Scenario planning during crisis
Markus Ansamaa, an entrepreneur and a data strategist and Ari Rantanen, a partner of AI Roots, shared their thoughts on utilizing data and scenario analysis during the time of exceptional crisis.
forecasting during unexpected crisis
Exceptional times can reveal the real competence of a leader. During good times one can succeed without major efforts but it takes strong business and leadership skills, experience, data and also a bit of good fortune to steer business in times like this.
Markus explains that in normal business conditions, we typically look at data to seek an answer to the question ‘what is likely to happen?’ and don’t bother ourselves too much with scenarios that are very unlikely. "During the good times, scenario planning may feel easy. But when the unlikely does happen, the rules of the game are completely changed."
Forecasts on sales volumes, costs or revenue in different scenarios are usually based on a combination of intuition-based estimates, business indicators and historical trends. But in the event of the black swan like COVID-19, this is not enough anymore. Suddenly having more external and predictive data sources for estimating the various potential business outcomes becomes one of the critical capabilities to survive from the crisis.
data or intuition in forecasting?
During an unexpected crisis such as COVID-19, a sizeable fraction of the previously collected historical data is not usable for predictive modelling anymore, Markus reminds. The changes in the market, environment, customers or processes are just too unique for any model. "During these times, you are basically forced to support forecasts with your intuition, even if you previously preferred using data-based predictions. It is like a law of nature that the role of human evaluation, intuition and emotions in decision-making will increase during the crisis.”
According to Ari, the role of human intuition in the decision making is indeed emphasized during the time of crisis. "However, it can still be very useful to support the decision making and often failing human intuition with transparent baseline statistical forecasts. These baseline forecasts can work as red flags that enforce us to identify biases in our intuition and justify our sometimes too quick conclusions with well-founded reasoning, if nothing else.”
Rules for managing the data may have changed but not the reasons to use the data in decision making. Data is needed more than ever in situations like this. The approach for using data just has to be adapted to the current situation.
data to be used as a first aid
According to Markus, also organizations need special survival skills and first aid kits to navigate out from the crisis. “Data is a critical item in the first aid. Knowing how to use it in the exceptional situation can make one stand out of the crowd.”
To support scenario-based decision making, the first aid kid should have these tools included:
- External data sources and non-financial indicators that are sensitive to changing trends to complement the core KPI’s of the organization
- Predictive models to support in the construction and assessment of a variety of data-based scenarios
- Analysis and insights of corrective actions to learn what works and what doesn’t
- Reporting tools to improve the situational awareness and to enable data sharing across the organization
need help in scenario planning?
Ari has has great news for companies and business leaders who would need to improve their scenario planning capabilities during the crisis:
"We have recently joined our forces with Civitta to supply our customers with the COVID-19 first aid kit you described above. We provide an experienced task force ready to improve the situational awareness of an organization. Furthermore, via data driven scenario planning and analysis, we help the organization to tune its operations to match the changed business environment. Once the bleeding has stopped, we move on from the first aid to supporting speedy recovery and identification of new growth opportunities."
The occurring crisis will have a deep impact on the behavior and to the needs and expectations of the customers in many industries. The crisis will also fundamentally shake the competitor landscape for many companies. We believe that by identifying these changes as early as possible and by creating an action plan to benefit from the changes companies will have a very strong position for growth once the recovery eventually starts.
Our mission at AI Roots with Civitta is to support companies in achieving the target scenario and move faster back to the growth track:
The services we provide in collaboration with Civitta are for example:
- BI solutions to combine company-critical KPI’s with pandemic tracking and other external measures
- Data driven scenario planning tools
- Deep dives to critical issues for your organization
- Data-driven tools to optimize your operations
- Change management support
- Robust scaling plan for the labour, capacity and materials supply
- Facts-based understanding of the pandemic’s impact to customer needs
- Design thinking -based improvement of data products and services to respond to the changed customer needs
Please contact us if you want to accelerate your recovery from the COVID-19 crisis with improved fact-based decision making and scenario planning capabilities.