Spotting Critical Issues Before They Hurt the Business
Five techniques detect problems before it’s too late. No. 3: “root cause analysis,” which dives deep to uncover the best solution.
In ancient times, soothsayers had elaborate customs to tell their leaders what lay ahead. They studied tea leaves, read the innards of dissected animals and threw bones to find patterns. Nothing is foolproof, but today we have better tools.
Jack Welch, former chair and CEO of General Electric, famously said, “Change before you have to.” At Guild Consulting, we often see Hawai‘ i-based enterprises try to tackle problems too late, but some proven tools can help you get ahead.
Often done in a small group or workshop, SWOTs bring together key stakeholders and specialized information holders to identify strengths, weaknesses, opportunities and threats. More sophisticated versions require evidence, identify top items in each category, and create actions that will augment the positives and attenuate the negatives.
2. Lagging & Leading Indicators
Lagging indicators look through the rearview mirror and graph performance over time. Leading indicators face forward and help illuminate the road ahead. A lagging indicator such as sales to an important demographic or employee retention data can point to past challenges or payoffs. Leading indicators like projected interest rates, fuel costs or anticipated workforce availability illuminate potential new investments.
3. Root Cause Analysis
Many perceived problems are symptoms of deeper issues. Root cause analysis dives below the surface to understand causes and effects, and can help businesses discover strategic leverage points that can potentially ameliorate several challenges simultaneously. For instance, knowing cash reserves are low is important but to take corrective action, you have to know if that is due to revenue decline, margin drop, a collections problem or unforeseen expenses. Each of these potential causes may have further explanations. The deeper and more specific the analysis, the more actionable it can become.
4. Future Scans
The world of business, government and society is full of noise. Identifying key signals in the clamor can help businesses spot potential opportunities and obstacles.
Many companies resist change, but a few discover ways to reformulate old products and create new ones. General Mills, for example, maintained a special cross-disciplinary team to monitor global magazines and newspapers for emerging food-related issues that could affect the marketplace.
5. Scenario Planning
Scenarios are stories of the future and a way of imagining the implications of possible changes. Many successful companies have used scenario planning to examine the financial, social and political ramifications of wild cards and “black swans.”
These tools can enable the self-scrutiny needed for making course corrections when problems loom. The purpose of all strategic and tactical planning is to avoid aimless wandering, set direction and achieve strong alignment among stakeholders.
Partner, Guild Consulting