Planning has been recognized as an essential preparation for orderly conduct of social and economic activities since early days of human existence. We have planned holidays, social and political events, and, most importantly, business work. For planning purposes, conventional approaches assume that we live and work in a reasonably stable environment with infrequent occurrence of unpredictable events. However in contemporary environments change is so rapid that the uncertainty rather than stability is the defining feature. We are now in one of these transitional periods with a number of drastic paradigm shifts that cause high levels of uncertainty.
Also, there exists compelling evidence that as the evolution of our Universe takes its course, the ecological, social, political, cultural and economic environments within which we live and work increase in complexity. This process is irreversible and manifests itself in a higher diversity of emergent structures and activities and in an increased uncertainty of outcomes.
The ever increasing numbers of players in the global market and the speed of information flow over the Internet accelerates market dynamics to such as an extend that the current generation of data-driven information systems supporting business processes will not be able to cope for long. We have to accept that complexity, and therefore uncertainty is a norm and that attempts to simplify complex situations and to eliminate uncertainty, which was a useful managerial and technological philosophy in industrial society when complexity was manageable and uncertainty was small, is now harmful. Complexity of markets has to be exploited - it offers rich opportunities for those who master the mindset, skills and tools of adaptation and resilience.
Planning under conditions of uncertainty requires a new method; it cannot be done using conventional planning approaches. This new method I shall call the Contingent-Adaptive Planning. There are several fundamental principles underlying this method as follows:
1. Planned Options - When operating conditions are stable the best planning practice is to work out and implement the optimal plan for these conditions. Under frequent and unpredictable changes in operating conditions the concept of optimality does not make sense; planners are advised to consider and work out in some detail a large number of optional ways of fulfilling the plan. Some of these options may never be required; however, due to uncertainty there is no way of predicting which ones will be needed.
2. Planned Redundancy - Planned options require planned redundancy of resources. In contrast to rigid planning, where redundant resources are considered as a waste and the key notion is a slim process, adaptive planning requires additional resources that are not needed for normal operation and which may be required only in case of the necessity of employing optional solutions.
3. Event-Driven Continuous Planning - In contrast to rigid planning which specifies what will be done within certain time periods (one-year plan, five-year plan), adaptive planning is a continuous process. As events affecting operation occur, the current plan is modified to accommodate the changes in operating conditions and modifications are immediately implemented. The process of perpetual modifications of the plan continues as long as the operation that is being planned is active.
4. Self-organisation in Planning - Under stable operating conditions (relative to the planning span) it is rational to conduct centralized planning; therefore if there is a high probability that economic conditions will be stable during the next five years it is rational to have a series of five-year plans. In complex operational environments, that is, when there is high level dynamics and uncertainty, there is a need for a different planning strategy. When changes in operating conditions occur on the hourly or daily basis, there is simply no time for reports on disruptive events to reach the central planning body, for planners to decide what modifications are required and send instructions to executives and for executives to implement the specified modifications.
Therefore, under conditions of complexity the best planning strategy is self-organization, which in a nutshell means that constituent units of the operational system are empowered to make all planning decisions through a process of negotiation with each other. The degree of delegation of decision making depends on specific conditions, although there is a rule acquired through experience, which stipulates that the deeper the delegation the more effective the self-organization.
5. Emergence in Planning - By definition, planning by self-organization means that the plan emerges from the interaction of constituent decision makers and is never imposed on them from higher levels of the hierarchy.
6. Multiple-Criteria Planning - Conventional planning is optimized using one criterion such as maximum profit, minimum costs or similar, which is applied uniformly to all resources. New methods have been developed for adaptive planning to use multiple criteria for every planning decision and to enable different balance of criteria to be used for different resources.
Under the present uncertain conditions, business organizations are left out without options other than using a contingent and dynamic approach to planning. When the next environmental event cannot be fully anticipated, the best business leaders can do is to estimate the probability of occurrence of alternate events and develop the corresponding contingencies ahead of time. As the mush clears out through the availability of new information, strategic choices previously articulated can be activated with a higher probability of success. The ability to apply the planning principles presented here can become the determining factor of success in an environment that promises to become more an more turbulent and uncertain.
Copyright 2010 QBS, Inc.