Planning outside the bandwidth

Dynaplan Newsletter

April 2020

Planning outside the bandwidth

Dear reader,

Allow me a small detour before coming back to the use and making of scenarios to meet some general planning challenges that are greatly amplified by the Corona pandemic.

My first memory of “media” is a fabulous radio produced by Radionette in Sandvika, Norway the year I was born. It must have cost my parents most of their savings to acquire this piece of luxury.

In daytime, we listened to public broadcasting, but we could also tune in to different stations. At night I was allowed to listen to Radio Luxembourg, where they played pop music.

It was not possible to receive signals from that station using the tuning wheel alone; Radio Luxembourg was outside the bandwidth of FM. So, I first had to press AM to switch to a different band (wavelength).

In planning, budgeting, and forecasting, we also talk about bandwidth. It reflects the fact that we cannot predict the future. The centre of the band shows expected values, while lines on either side represent possible outcomes in diminishing order of statistical probability.

Bandwidth planning  
Bandwidth planning

Going from a single assumption about the future to a fan of outcomes with different probabilities is a great step forward in strategic planning. It helps us be aware of — and to prepare ourselves for — different futures. You can read more about bandwidth planning under “Driver-based simulation in managerial accounting at Infineon” below.

What we experience with the Corona epidemic is a future that is completely outside the bandwidth of any plan that you and I, our companies, or even our governments had envisioned for 2020. It is time to switch from FM to AM, so to speak.

Why not just expand the bandwidth to include more possibilities?

We know that many things that happen have extremely low probability. As an example, it is very unlikely that you (of all people) will win in a big lottery. On the other hand, it is 100% certain that someone will win.

From a planning perspective, it is nonsense to plan as if you’re going to win. You can hope to win. You can imagine what to do with the money in case you win. But you’d rather not bet on it.

The same goes for business planning: We cannot investigate and prepare for all thinkable possibilities, simply because that would consume all of our resources, and still not be enough to cover “black swans”, which are not even on the radar.

When reality falls outside the planned bandwidth, then what?  
When reality falls outside the planned bandwidth, then what?

In times of great uncertainty and big changes, it is widely accepted that planning needs to be based on future scenarios rather than trends and predictions.

Forget about machine learning. Forget about artificial intelligence. Forget about data mining. These technologies have many applications, but in the current circumstances, they all fail because they rely on data which won’t be available until long after we must decide how to deal with the situation.

How do we create scenarios that can help us come safely through the different paths this virus might take us through? The answer is to use the same approach for our strategic analysis and planning as the epidemiologists use to forecast the development of the disease in the population: They use models that are fed with new information as soon as it becomes available.

Since the future outcome of our decisions are influenced by uncertainty and unknowns, it is not fair to judge decisions in hindsight by their outcome. Instead, decisions should be evaluated on their use of then available data and knowledge, the quality of the analyses that were done, and the evaluation of options and associated risks and opportunities.

Scenario simulation makes the best possible use of knowledge as well as data. Knowledge is covered in the model structure while data is provided as inputs and assumptions to the simulation.

In contrast to the data-centric approach, simulation-based scenarios rely on the main business logic, and the key resources and processes that determine the performance of our company in the context of its environment (including assumptions about Corona).

Companies that model their business can get immediate benefit from truly agile planning and coherent scenarios. The process is agile because it takes little time and effort to adapt models and input new information. It is coherent because it is based on a holistic, validated picture of the situation. Under “SWP in Corona times” further down, you can read how models are adapted and the time horizon is narrowed to the scale of the pandemic.

Here at Dynaplan, we are thankful that all employees and their families are at good health so far, and that the company can operate with full capacity to help customers create scenarios incorporating effects of and measures against the pandemic that concerns all of us.

Best wishes in turbulent times,
Your Dynaplan team

Contents at a glance

  • New SWP webinars with Haufe
  • HR practice group in May 2020
  • ISO 27001 certified
  • Driver-based simulation at Infineon
  • SWP in Corona times
  • Dynaplan covered by 451 Research
  • Smia 2.0 release
 

New SWP webinars together with Haufe Akademie

Get up to speed with SWP and learn the principles of good and right SWP. We are happy to announce a series of webinars in the area of strategic workforce planning together with the Haufe Akademie. Please follow the link to sign up and understand how SWP can become a crucial navigation tool out of the crisis, how it can become a cornerstone of your business success, and what you need to get started right away.

Sign up now 

HR practice group at Audi in May 2020

The next HR practice group will be hosted by Audi, and is scheduled to take place 27 May. In times of high uncertainties, SWP and scenario planning in general become very valuable tools. We will have an in-depth discussion on how the planning models can be used to forge a way out of the current crisis.

Due to the uncertain situation regarding traveling restrictions, we are offering the option to join remotely via web conferencing for the presentations and discussion. You are invited to sign up for this free event, provided exclusively for our customers.

