Considering Subsequent Effects: Business Planning

Often, the immediate, intended outcome of a decision is clear. Lowering a price might boost sales today; investing in new equipment might increase capacity this quarter.

However, truly effective business planning and insightful advisory go beyond the immediate effect to consider the subsequent effects – the downstream consequences and wider implications that unfold over time.

Ignoring these future ripples can lead to unforeseen challenges, negate initial benefits, or even create entirely new problems. Developing a keen eye for these subsequent effects is essential for long-term success and risk management.

What are Subsequent Effects?

Think of dropping a stone into a pond. The immediate effect is the splash. But this triggers a series of ripples that spread outwards, affecting the entire surface.

In business, a decision is the stone, and the subsequent effects are the ripples.
They can be:

• Direct but delayed: The need for increased warehousing space months after a successful sales campaign.
• Indirect: A change in supplier impacting product quality, which then affects customer satisfaction and ultimately, brand reputation.
• Unintended: Implementing new software causing initial productivity dips due to inadequate training, or a cost-cutting measure leading to key staff departures.
• Positive: An investment in employee training leading to unexpected innovation or improved customer loyalty years down the line.

Why Immediate Outcomes Are Only Part of the Story

Focusing solely on the initial result of a decision can be a trap. While short-term gains are important, they can mask long-term liabilities or missed opportunities.

• A decision to aggressively cut costs might provide an immediate boost to the bottom line, but the subsequent effects could include reduced product quality, decreased employee morale and productivity, and damage to supplier relationships, all of which erode profitability over time.
• Launching a new product without fully considering after-sales support or potential warranty claims might look like a quick win in sales figures, but the subsequent effect of poor customer experience can lead to negative reviews and damage the brand's reputation, impacting future sales.

Illustrating the Ripple: Launching a New Product Line

Let's consider the seemingly positive decision to launch a new product line.

• Immediate Effects: Increased initial sales revenue, marketing costs, production ramp-up, potential need for new raw materials.
• Subsequent Effects (Ripples):
  • Financial: Increased working capital tied up in inventory for the new line. Potential need for additional funding if sales growth outstrips initial projections. Impact on overall gross profit margin if the new product has different cost structures.
  • Operational: Strain on existing production capacity and potential need for overtime or new equipment. Changes in warehousing requirements. Increased complexity in logistics and distribution. Need for new operational procedures and quality control checks specific to the new product.
  • Marketing & Sales: Cannibalisation of sales from existing product lines. Need for ongoing marketing spend to maintain momentum. Impact on sales team structure or incentives. Potential for increased customer service inquiries related to the new product.
  • Human Resources: Need to hire and train staff for production, sales, and customer support related to the new line. Potential impact on morale if existing staff feel overloaded or inadequately trained.
  • Strategic: How does the new line fit with the overall brand strategy? Does it open doors to new markets or customer segments? How will competitors react, and what will be the subsequent impact on market share? Does it divert resources or focus away from core, profitable areas?

As this example shows, a single strategic decision creates a complex web of subsequent effects that touch almost every part of the business over time.

Practical Steps for Considering Subsequent Effects

Businesses and their advisors can implement several practices to foster this forward-thinking approach:

1. Scenario Planning: Don't just plan for the expected outcome. Develop "what if" scenarios to explore potential positive and negative subsequent effects of key decisions under different conditions (e.g., optimistic sales, pessimistic sales, competitor enters the market).
2. Cross-Functional Impact Analysis: Before making a significant decision, involve stakeholders from different departments (finance, sales, marketing, operations, HR, legal) to brainstorm and map out the potential impacts on their areas using visual tools like impact maps or flowcharts.
3. Use Data and Analytics: Leverage historical data and predictive analytics to model potential outcomes and quantify the likely subsequent effects where possible, refining models as new data becomes available post-decision.
4. Risk Assessment Integration: Ensure that considering subsequent effects is a core part of the risk identification and assessment process. What new operational, financial, compliance, or reputational risks might arise later from a decision made now?
5. Build in Feedback Loops: Once a decision is implemented, establish clear metrics and monitoring processes to track the actual subsequent effects against those anticipated (KPIs). Regularly review performance data across all impacted areas and be prepared to adjust the course of action based on real-world outcomes.
6. Seek External Perspective: An experienced business advisor can provide an objective viewpoint, challenge assumptions, offer insights from similar situations in other businesses, and help to uncover potential subsequent effects that internal teams might overlook.

Conclusion

A narrow focus on immediate results is a recipe for potential difficulty. Effective business planning demands a broader perspective – one that actively seeks to understand and anticipate the subsequent effects of every action and decision.

By embracing this foresight, businesses can make more informed choices, build greater resilience and uncover hidden opportunities.

It's about understanding that the splash is just the beginning; the real impact lies in the ripples that follow.