The elephants in the room

In 1992 Bill Clinton was totally right when he said; "It's the economy, stupid."

The state of the economy has a lot to do with how well, or poorly, corporations financially perform in any given year.

If the economy is flourishing, consumers feel optimistic and spend their disposable income freely.

If times are tough in the economy, at best consumers spend less or buy down; at worst they lose their jobs and increasing numbers of people end up on state sponsored welfare or on the streets.

For most brands then, their financial performance for a given year is dependent on the performance of the economy.

In South Africa, the performance of the economy is very much hinged on a number of key factors; elephants in the room.

These elephants are: (1) interest rates, (2) the strength / weakness of the Rand, (3) the amount of load shedding we are experiencing at any given time, (4) the number of diplomatic 'own goals' that our politicians manage to score, (5) the level and pervasiveness of social unrest happening at any time.

These five elephants are interconnected and when they stampede they can wreak havoc on the earnings potential of most organisations; generally those firms that don't have a critical level of agility to out-manoeuvre shocks or a sufficient amount of cushioning to absorb short-term hits to consumer confidence.

All five elephants independently can have a significant impact on the performance of the economy and how they will move in the next 12-months is highly uncertain.

There is just no way that any organisation in South Africa can make accurate financial forecasts for the coming year given the weight and uncertainty of these five factors; so rather than plotting a single possible future growth path given this - it would be of far more useful for organisations to map out a range of possible scenarios that might unfold over the next 24-months and plan responses beforehand based on these alternative futures instead.

Having a single view of the future is very dangerous because it locks the organisation's mindset into just one possible outcome.

With multiple plausible futures outlined, South Africa organisation can then far better prepare themselves mentally for a variety of conditions under which they can then plot their options as to how they might respond.

The elephants are restless, how they may move is very uncertain. To avoid getting trampled, it's wise to map out how they might shift and in so doing uncover where safety and opportunity can be found.