The New Normal? – How corporate planning and corporate management must adapt to the increasing dynamics of the market and competition (1)
The dynamics of the market and competition are constantly increasing – not least due to COVID-19. This is currently becoming a matter of concern to everyone. An adjustment of corporate planning and corporate management is required to cope with these increasing dynamics. Well-founded decisions based on current forecasts, the efficient evaluation of possible future developments and the automation of processes are becoming massively more important. But what effects does increasing dynamism have on corporate planning and corporate management? What is the "New Normal" and how must corporate planning and corporate management adapt? These and other questions are answered in this three-part blog series.
Continuous change is the only constant in volatile times
The dynamics to which companies are exposed are increasing massively, not least due to the global COVID-19 pandemic. Dynamism is characterized by innovations and changes in the social and political environment. Highly dynamic markets are complex and their development cannot be fully predicted. Market dynamics have been rising for a long time and companies are feeling the increasing pressure. However, the rapidity with which COVID-19 has overturned many of the things that were once considered safe has put the challenges of dynamism, volatility and complexity painfully back into the spotlight.
Increasing dynamics make it necessary to adjust corporate planning and corporate management. A dynamic environment requires flexible decision support and short-term updates of targets and forecasts. Companies are feeling extra pressure to change, primarily as a result of technological progress (see Figure 1). Digitalization is a key driver in this process. However, increased and individual customer preferences, growing responsibility for the environment and rising global competition are also driving organizations to adapt. Only truly agile organizations can perform at their best and survive in the market under these conditions.
Figure 1: Where is the strongest pressure for change in your company coming from at the moment? (Source: BARC “Sound Decisions in Dynamic Times – Forecasts and Simulations Support Modern Corporate Management”, n=274)
Dynamic times require adaptability and a fast supply of information
In dynamic markets, up-to-date information is essential for decision-makers. This is seen as the most important goal for corporate planning and corporate management (see "Speed" in Figure 2). However, an accelerated supply of information for decision-makers only makes sense if the quality is also right. This is where integration and automation make a significant contribution to the consistency and transparency of the supplied data. Companies demand a high degree of adaptability from their software solutions in order to be able to quickly and flexibly take into account changing conditions and incorporate requirements. Modern software tools with modeling suitable for business users have a clear advantage. They enable calculations, forecasts and simulations to be adapted directly in the business department. Despite increasing requirements, the time of those responsible for planning in business departments, as well as the planning coordinators in controlling, is valuable and limited. The efficient execution of planning, forecasts and simulations is therefore becoming more and more important, especially due to the higher frequency of updates required.
Figure 2: Which goals is your company pursuing in planning and forecasting to respond better to dynamics? (Source: BARC “Sound Decisions in Dynamic Times – Forecasts and Simulations Support Modern Corporate Management”, n=274)
In summary, it can be said that the dynamics and thus the pressure to change for companies have increased significantly in recent years – and this trend will continue. Corporate planning and corporate management must be prepared for this by significantly reducing the level of detail in planning and forecasting and by making efficiency and automation key objectives. The use of modern methods such as rolling forecasts and well-founded simulations are decisive components of modern and agile corporate management.
In the second part of this three-part blog series, you will learn why forecasts are replacing classic budgeting as the central instrument for corporate management and why simulations are the basis for the well-founded analysis and evaluation of action alternatives, opportunities and risks.
