Donald Rumfolt said there are things we know we know. … But there are also unknown unknowns—the ones we don’t know we don’t know.
When dealing with the things we know, we can plan accordingly, but however good business or marketing plans may be, they can sometimes go awry because of unexpected events. For the commercial manager, responsible for producing profitable income for the business, any failure to achieve the planned business results and income could be a serious situation for the business. How a commercial manager deals with such a situation when things go wrong will mark them out as either an effective manager or as someone who according to the Peter Principle, has reached the level of their own incompetence,.
The Deepwater Horizon oil spill in the Gulf of Mexico was both a financial and public relations disaster for British Petroleum. Marine oil spills are an expected, although rare event in the oil extraction industry. No doubt BP had contingency plans to deal with such a problem, but results suggest that they were inadequate. The engineering solution, proved more difficult and protracted than expected, and the company lost control of the media story, which seriously damaged public relations. In hindsight, better risk awareness, assessment and contingency planning might have reduced the environmental damage and guided the press relations to counter the negative perceptions and reactions of the media and public.
When things go wrong in business, they can either happen quickly or slowly. Events that develop slowly are those which should more easily be managed. However, it is the rapid and unexpected development, either externally or internally, which usually compromise business and marketing plans and potentially form a serious crisis for the company. It should therefore, be a normal part of the planning process to identify potential threats and opportunities and specifically, to prepare contingency plans and resources to deal with them. It should never assumed that all will go as planned; customers may provide new opportunities or may fail to complete on expected orders; sales may not reach targets; promotional programmes may yield unexpected demand that creates production problems or alternatively, fail to produce the expected result for the investment made. These are the sorts of events that should be anticipated as potential problems which would require a rapid and planned response to ameliorate the potentially damaging results. But what about other unexpected, or unplanned events?
Most commercial events are predictable to a greater or lesser extent, thus the commercial manager should always have prepared contingency plans that can immediately be enacted. Ultimately, when things go wrong, it is the responsibility of the commercial manager to reduce the negative effects and to exploit and maximize any opportunities that unexpectedly arise. Unexpected events may not be the fault of the commercial manager, but their management actions are fundamental to making matters better or worse. Having a prepared action plan for the “what if” situation, is an essential requirement for the commercial manager and for all senior managers.
Unexpected events may take many forms, for example war, or what are often termed Acts of God, usually including earthquake, fire and flood of which the corona virus outbreak may be considered the most recent example.The commercial manager should always plan for the best, but be prepared for the worst events. Unexpected events might be accidental, e.g. a major supplier is destroyed by fire, freak weather disrupts transport, acts of war or a political situation. One cannot plan for every possible eventuality, but by using risk assessment it is possible to identify the sorts of unexpected events and assess the probability of their fruition so that the principles of a basic contingency plan may be made.
In February 2015, the company, Dowty Propellors suffered a catastrophic fire that destroyed its offices and its production centre. Yet by April 2015, it was in production at a temporary site, with over 100 engineers and support staff were re-housed at an alternative site in portable buildings. But despite this setback the company survived, and opened a new factory complex in December 2019.
Stork was a “premium” brand of margarine first produced in 1920. In 1939 the outbreak of the Second World War brought in food rationing. Throughout the war, although not able to sell its branded product, Stork continued to advertise and publicise its name through Stork recipe booklets, so that when rationing finally ended in 1954, the product was relaunched, with most people regarding it as a luxury after the years of “National Margarine, and it was instantly the brand leader.
The international and national effect of the coronavirus is just another example of the unexpected and unforeseeable events that can seriously effect trade and businesses.
To mitigate the effects of unexpected events, of war, fire, flood and pestilence there are some actions that can be taken:
* Store continually updated copies of records and data off site and elsewhere – possibly in the “cloud”.
* Suitable insurance cover.
* Consider what resources would be needed to maintain business operations even on a reduced scale.
* Consider where to locate or relocate facilities in an emergency.
* Widen the supply chain to alternative and additional suppliers, to lessen risk of disruption.
* Consider alternative or additional transport systems.
* Build a financial war chest big enough to cope with a period of business disruption.
* Ensure that media specialists are kept informed of all developments at all times, so that they can manage the company’s business news to best effect, with a publicity plan to deal effectively with both positive and negative media coverage.
While specific events may not be foreseen, potential types of events and risks can be identified. Then an assessment of the potential risks may be made and contingency plans in outline and detail prepared accordingly. Being able to deal with the unexpected change of circumstance as they arise, is therefore an important attribute for every commercial manager,