Whether you are playing chess, poker or running a business, there are similarities in strategies. In both games and in business, you must think a number of moves ahead and gather as much information as you possibly can.
What does thinking several moves ahead mean? What kind of information should we gather? In poker or chess, it means anticipating the potential moves of our rivals, understanding what’s going on around us by studying others’ strategies, and watching the board or table and the players’ body language for clues. This is information we can base our own decisions or actions on.
In business, thinking several moves ahead requires contemplating long and hard about the future in anticipation of what is to come. Dr. Edward Banfield of Harvard University, in searching for the sole criterion of financial independence, found that projecting far into the future when deciding actions to take in the present was the determining factor of success. The further one projected into the future, or the more moves one thought ahead, the more financially successful one became.
The current recession is an example of not thinking several moves ahead. Many consumers failed to delay purchases of new homes until they could truly afford to buy one. Bankers loaned money to unqualified buyers because they wanted to make an immediate profit. Washington politicians encouraged this behavior because they wanted to give more Americans what they desired in order to acquire their votes.
Everyone involved decided to immediately gratify themselves without consideration of the consequences of their actions. No one involved looked several moves ahead to predict the recession we are experiencing. The failure to plan long-term created the current crisis.
As Winston Churchill said, “One must always look ahead, but it is difficult to look farther than one can see.” In business, even if it is difficult, it is something we must all do. Most of us run our businesses day-to-day. We are totally caught up in the next move. The fact is most businesses are reactive. In chess and poker, being reactive is a recipe for failure. In poker, failure may cost you lots of money.
What can help us think several moves ahead? We have to be more strategic. To succeed requires strategic-level thinking and working. Strategic-level thinking requires asking yourself three questions: 1) Where am I now? 2) Where do I want to go? 3) How can I move myself (and the company) there efficiently?
Now’s the time for thinking several moves ahead. It’s January -- perfect timing to prepare for 2010. Here are four actions you can take:
#1: Reflect on the past and consider the present.January is the time to sit back and reflect on the results of 2009. Pull out your 2009 income statement and balance sheet. Look at the results. Knowing what you know now, what would you have done differently? If you don’t know where you are, how can you read the map? It’s like working in the dark. And working in the dark is like going on a dangerous hike without a compass.
#2: Project income statements, balance sheets and cash flow for 2010.Based on your current reality, put a spreadsheet together to forecast sales for each month using your past results. Consider the monthly and seasonal variations you have had in the past. Forecast your net profit. As you forecast your future, ask yourself if you are happy with the direction you are going and with the expected outcomes.
Create a monthly break-even analysis of your business. How much would you have to sell and at what margin to pay your projected expenses? Are those numbers reasonable?
#3: Write specific goals in areas of your financial statement that you want to improve.Don’t worry about how you will accomplish those goals. The goals come first. The goals will motivate you to act when you can foresee the outcomes you desire, but not the paths to them.
In past articles I have written about the importance of creativity and innovation. As in chess and poker, one is always gathering information – watching the other player(s), the board or table, and the cards or the chess pieces. That information, with a clear picture of your desired results, will give your mind fodder on what to do next. The same is true in business: With a clear goal and an information seeking mind-set, ideas will come to you to help improve your business and find the results you desire. Give your mind the what, and fill it with pertinent information; then your mind will give you the how.
#4: Create action plans for each goal.Breakdown each goal into as many action steps as possible. Assign timelines, responsibilities and expected results for each action. Hold anyone, even yourself, responsible for implementing the plan. Most business owners don’t plan to fail, but over 90% of them fail to plan.
The plan itself will most likely evolve over time; the plan doesn’t have to be perfect. As General George Patton said, “A plan is always perfect until the battle begins.”
Planning requires you to think several moves ahead. President (and General) Dwight Eisenhower said, “Plans are nothing; planning is everything,” and “I have found in battle, plans are useless; however planning is indispensible.” Planning keeps focus on what you can control, not on what you cannot control.
Planning focuses on actions to take. Famous Chinese proverbs say, “Talk will not cook rice,” and “Man who waits for roast duck to fly into mouth will wait a very, very long time.” The simple acts of planning and strategizing about your business will make you think ahead several moves. In chess, it is imperative; in business it is critical.
Take control of your future. It’s January. Make the year 2010 better than 2009. If your 2009 was like mine; you need to set some goals, create plans and then work them. As Philip Crosby once said, “Good things only happen when planned; bad things happen on their own.”