“In this world, nothing can be certain but death and taxes,” a quote attributed to a letter written by Benjamin Franklin in 1789, certainly applies to the steel business. Except, of course, for the taxes part. Because, with an ever-changing political landscape, even taxes- their impact, structure and size- are an uncertainty.
The human brain is hardwired to react to uncertainty with fear. That may be well-and-good when venturing into the wilds of the Amazon, but it doesn’t work in a business setting. Particularly if that business is in an industry heavily influenced by market fluctuations.
What does work?
First, know what you know.
In order to confront uncertainties head-on, it’s important to correctly identify them. For instance, the taxes we mentioned above. While it’s true that tax laws change, and those changes have an affect on everything from payroll to procurement, it’s also true that those changes are generally vetted and discussed in open forum. The end results are rarely a surprise. In this case, putting a “what if” plan into place is possible.
Similar to tax legislation, our industry faces the uncertainty of changing trade deals and the potential impact they might have. At the moment, the steel industry is dealing with the possibilities presented by the current administration’s focus on Section 232 of the Trade Expansion Act of 1962. It allows the president to initiate an investigation to determine if national security is threatened by imports, including “substantial unemployment … decrease in government revenue …and… displacement of any domestic products by excessive imports.” Given the amount of steel that is imported into the U.S. currently, any argument made (and accepted) that importing steel is a threat could have far reaching implications that are difficult to quantify.
Uncertainty of this magnitude is hardly commonplace, however, and even big changes can be handled, if you have a plan.
Secondly, remember: if you can create a “plan A” you can also create a “plan B.”
Plan A should focus on the most likely scenario, and create a decisive path towards success based on facts you have at hand.
Plan B, however, should focus on the improbable, less likely sequence of events and predict the “what ifs” associated with that scenario. For example, we know plane crashes are really rare– Three years ago, The Guardian reported that out of 36.4 million flights that year, there were 81 aviation accidents. Yet, anyone who’s flown in a plane knows that there is an emergency plan in place, just in case of a crash. Frequent travelers can recite airplane safety procedures from memory. Having a plan for the extraordinary gives you, and your team, the ability to respond.
One excellent (and possibly first in the oil industry) example of this is the way Royal Dutch/Shell operated in the late 1960s and early 1970s. Shell developed a technique known as “scenario planning.” According to an article in the Harvard Business Review, “By listening to planners’ analysis of the global business environment, Shell’s management was prepared for the eventuality—if not the timing—of the 1973 oil crisis. And again in 1981, when other oil companies stockpiled reserves in the aftermath of the outbreak of the Iran-Iraq war, Shell sold off its excess before the glut became a reality and prices collapsed.”
This need to plan for the most unlikely situation is a lesson all senior managers need to learn.
Which brings up the third way to deal with uncertainty: stay positive.
Just as the unlikely scenario of a plane crash, or a radical change to trade based on rewriting a few phrases in an older treaty, doesn’t stop our team from traveling or doing business, uncertainty doesn’t have to be seen as a negative.
In fact, knowing the “uncertainties” -and naming them- lets you refocus on what you can do, and do well, despite any outlying unknowns.
After all, when venturing into the Amazon you’re as likely to encounter hummingbirds and toucans as you are jaguars. However, you won’t meet either if you let uncertainty slow you down.