Advanced Analytics

Transform how your business operates and empower leaders to respond to any scenario

It continues to surprise how often we hear business leaders say phrases, such as:

“Hopefully we will hit our sales targets with this pricing.”
“Hopefully we will have enough resources to deal with our volume.”
“Hopefully we will not run out of inventory over the next week.”

For better or for worse, uncertainty is a part of business—and hope is not a business strategy.

 

Prepare for an uncertain future with scenario planning

Scenario planning is a structured approach for organisations to think about the future. In many organisations senior executives develop a number of scenarios and model the resulting business outcomes, typically at a strategic level. For example, a company might explore the impacts of sudden market changes and how the company can prepare for various “what-if” scenarios. Or a governmental authority might want to understand how population trends over the next few decades might impact demand patterns to most effectively target infrastructure investment.

Executives tend to agree that scenario planning helps with complex decision making and avoids the dangers of simplistic, one dimensional thinking. Scenario planning empowers leaders to pressure-test plans and gives them comfort about an uncertain future before they decide on a certain course of action.

 

Close the gap between strategic scenario planning and day-to-day management

While scenario planning is common at a strategic level, it is uncommon at the day-to-day management level. This is why so many leaders hope that everything will be okay. This is compounded in most organisations by uncoordinated, fragmented, sub-optimal decision making processes across the value chain. Microdecisions—small decisions made repeatedly by many employees—can have a major impact on the business. If an organisation identifies and focuses on improving just a few key microdecisions, performance can lift substantially.

Examples of key microdecisions vary by industry and company. For a company that has a physical supply chain, what is the impact to inventory levels across the network if a replenishment order is delayed by a day? What is the likelihood that the delay will impact customer experience and lead to lost revenue from stockouts? What are the cost savings, if any, of delaying a replenishment order? How are those tradeoffs weighed? In many organisations scenario planning for microdecisions is often in leaders’ heads or back-of-the envelope calculations. If they are formal, they tend to be in spreadsheets and there can be substantial lag time before the analysis is complete.

 

Make better microdecisions with forecasting and instant self-service scenario analysis

The most effective solution is to enable leaders at all levels of an organisation to have access to advanced dashboards with smart features to make better, more effective decisions throughout the organisation. The first step involves moving beyond a historical or current view of what is happening in the business to anticipating what might happen with forecasting. This could include simple regression forecasting models, or more sophisticated techniques, such as ARIMA models. Whatever the model, we recommend embracing a clean, minimalist front-end design so that leaders aren’t overwhelmed by data.

The next crucial step is how business leaders respond to unanticipated events. The objective here is to be proactive, not reactionary. This is where scenario planning is embedded into the forecasting model. The dashboard should contain the key levers that impact business outcomes. It’s not helpful to include every conceivable lever or scenario. Instead, in line with the Pareto principle (80/20 rule), the most common levers or those with the biggest impact should be added.

 

Advanced dashboards in practice—IT call centre case study

Like many operations teams that rely on people, an ongoing challenge for an IT call centre is the Goldilocks problem—if there are too many resources there is wasted cost, and if there are too few resources the customer experience is impacted. The Tableau dashboard in case study 1 is like a Goldilocks game—the objective is to achieve as much green as possible through adjusting the levers so that resourcing is just right. In this case, there is intermittent under capacity throughout the day (see left side of dashboard).

 

The upper right chart in the dashboard indicates that the team is forecasted to continue to be under capacity for the next several weeks. What can a business leader do to address this looming problem? This is where the scenario planning becomes particularly helpful. The right hand side of the dashboard includes a number of levers that can be pulled to return to a green position. For example, if we increase utilisation by 2% by cancelling meetings and postponing training, we nearly close the gap.

We can play out further scenarios and courses of action. For example, we can adjust volume, outcome per person, absenteeism, team capacity, and backlog. The combinations of these different scenario levers are practically infinite and they enable rapid business decisions and actions. In this case the IT call centre didn’t need to pay overtime to maintain the same level of service, despite a 10% increase in call volume.

 

Stop hoping for the best and instead take rapid action when needed

Advanced dashboards with scenario planning empower business leaders to routinely make smarter, more timely decisions. A sustained practice of using scenario planning not only drives better business results, but can help leaders feel more comfortable about future uncertainty and less reliant on hoping for the best.

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