Sign up now 

HR practice group  
HR practice group

Dynaplan is ISO 27001 certified

Last year, Dynaplan became compliant with the ISO/IEC 27001:2013 standard for information security management. We are happy to announce that, as of 22 January, we are also certified. The system helps us ensure that data are handled according to best practices and legal requirements, such as the General Data Protection Regulation of the European Union.

Read more 

Dynaplan is ISO 27001 certified  
Dynaplan is ISO 27001 certified
 

Driver-based simulation in managerial accounting at Infineon

We are very pleased about the successful collaboration with Infineon, and the resulting article about driver-based simulation in managerial accounting.

Automated forecasts support the evolvement of the controlling function towards a business partnering. Reduced efforts for generating aggregated financial predictions provide more time for value-adding activities. Hence, driver-based models support automation without losing control of understanding for the drivers and their impact.

The article was published in the journal Controlling, issue 2/2020, and is only available in German.

Read more 

SWP in Corona times

The impact of COVID-19 in the short, medium, and long term is manifold and uncertain. Business- and human-wise, the implications are just starting to emerge, and even optimistic forecasts hint at a long way back to normal, which in many cases is a new normal.

In this context, the enablement of the business strategy through the right workforce, as the main goal of strategic workforce planning, will be harder than ever. The dynamics of the synchronisation between business and workforce strategy has never had so many moving parts. Alternative scenarios will emerge as organisations go beyond surviving to achieve sustainability, return to growth, and even reimagine themselves in the new normal:

  • On the workforce demand side:
    • How far will the market demand decrease?
    • How long will it last?
    • How fast will the recovery be?
    • Will consumer side changes alter the relative importance of specific products/services across the portfolio?
    • Will a faster adoption of virtual services lead to the emergence of new jobs and functions at a faster rate than expected?
  • On the workforce supply side:
    • What will be the impact of the infection curve on workforce absence (either due to infection or to indirect consequences such as childcare)?
    • Will public health measures lead to a sustainable reduction of infections, enabling the workforce to get back to work? Or will a new mode of working (i.e. virtual offices) become the new normal?
    • How to address potential workforce surplus caused by demand reductions? Which are the possibilities of redeployment?
    • What is the long-term impact of short- or medium-term HR actions?

In the face of such variety, making sense of all possibilities in an effective and integrated way is challenging. A scenario methodology can help organising the alternatives in a process that results, despite the prevailing uncertainty, in concrete actions.

As we partner with our customers to navigate the crisis, we are developing an approach as follows:

  1. Bring back the business as usual scenario before COVID-19 to understand the baseline that was impacted by the crisis.
  2. Define the impact of all external factors (assumptions) in workforce supply and demand for 3 scenarios: the best, base, and worst case of handling of the pandemic within the organisation regional scope. Key factors include:
    1. Shape of the market disruption: A prolonged downturn with slow or no recovery (“L-shape”)? A sudden fall followed by slow recovery (“U-shape”)? A quick rebound (“V-shape”)?
    2. Impact of disruption on key demand drivers.
    3. Impact of epidemics on workforce absence.
  3. Simulate each scenario, understand the key risks, and identify potential workforce and business decisions that can mitigate them.
  4. Identify decisions that are common among the three scenarios. Such are robust decisions: decisions that hold even in cases of high uncertainty.
  5. Define concrete HR measures based on the robust decisions identified and the decisions defined for the most likely pandemic scenario at the time.
  6. Revise the simulation as the pandemic develops and verify that the decisions still mitigate the risks identified.
Simulating impact of COVID-19  
Simulating impact of COVID-19

In summary, by the end of the process the planner will have approached uncertainty systematically and will have linked broad pandemic scenarios with concrete HR measures to be monitored and reviewed as events unfold. Ultimately, the planner will move from a reactive to a proactive approach to tackling the impact of the pandemic.

 

Dynaplan covered by 451 Research

After being part of Gartner’s list of Cool Vendors some time ago we are proud to be covered by another leading market research company: 451 Research, a part of S&P Global Market Intelligence. Analyst Conner Forrest titles that: Dynaplan’s simulation engine bridges the gap between workforce and business planning.

Please contact Conner at 451 Research to get the full report.

Smia 2.0 release

On 31 March, Dynaplan Smia 2.0 was released. In this version, customers can now host their models on their own SharePoint servers, or their local file system, ensuring their data never leaves their intranet, even encrypted. The user interface is more customizable than before, letting users switch between tablet and desktop look-and-feel based on their needs, removing most of the interface altogether with the panorama mode, and even going full screen when desired. The engine has been updated with support for more varied simulation horizons, agent-based motion functions for SWP, and better data importing capabilities. Performance has been enhanced in several areas.

A new, compatible version of the Smia app for iOS is also now available. It includes all the relevant improvements from the desktop version.

Read more 

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