A Growing Focus on Preparedness

A dramatic shift has shown up in our 14-year survey of companies’ use of more than two dozen management tools and techniques: an abrupt and sustained surge after September 11, 2001, in the use of scenario-and-contingency (S&C) planning tools. The change reflects corporations’ growing focus on managing uncertainty in an increasingly turbulent world. Our survey, involving more than 8,500 global executives to date, tracks the use of and satisfaction with tools ranging from strategic planning and reengineering to Six Sigma and the balanced scorecard. S&C planning appeared on our initial list of tools in 1993, the year that terrorists first attempted to destroy New York’s World Trade Center. Back then, 38% of firms reported using formal techniques for spinning out what-if scenarios to anticipate potential crises and disasters, as well as for creating simulation models for business growth. But satisfaction was low; the tool’s performance ranked only 15th out of the 25 tools, suggesting that companies were finding S&C planning only modestly useful. In the relatively stable world of the 1990s, preparing for scenarios that had a low probability of happening, or a limited impact if they did occur, often felt superfluous. One early and consistent employer of scenarios, however, was the New York Board of Trade (NYBOT), which used what-if analyses in 1993 to decide to build a second trading floor outside the World Trade Center. That foresight kept the organization afloat after 9/11, and NYBOT has since created a third trading floor. As the graph shows, in its first eight years on our radar, S&C use remained relatively flat, tracking well below the mean usage rate for all tools. But in 2002, use leaped above the mean, nearly doubling to reach 70%. Use has remained at or above the mean ever since, hitting 69% globally in our 2006 survey, 72% in North and Latin America, 74% in Europe, and 64% in Asia-Pacific. Moreover, executives are finding the tool more valuable, last year ranking their satisfaction with its performance at eighth out of 25. This growing satisfaction is probably due to improvement in the S&C tools, increased experience with them, and a broader appreciation for them, as global events have underscored their value. S&C tool use and satisfaction levels are highest at large companies (those with annual revenue exceeding $2 billion) and in the health care, energy and gas, and transportation sectors. Planning Catches On For years, companies’ use of scenario-and-contingency planning tools lagged behind the average for management-tool use overall; that changed abruptly after 9/11. Our results show that companies recognize the greater opportunity and risk that come with globalization and the increasing need to anticipate crises and develop robust contingency plans. Growing use of S&C tools suggests that companies are finding value as never before in planning for an uncertain future.

A Growing Focus on Preparedness

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