Sense-making – a new strategic planning approach

COVID-19 is now the biggest disruptor in business and society since World War 2. Not only is it disrupting traditional businesses such but also the so-called tech disruptors.

For instance, Airbnb, the disruptor of the hospitality industry, has announced that its revenue this year will be less than half of what it earned in 2019. “COVID-19 is having a more severe and sudden impact on our business than 9/11 and the 2009 financial crisis combined,” said Brian Chesky, Airbnb’s chief executive, as reported in Euronews.

Uber Technologies Inc, another disruptor in the transport industry, said it expects an impairment charge of up to $2.2 billion in the first quarter due to the coronavirus outbreak and revenue to decline by $17 million to $22 million in the quarter, as reported by Reuters.

If these disruptors are trying to weather the storm, what more for traditional industries and businesses like travel, retail, and entertainment, which are facing grave threats during the pandemic? Business executives, entrepreneurs, and professionals are trying to make sense of what’s happening and what’s in store.

But despite the proliferation of free webinars on how to deal with the pandemic, the prescriptions of supposedly experts remain incohesive and largely opinion-based. Why? It’s because humanity hasn’t experienced this magnitude of a crisis in a hundred years. Furthermore, the traditional approach to strategic planning, which is linear or sequential in nature, is oftentimes not applicable. Hence, a new approach to strategic planning is requisite to account for the chaos and uncertainties that are happening all over.

One approach which we have been using in our consulting work is ‘sense-making’, a new approach to strategic planning. It “refers to how we structure the unknown so as to be able to act in it,” according to Prof. Deborah Ancona of the

MIT Sloan School of Management. It draws from the collective wisdom of the leadership team of an organization by “coming up with a plausible understanding — a map — of a shifting world; testing this map with others through data collection, action, and conversation; and then refining, or abandoning, the map depending on how credible it is.” Sensemaking enables leaders to have a better grasp of what is going on in their environments, thus facilitating other leadership activities such as visioning, relating, and inventing.’ It involves three major steps - explore the wider system, create a map of that system, and act in the system to learn from it.

Explore the wider system. The key to this step is to work with others to observe what is going on, may it be using external consultants or involving other leaders in the organization. This involves identifying drivers of change, such as the pandemic, new emerging technologies and competitors, and evolving customer personas. The latter is especially important, as the crisis we are facing will result in new consumer segments with different set of needs and wants.

One key component of this activity, as the result of the pandemic, is identifying black swans, those events with unknown probability of happening but can yield extremely high impact, such as the 9/11 attack and World War 1; and grey swans, those events with low to medium probability of happening and can produce high to extremely high impact, such as the Covid-19 pandemic, climate change, and Brexit.

These should be supplemented with different data types and data sources to validate and expand the perspectives. It’s also important to remove prior biases from interfering with your perceptions, by utilizing external facilitators to help de-bias the views of leaders.

Create a map or story of the situation. Sense-making can be likened to cartography. The key is to create maps and frames that adequately represent the current situation that an organization is facing. Maps and frameworks give leaders snapshots of the current and future scenarios, enabling them to better process data and information.

In our strategic planning workshops, we also employ various frameworks that map the competitive landscape of an organization’s industry, including levels of investment in various factors. We employ the business model canvas to map an organization’s current and future activities that deliver value to its customers. We also map the potential impact of black swans and grey swans using scenario mapping. These maps, along with others, are extremely powerful visuals and tools to help leaders frame their competitive environment.

Act to change the system to learn from it. Using the same methods of mapping and framing, leaders create their own environments of the future by trying new ideas and perspectives. For example, in the business model canvas, business leaders can visually experiment on implementing new sources of revenue, such as subscription service, and how it impacts the other components in operations, marketing, and cost structure. This is where strategies and tactics to employ digitization and digital tools to adapt your business based on the current and future environment.

Using these steps in sensemaking, when done in a comprehensive and de-biased way, prove to be a powerful approach for leaders to better understand how they will respond to the changes in the environment, especially during this time of crisis, and formulate innovative strategies to capitalize on opportunities.

The author is CEO of Hungry Workhorse, a digital and culture transformation consulting firm. He is Fellow at the US-based Institute for Digital Transformation and the Country Representative of the Institute of Change and Transformation Professionals Asia (ICTPA). He teaches strategic management in the MBA Program of De La Salle University. The author may be emailed at rey.lugtu@hungryworkhorse.com