I’ve always been intrigued by the notion of planning for unpredictable outliers. Since studying game theory at university and then reading Nassim Nicholas Taleb’s “The Black Swan: The Impact of the Highly Improbable” the better part of a decade or more ago, the extreme impact of rare and unpredictable events upon our best planned strategies and models has fascinated me.
In business, game theory has proven a great tool for predicting outcomes of competing companies where the action of a single company affects the payoff of the group. The payoff calculations enable a business to form an optimal strategy. Black swan theory, which came about after the discovery of black swans in the wild, is about the consequence of unexpected events and the role of high-profile, hard-to-predict events that fall outside of the realm of expectations. Black swan theory is a metaphor that speaks of psychological biases that blind people and groups to uncertainty and a rare events role in history, which brings me to the auto finance market and the belief it is somehow less susceptible to such events.
I’ve certainly heard arguments in recent years that auto financing is stable and predictable and only changes slowly over time. I don’t think that’s the case. If we think back to the 2008 economic recession that came shortly on the heels of “The Black Swan’s” 2007 publication and the damage that catastrophic event wrought on auto finance for years to come, I think it’s safe to say that the auto financing market is not impervious to extreme events.
So, how do you find the right mix of time and effort between pondering the completely unpredictable and planning or modelling the partially predictable?
Every July marks the outset of planning for the next year’s product roadmap for my company. This process of refreshing the business and solution strategies to look much further out into the future can be all consuming and always involves a lot of informed guess work or prognostication from everyone in a company. It takes a village, top down and side to side, to draft. Assumptions are made about what will change and when and what is the true speed of innovation in consumer behaviors, business processes, and underlying technologies.
Despite all the strategy sessions we run with clients and our many other conversations with industry participants via quarterly business reviews, it’s still a bit of a crapshoot, informed as it may be. It’s impossible to know with any certainty what our businesses will face before year’s end. (Case in point: These last four months of 2020.)
That it takes a lot of work is clear, but it happens to be my favorite business “season” of the year.
For me the biggest part of the approach we take is the synthesis of market perspectives and requirements (past, present and future) from clients, prospects, partners, analysts and internal stakeholders. Much of this effort is about how consumers, processes, and technologies are evolving and what is the role of innovation in response.
This year there is certainly a sense, more than any time in recent memory, that we need to be thoughtful about why some things change overnight or at least when we aren’t really looking and why other things never seem to change despite all the hype in them. (Such as the prevalence of fully autonomous fleets of shared vehicles by 2020. Anyone see them?).
As people and markets, we often seem to crave novelty and even revolution and yet in other ways we can be so resistant to even the smallest of changes. We may know what is possible or what truly needs to be done but inertia of all types — personal, organizational, economic, political or cultural — may hold us back from even thinking about addressing those changes in the moment.
So, if this inertia exists at the same time as overnight change, we need to fall back on one of my company’s core beliefs: deliver today while building for tomorrow.
If what we plan for and strategize for isn’t grounded in the practical possibilities that create new options for the future while addressing current needs, it’s probably not the best path forward.
To mix metaphors and borrow from auto racing, good planning is all about finding that perfect driving line on the track and letting inertia pull you into the corner while harnessing that inertia with your own investment and acceleration to hit the corner where we want and launch forward into the future.
While at the end of the day we may not know where the road ahead is taking us ahead of time (and yes that is how every day feels right now), if we manage our resources to find and pick that racing line ahead of us we are truly delivering today while building for tomorrow which really is what this moment in time should be all about.