it is a good way.

1. Set the aspirational destination, which should be derived directly from the mission and vision. This allows the team to build a clear and direct path toward the aspiration.

3. Assess the facts of the current reality and develop future scenarios by looking hard at Customers, Collaborators, Capabilities, Competitors, and Conditions. Then, develop scenarios to foresee potential changes outside your control that might impact your strategic choices.

3. Identify potential alternatives to bridge gaps between reality and aspiration. Be creative so you can come up with a range of alternatives that could potentially address the issues and move the organization forward.

4. Evaluate potential alternatives under different scenarios to identify which strategic alternatives create the most risk-adjusted value over time, under different scenarios. This should lead to primary choices and back up, contingency choices.

5. Develop detailed business plans that address the strategic, operational, and organizational actions that are needed to implement each selected set of alternatives.

6. Act, measure, adjust and repeat continually monitoring progress against your stated goals and milestones to ensure what you thought would happen is happening in a timely manner and triggering back up, contingency plans as appropriate.

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