The coronavirus pandemic provides us with a somber reminder that the world is volatile. Our planning for volatility should involve more than panicked midnight runs for hand sanitizer and toilet paper. Those who  prepare for the things they can't control are in a better position to react to the unexpected.

It is becoming clearer which companies need to bake  agility into their strategies and operating models. The word agile conjures up a way of doing business where things are a bit chaotic, but it doesn't have to be that way. Best-in-class organizations have a vision for the future, and the ability to pivot based on changing levels of demand. 

Here are six ways to adapt to dynamic shifts in market conditions:

1. Conduct a STEEP analysis.

A STEEP analysis is an external environmental scan of social, technological, economic, ecological and political trends that could affect your business. While it would have been hard to predict a pandemic that would bring the global economy to its knees in a matter of weeks, companies can consider market dynamics that could change an industry forever. By reviewing outside forces (social, technological, economic, ecological and political), a company can paint a picture for various external events. 

For example, when Square came to prominence, there were powerful societal influences that shaped the demand curve. Malls started attracting pop-up kiosks, and retailers wanted their salespeople out on the sales floor. Smartphone adoption made more flexible payment options possible, and Square replaced an industry (cash registers) that took 100 years to erect. 

2. Separate trends from hype.

There are times when it is hard to separate a real trend from propaganda. While it seems like cyber-currencies may be more hype than substance, blockchain looks like a technology with legs. In order to "separate the wheat from the chaff," assign team members to stay current on emerging technologies to assess their relevance. Identify external indicators that may provide a measurement of demand (such as volume or the stock price of companies in that space). 

3. Build scenarios into your strategic plan. 

Nowhere is it written that your goals and objectives must be set in stone. In fact, scenario planning provides opportunities to weigh multiple variables and imagine various financial conditions. Companies may have as many as three financial scenarios--the most likely, one optimistic, and one pessimistic.

4. Develop a 6+6 budget.

During a year, companies can pressure test their financial plans. By using a 6+6 budget, your financial people can blend reality into a forecast. For example, 6 months into the year, use 6 months of actual data and 6 months of budget to create a working forecast (this could be done in any month, as in a 3+9).

5. Establish a business continuity plan.

In recent weeks, companies have unearthed their business continuity plans only to find them out of date. Companies should do a deep dive to assess business risks and develop plans to mitigate them. Such a plan can be your lifeline during a cyber-attack, natural disaster, utility failure, or market shock. Companies need to be prepared in the event they do not have access to the internet, power, or their physical workspace. 

It is critical in times of crisis that:

  • You have a way to contact all employees through a mass messaging app such as Simplified Alerts. 
  • You have alternative methods for retrieving documents, information, and data. 
  • Your team is equipped to leverage collaboration technologies. 
  • You test your plan through simulations.

6. Develop contingency plans.

Other market shocks may require specific course corrections. For example, the following would be an example of a contingency plan in the event that you lost a large customer.

Scenario A: Loss of ABC Widget Company, 22 Percent of Revenue
Risk Level: Medium
Annual cost: $2 million

  Role                  Action                                                                                                Timeline

CEO Notify board 1 day
Communicate with team 5 days
Notify lenders 5 days
CFO Restate forecast 5 days
Re-forecast scenario cash flow/ratios 5 days
Sales Consolidate account management 5 > 4 5 days
Revise workflows 14 days
RIF 10 FTE 21 days
Ops/HR Close PA call center 21 days
Consolidate into Tucson call center 21 days

Planning can be hard work. It's often easier to wing it, but it may not be the best approach when your business is on the line. Your future could depend on your ability to adapt to things beyond your control.