As the economy moved into a recession, last year’s Black Friday was particularly dismal for many retailers who, in anticipation of the usual holiday rush and ignoring any leading economic indicators, had stocked up on inventories. Last year’s lesson was remembered this year, and Black Friday profits – although weak – at least weren’t dragged down by the costs of excessive year-end inventories.

But our collective memories are relatively short. Already new mortgage-backed securities are being sold, this time on the backs of first-time home-buyers even as Dubai World sends jitters through the financial community. Are we able to recognize the weak signals that will eventually turn into tsunamis, but well in advance, so that we have time to react? Or are we still relying on the tried and true lagging indicators, quarterly sales reports and performance reviews?

And even if we recognize the signals and know what we need to do in order to stay competitive, will we be able to adapt quickly and then sustain the ability to respond for the next time when conditions change yet again?

Dealing with Change – Teaching an Old Dog New Tricks

Gartner maintains that companies need to be proactive in reacting to changes and recognizing the early indicators and patterns that can provide visibility into potential future opportunities and threats. These early-warning predictive patterns are increasingly coming from outside the enterprise, driven by an interconnected society and changes that are outside the control of an enterprise. As the investors in Dubai World seek funding, US corporate executives worry about the impact on their already fragile economic recoveries and how deliveries passing through the busy United Arab Emirates ports will affect their just-in-time supply chain. Earlier Sense and Respond systems and Business Intelligence systems did not focus on the transactional data in ERP systems that might reveal indicative patterns of future changes and help executives make fact-based decisions. Further, Yvonne Genovese, Gartner VP and Distinguished Analyst, identifies several factors that inhibit the ability to predict and adapt to change in ERP systems. Genovese maintains that, even when exceptions are recognized in an enterprise, there is “siloed visibility” meaning that the exceptions are not shared across different organizations. Additionally, the lack of transparency and the presence of conflicting data often result in conflicting patterns, and finally, ERP systems by their very nature are not flexible enough for decision makers to change the business processes in order to react to and change the pattern quickly (and not a 3-year reimplementation process).

Gartner identifies three component parts of Pattern Based Strategy: Seeking, Modeling, and Adapting. Read more…