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Using analytics to fuel strengthened focus in volatile times

Confronting uncertainty intelligently

In turbulent times even stronger strategic positioning is needed. Analytics, with its prescriptive abilities to drive more accurate, actionable and scalable business interventions, is a key capability. The second article of the Confronting Uncertainty Intelligently series explores how to decide - with strategic precision - where to allocate resources, and how the power of analytics helps to make better choices.

By Robbe Claessens, Stephanie Brood and Nils Wolthuis

In volatile times, organizations should use the power of analytics to recalibrate their position across a set of four integrated strategic choices. The previous blog detailed the first choice: ‘What future should we plan for?’. We discussed the power of scenario modelling to regain control in volatile times. Scenario modelling however, is only the start of confronting uncertainty intelligently. Scenario modelling allows us to prepare for a set of possible futures. It is in the end how a company responds to a possible future that enables the company to come out winning. The second, third and fourth choice together shape that company’s response.

Blog series: Confronting Uncertainty Intelligently

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In this blog, we will discuss the second choice: ‘Where should we strengthen our focus?’, which is a key decision for companies to make, deciding where to effectively allocate (scarce) resources.

High fidelity in the boardroom: The need for strategic precision in volatile times

To thrive, a company should embrace the concept of strategic precision (a concept that we have detailed in our smart growth series ), by making crystal-clear choices where they will focus, but equally important, where they will not focus. Especially in an economic downturn, making too broad or ambiguous strategic choices (deciding to ‘play everywhere’) can be detrimental to a company’s survival, as playing in too many places spreads resources too thinly, which may result in a subpar or even losing position over the full playing field – especially at times when there is less room for error.

COVID-19 has slowed down global demand. However, the impact differs significantly between sectors and geographies. The economy in China is already showing signs of recovery, whilst South America is still in the midst of the pandemic and the corresponding negative economic impact. Furthermore, the global availability of human, material and capital resources is severely hampered.

In an economic downturn, when supply and demand are uncertain and volatile, companies can respond by (re)allocating resources towards those activities where winning in the new and volatile context is possible. A company can strengthen its focus on four key dimensions: geographies, products, customers and channels.

For example, when a global consumer
product company is experiencing significant economic effects of the pandemic,
they decide to respond along 4 dimensions:

  • Geographies: re-allocate resources from countries where stores need to be closed due to lockdowns, and demand is significantly hampered, to countries where stores remain open
  • Products: push/scale product categories that are in high demand due to lockdowns, such as home office furniture and home sports equipment
  • Customers: increase focus on younger customers, who tend to be less risk-averse (when stores have re-opened) and more digital savvy (when stores are still closed)
  • Channels: highly invest in growth of your online channel, due to a greatly accelerated trend to digital with short- and longer term impact

Taking a superior position: super-charging your strategic choices with analytics

Analytics has the ability to greatly improve the quality of decisions, by removing uncertainties in the context of the choices that need to be made. When executed well, it significantly improves the ability to accurately and actionably define the areas where we should strengthen our focus and also do so in a scalable manner.

As an example, let’s consider a company in the consumer goods industry. The company can leverage external COVID-19 data (e.g. on cases, deaths, recoveries, government measures and consumer sentiment) and decide to open or close stores based on pandemic trends and resulting government and consumer responses. By increasing the granularity of the data (e.g. going from country-level to city-level COVID-19 data), they can make their decisions more actionable and accurate, by selectively opening or closing stores on a highly granular level (e.g. cities or neighborhoods). Finally, when a proof of concept has been set-up for a certain country or BU, it can easily scale the generation of those insights to other countries and BUs, as long as data is available and scripts have been written in a country-agnostic manner.

Better decision making through analytics are effective in both the short and long term. In the short term, analytics allows us to monitor our choices in real-time, enabling us to assess the impact of our decisions right here and now and recalibrate when needed. Additionally, changes to strategic choices impacting the longer term (like 3 to 5 year company plans) and monitoring the subsequent effects with meaningful KPIs allow us to stay flexible and robust in uncertain times.

Finally, analytics also entails the creation of more complex and interactive visualizations, like geospatial analyses, which use maps (instead of rows and columns) to produce and extract useful insights on a cartographic dimension. In the example given above, the company can monitor the effects of their decisions to open or close stores in relation to COVID-19 trends and can use geospatial analyses to effectively determine where corona hotspots exist.

In volatile times, such as during the COVID-19 pandemic, the companies that will come out winning are the ones that effectively revisited their strategic position, strengthened their strategic focus and deployed scarce resources accordingly. 1 It is as Darwin never said: “It is not the strongest of the species that survives, not the most intelligent that survives. It is the one that is most adaptable to change.”

In the next blog we will discuss how companies increase Customer Equity (by intelligently using the levers of acquiring, retaining, growing and optimizing customers) in their focus areas.

1 Interestingly, many people attribute this quote to Darwin, whilst he never actually said this (See the University of Cambridge on this legendary misquote:

More information?

For more information about 'Using analytics to fuel strengthened focus in volatile times' and/or the ‘Confronting Uncertainty Intelligently’ blog series, please do not hesitate to contact Stefan, Perry or Nils via the contact details below.

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