“To be or not to be – that is the question” – or is it?
According to Golda Meir, the ‘Iron Lady’ of Israel – it really isn’t a question at all, “To be or not to be is not a question of compromise, it’s a statement of choice – either you be or you don’t be”.
From a business perspective, ‘To be’ is no longer an option. To succeed in today’s supercharged, highly competitive and constantly changing globalised world, we need to shift from ‘To be’, ‘To be better’.
So how do we be better?
In a buoyant economy, where successful companies are producing good returns for shareholders, it could be to hold the course, to deliver “more of the same” – to maintain the status quo.
But in a stagnant or shrinking economy, where demand reduces and competition increases, where price increases are resisted, where profits and cash flows are falling, the status quo is not an option.
So, what do we do?
Well, typically we “brainstorm”, develop strategies, scenarios, forecast, budget, or use big data analytics as a predictive tool. But are these methods effective and capable of allowing what-if analysis and developing alternative scenarios? Do they permit us to be proactive – to look to the future and to use appropriate tools to guide us in the right direction, or do we remain mired in the present and focused on the past.
And do they allow us to quantify the strategies – easily, accurately and quickly?
I suppose like most tools their efficacy depends on the skill of the user and the design of the tool.
In a recent interaction with senior management of large diverse organisation, it was rather disconcerting to be told that they did not have adequate resources to build a management tool to assist and guide them to make informed decisions. And this against a backdrop where their recent performance has been anything but stellar!
It’s the equivalent of saying – “I don’t have the time to be better”! Of course, it could also be a matter of priorities.
Having been at the helm of a variety of companies, big and small, I have experienced the dilemma of unexpected or unpredictable business situations and have many times been subjected to opposing or conflicting courses of action. And on more than one occasion wished for a crystal ball or the wisdom of Solomon.
Sadly, neither have materialised and in the absence of both, one reverts to more practical or pragmatic solutions – like properly researched, comprehensive, flexible predictive financial models.
Creating certainty in uncertainty
Models which allow for quantification of strategies and comparison of alternatives, that highlight courses of action and the most likely results. Models which thoroughly speak to the business case and allow what-if comparisons. Models that shed light on the situation.
Financial models may be a far cry from the Holy Grail, subject to inaccuracy, but when speaking as a businessman, I would always opt for a little light to show me the way than a black hole of uncertainty.
Colin Human CA (SA)
Goalfix Financial Modellers
May 2019
