To be honest, there is never really a point where a business will not have to contend with a certain level of volatility and change. Consumers are fickle and shift their preferences constantly, competitors are always altering their strategies, supply chains change for the better and for the worse. What makes this period of volatility any worse than any other? It comes down to three things. The first is that politics and government action have played a far bigger role than has been the case in previous chaotic times. The second is that technological change has been far more fundamental and rapid than before. The third factor is that workforce transition has been abrupt and often unpredictable.

Politics taking the lead

The most obvious factor has been political. If one looks at the current set of challenges and crisis situations, they all have their roots in political decisions—not economic or business­-led ones. The oil crisis is all about the decision to attack Iran. There are many reasons to consider Iran an immediate threat, and there are certainly ample reasons to want to curtail any development of nuclear weapons capability. 

Some may find it worth the economic sacrifice necessary, but it can’t be ignored that the war has already cost the United States more than $150 billion and has forced the price for oil as high as $120 per barrel. The impact on the global supply chain has been severe, and electrical contractors have seen massive price shocks already. The conflict escalated quickly and has already lasted longer than anticipated, which has left companies with little time to develop a compensating strategy. 

The tariffs and trade wars have been about getting nations to do or not do things the United States government wants. These have rarely been aimed at supporting the U.S. economy. There have been tariffs on Brazil to protect a U.S. ally, tariffs on India to get them to stop buying Russian oil and tariffs on Canada and Mexico to force more action on drug cartels. 

It is not that these are not important issues, but tariffs and trade wars affect business decisions in dramatic ways. There are companies that benefit from the restrictions on imports, but many more face higher supply chain costs as a result of these tariffs. And it has not helped that the imposition of these restrictions has been extremely uneven and unpredictable. 

Even the targets of the tariff policy have changed. At the start of the Trump term, the focus was on China, as they had been running an enormous trade surplus with the United States. Now, China has seen more concessions and lower tariffs than most U.S. trade partners in Europe or North America. Canada and the European Union have been consistent targets. These are nations the United States does a lot of business with, in terms of both imports and exports. 

It has been hard to determine just what the issues have been, and that adds to the uncertainty. Frankly, navigating this is not easy because of the unpredictability. The best advice is to rely more on building inventory and diversifying one’s supply chain, but these are not easy, or cheap, steps to take.

How to handle hype

Technological change has been the other major driver. We are all inundated with discussions of A.I. and robotics, and it can be overwhelming. It is helpful to remember the Gartner Hype Cycle. It holds that every new technology goes through the same phases. It starts with wild and unbridled enthusiasm as this new tech will change everything. This is referred to as the “peak of inflated expectations.” Then people start to question what this innovation will actually accomplish, and what follows is the “trough of disillusionment” and some turn away from the technology. As people reconsider and understand what it can do, there is a renewal of interest and movement through the “slope of enlightenment” and ultimately to the “plateau of productivity.” 

According to Gartner, we are about halfway down the trough of disillusionment. Coping with technology is finding that balance between being an early adopter that has to wade through all the teething pains and being late to the party. 

For the electrical contractor, this has been a lucrative development and a challenge. The more businesses rely on robotics, artificial intelligence and technological innovation, the more they need electricity and power. The predicted need for additional energy is staggering—as high as 43 terawatts. The threat comes from technology that replaces what people do for a living. The major challenge will come from robotics, as these machines may be evolving into having the ability to carry out tasks once performed by people.

Workforce woes

Finally, there is the creeping threat of workforce instability. The exit of millions of Baby Boomers has robbed the system of experience, as there has been little focus on capturing that knowledge. They have to essentially reinvent the wheel, which drags down productivity. They know things the older workers may not, but the value of experience is impossible to ignore. 

There have been predictions of a Great Recession by 2030, and that assessment is based on that workforce issue. By 2030, every single member of the Baby Boomer generation will have reached the age of retirement, which is more than 72 million people. It is unlikely they will all retire at once—after all, they are Boomer workaholics. The point is that eventually they will, and that leaves a gap. 

The cohort behind the Boomers is Gen X, and it is the smallest. Who replaces the exiting Boomers? Is there enough attention to training the next generation of workers? A cursory examination would suggest there is not a plan in place.  

As companies confront the turnover, what are their options? Some glibly suggest that companies need to do their own training and should just hire people with potential. That is easier said than done. It takes between 18 and 24 months before a new hire is in a position to contribute to profitability. 

Then there is the challenge of retention. How does a smaller company avoid being a “farm team” for larger operations? They invest in and train a new worker and then watch them go to work for someone else.

These are not the only motivations for business volatility, but they have moved front and center. Coping with this environment means maintaining a diverse set of options—preparing for a variety of eventualities. It also means maintaining a level of flexibility that can be complex and expensive—the ability to quickly adapt to unexpected good news and bad news. 

Basically, it means developing and maintaining an intelligence system that allows an accurate look ahead. Of course, that is easier said than done. What does a system like this look like? 

It comes down to scenario development. One of the tools the intelligence community deploys is the Lockwood Analytical Method for Prediction, used by groups such as the CIA, MI-6 and even Russia’s FSB. It involves developing every likely scenario and then “voting” on the ranking. A or B, B or C, C or A and so on until all have been ranked. It gives you the priority for contingency plans. It relies as much on qualitative data as quantitative, and that allows better reaction to the often unpredictable human element.

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