Build Margin of Safety in Strategic Planning
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Build Margin of Safety in Strategic Planning
In "Difficulty in Equipping Army" of Chapter Seven of Sun Tzu Art of War, we have seen that no matter how far the troops travel, it will lose a certain amount of troops if they are rushed to the battlefield. Depending on the distance traveled, the amount of troops or officers lost could have a detrimental effect because in war, numerical strength is one of the important factors that will determine the victor.
In my opinion, this can be avoided if your calculation of the whole process from the start of the preparation to the marching to battlefield is accurate. But who can say that guarantee the accuracy of his calculation and does reality act in the way you planned and calculated? So a margin of safety would be the best way to act against such uncertainty. If you are rushing a troop of 100,000 for 100 miles, expect only 10,000 would reach the destination in time. Take the decrease into calculation.
Business Application
This applies to business as well since it is well-known that the business environment is very dynamic. Managing such uncertainties well can increase one’s ability to survive, or even enhance one's competitive advantage.
For instance, when an entrepreneur or businessman ventures into a new business, they would need to plan their finances for the next three to five years. Most of them are able to plan accurately, down to the exact cents, how the budget is to be spent. And they start seeking finance for that particular budget. Such accurate planning is admirable, but what they should also plan for is uncertainties that can happen.
You need a buffer in your budget, buffer for you to act on emergencies or the circumstances that you might have overlooked. You might have to seek another round of finance if you are not prepared. And we all know that seeking another round of finance would not be favorable especially when your infrastructure has been set up by the first round of funding and the survival of business depends on this critical round of finance. Think about the amount of work that needs to be done to seek this additional round of finance and how distracting it can be.
Another buffer you need to build in, wherever possible, is time. Preferably build in a time buffer in your deadline so that you can tackle difficult issues that arise. For example, the suppliers have some problem with their raw materials supply thus they are not able to supply the materials you need to manufacture your products or services, or there is a strike at the port thus no one to unload your goods and so on.
So always remember to have a margin of safety when planning your strategy.
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