Firstly, private sector organisations could usefully reframe their missions from maximizing returns to equity holders, to instead be the reform of something – housing reform, education reform, health reform, transportation reform, transaction reform, distribution reform, FMCG reform, risk reform, entertainment reform etc. A few examples are as follows:
- The mission for a construction company, building parts company, building materials company, conveyancing firm, lettings agency and private sector landlord could each be to play their part in housing reform.
- The mission of a private hospital, private dental practice, self-employed pharmacist and pharmaceutical company could each be to play their part in health reform.
- The mission of an independent school (tuition fees funded by parents), education software company and private tutoring company could each be to play their part in education reform.
In each case, strategic plans are then generated by those firms to achieve the stated reform, while maximising returns to equity holders.
How does the above relate to Plan and Options Flexibility?
Plan Flexibility is described as having multiple plans at the same time. Options Flexibility is having one plan. But developing options to achieve it.
Delving a little deeper and considering Plan and Options Flexibility relative to an organisation’s mission, strategic plans and tactical plans, Plan Flexibility (Plan FL) can happen at two levels; the first is having multiple strategic plans (perhaps one per subsidiary company, but ensuring compatibility at parent level) to achieve the mission. Plan flexibility might also consist of having multiple tactical plans to achieve a strategic plan.
Options Flexibility (Options FL) arises from developing options – ideally at both the strategic and tactical level. Also, it is likely that by improving Options FL for any given plan (creating wider options, or moving to a better set of options), the plan’s viable duration is strengthened. This is different from acknowledging that one option’s value increases under volatile conditions and as the time to option expiry lengthens – refer Luehrman article in HBR 1998 for more on this[1]. It’s also different from influencing time directly, perhaps through time flexibility tactics such as playing for time, buying time or reinventing time.
In summary, perhaps options portfolio value is maximized when:
- tactics are employed to lengthen expiry time relating to an option in a volatile environment.
- options are developed and managed at both tactical & strategic levels.
- plan flexibility is utilised, using plans that rely on options.
- innovation is employed to create wider options, as well as to move to a superior portfolio of options over time.
If the organisation’s objective or mission was housing reform, Plan FL might involve a construction company having two strategic plans:
- increasing the supply of new houses at affordable prices.
- refurbishing/converting existing dwellings to residential use.
At the tactical plan level for strategic plan (1), two plans might be:
(1A) to use new techniques to build modular dwelling units using prefabricated panels & recycled materials.
(1B) to create leased land sites on publicly owned land, in order to lower the purchase price from land & buildings, to buildings only.
At the tactical plan level for strategic plan (2), two plans might be (2A) to fix acute fire risk, high-rise social housing and (2B) to convert surplus office space to residential use dwellings.
What Options FL could be developed at the (1) Strategic Plan level? Some examples are to; build cash reserves to finance future production, obtain pre-approval for loans to finance the works, create a land bank (perhaps through land swaps) to build on and acquire first rights to buy certain building sites.
What Options FL could be developed at the (1A) and (1B) Tactical Plan levels? Some examples of options at (1A) are to; obtain first rights for preferential production of modular units and prefabricated panels. And to secure first rights on the supply of recycled materials to act as raw materials in the modular unit production process. An example of an option at (1B) is to obtain pre-approval/planning approval for the conversion of public land use to long residential leases for particular site locations.
What Options FL could be developed at the (2) Strategic Plan level? Some examples are to; build cash reserves to finance future refurbishments & conversions, obtain pre-approval for loans to finance the works, obtain cost subsidies through donor fundraising (to assist social housing tenants in high rise blocks) and to acquire first rights & planning permissions to refurbish or convert certain sites.
What Options FL could be developed at the (2A) and (2B) Tactical Plan levels? An example of an option at (2A) & (2B) is to obtain first rights to labour & materials, to complete specific refurbishment projects & building conversions to residential use.
Lastly, at the 2020 Festival of Work, virtually hosted by the Chartered Institute of Personal and Development www.cipd.co.uk Andrew Scott, a professor of economics at London Business School, said that ‘when facing a crisis such as coronavirus, businesses need to consider their overall mission and be flexible with how they achieve that. Don’t try and get back to your plan. Think what is our ultimate purpose and mission? [That is what] delivered the plan that you’re scrapping. Reconfigure your plan to deliver your mission.’
That approach essentially promotes Plan Flexibility.
Simon Leicester
Business Flexibility Consultant
[1] Luehrman T. ‘Strategy as a Portfolio of Options’ Harvard Business Review Sept-Oct 1998.