Scientists believe humans are the most adaptable species on the planet. Our capacity to adjust to change is why we are still here and has a lot to do with why we have outlasted other life forms. The dinosaurs disappeared not because of bigger, faster, or meaner beasts coming after them. They disappeared because they failed to anticipate and adapt.
Humans have a good track record of reacting to what is within sight and what we can believe with sufficient certainty. We adapt when the upside or downside are great enough to overcome inertia. We seek to minimize uncertainty to survive. We don’t generally adapt to live larger.
Today’s challenge is that adapting to market conditions by making what appear to be predictable, controllable, incremental moves after the fact is no longer good enough. Among the many lessons of 2020, being able to anticipate – in a market where speed and unpredictability seem to be constants – will be far more useful than the slow and measured responses that may have been adequate for the slow, measurable and controllable shifts of pre-digital and pre-pandemic times.
The new ground rule: Anticipate whenever you can and be prepared to adapt when the inevitable unanticipated happens.
Why is it so critical for the CFO to anticipate and adapt?
The CFO has a unique lens on the business, covering the entire scope of what all individual units and functions are producing and spending, their results, and the implications for how the totality of everyone’s efforts delivers against shareholder expectations.
In an environment of rapid and unforeseeable change, the CFO can help the CEO and their c-suite colleagues get a head start on seeing what may be around the corner and as a result improve agility and their ability to manage risk. The CFO who accomplishes this will be stepping up their contribution as a strategic business partner.
Why are some teams better at anticipating and adapting than others?
Businesses that are able to reinvent have five traits in common. They:
1. Proactively and consistently pay attention to and act upon social and economic trends.
2. Know and are passionate about their purpose.
3. Routinely experiment and learn in the course of operating the business.
4. Seek and value diverse perspectives.
5. Have alignment with their investors on purpose, vision and strategy.
Why is it so hard to anticipate?
Absent a known future it’s hard for most people to anticipate. There’s no target timing, and there is no certainty of a positive outcome. If things are good, why bother even imagining having to change?
We all have biases, formed naturally by our accumulated knowledge and experience. Our biases can act like blinders, limiting our thinking, and actually blocking out our ability to see new possibilities which would lead us to reallocate resources, reprioritize, shut down favorite projects, restructure, or turn our attention to work that was not part of our plans.
Enabling the ability to anticipate and adapt
Distill anticipating and adapting down to decisions and behaviors. Start by deploying these tactics:
1. Recognize and question biases, whether your own or those of colleagues and team members, vendors and partners. Being able to set biases aside will allow you to see your business’ situation differently.
2. Send the message to the organization that anticipating is a valid use of effort and resources. This means investing routinely in trend identification, assessment and analysis, engaging in customer listening, seeking different perspectives from external experts, advisors, or others who can look at your situation in ways completely differently than your own. It means synthesizing what you discover into “so what’s” – implications – that should be inputs to the planning process and affect decisions and actions.
3. Challenge how you execute, not just what is executed. Old methods generally don’t work to solve entirely new problems. As you anticipate alternative futures, do not underestimate that retooling will be required — people, process, infrastructure, how resources are allocated, how decisions are made. We have all seen during 2020 extreme changes not only in priorities, but also in how we executed to deliver.
4. Connect your organization’s vision and purpose to your priorities. Not clear on your business’s vision and purpose? Push for resolution, starting with the CEO and your colleagues. Lack of purpose in these times could become the equivalent of sitting on a foundation made of sand.
5. Value people whose strength is imagining and shaping the future. Some people are simply better than others at seeing beyond what is happening right now. Their specialty is making non-linear moves. But especially in a mature business these people can be dismissed as dreamers because they may not affect short-term results. They may not be making the numbers for the quarter, but they could be the ones who rescue the year or next year. So be sure the anticipators have a home on the team and provide them with air cover.
6. Set appropriate expectations. Effort invested in anticipating and readying the organization to adapt with agility will not deliver linear results and will not deliver on a typical timeline. Assume setbacks. Be ready to accelerate. Expect to iterate, experiment, prototype and learn to build your anticipation muscle and mindset.
Anticipating, and then being ready to adapt effectively, are no longer optional. The CFO is well positioned to play a leadership role in building the organization’s capacity to anticipate and adapt. These competencies are built-in to the CFO’s elevated role as a strategic business partner, and to their responsibility to manage business risk.