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One reason for this can be found in the nature of the forecasted information.  In many firms, forecasts of economic conditions, sales, earnings, and costs are extrapolative in the sense that they project past performance patterns into the future.  In such forecasts, the early impact of discontinuous departures from historical trends remains hidden behind the normal statistical fluctuations induced by economic and competitive activities.  Only when the impact becomes large enough to stand out from the pattern does management become aware of the discontinuities.  By this time, the advantages of anticipation may be lost.

 

A growing number of firms use nonextrapolative technological forecasting, structural economic forecasting, scenarios, etc., which are specifically addressed to identifying threats and opportunities posed by strategic discontinuities.  These provide information and, in principle, permit before-the-fact anticipatory responses.  Given a distant enough time horizon, such forecasts enable the firm to complete its response before the threat can do any damage.

 

But, again, experience shows that in many firms such forecasts remain unheeded, and procrastination may last until after the threat has become a painful reality.  For example, when it became clear that liberalisation and rationalization of duties will take place in India, most of the companies did not pay any head till the time it became a reality.  By then it was too late.

 

The firm should start its response as soon as the forecast has unambiguously identified an impending threat. But, curiously enough, the procrastination delay, which is found in reactive management, and is absent in decisive management, resurfaces in planned behavior.  The same factors contribute, but for different reasons.

 

The systems delay is smaller in planned management than in the other cases.  Unlike reactive management, where the information is derived second-hand from data intended to measure past performance, threat/ opportunity forecasting is primary input data.  Typically, when such forecasts are made, the individuals making them are not under pressure from other activities; they report their identification of the threats, either directly or through a small chain of command, to the responsible managers.

 

Offsetting the smaller system delay are potentially larger delays due to verification, political resistance, and unfamiliarity rejection. The fact that the triggering information is conjectural and no longer based on painful experience, as it is in reactive management, reinforces and provides justification for the natural delay tendencies in all three categories.

 

The verification process, instead of questioning whether an observed result will persist, is now concerned with whether the threat will occur in the first place; and if it occurs, which course to follow.

 

The defensive political tendencies of threatened managers are supported by the argument that it is imprudent and foolish to respond to `mere speculations' about the future.

 

In this view, the threatened managers will be joined by others, who, on psychological rather than political grounds, would refuse to take seriously a vague threat which has no precedent in prior experience.

 

Thus the delay mechanisms tend to vitiate the potential advantages of forecasting.

 

The period between the first awareness of the threat and the point in time at which management turns to coping with it may last months, or even years.  But it would be wrong to visualize the pretrigger period as one of watchful inactivity.  The daily life of management consists of problem solving: coping with unwelcome deviations, planning to assure future successes.  During the pretrigger period this coping goes on as before: deficiencies are perceived, analyzed and corrected, but all within established routines and programs of `normal' activity.  The significance of the trigger point is that it ushers in extraordinary, nonroutine, drastic measures.

 

For our purpose, it is useful to divide these extraordinary measures into two classes:

 

1.                  The first copes with discontinuous changes in the firm's relationship to the environment, in its internal dynamics, and/or in its value system.  Diversification into new businesses, divestment from major product lines, major reorganizations, introduction of strategic planning systems - all exemplify such measures which change the `face of the firm,' alter perspectives, introduce new ways of life.  We shall call these changes strategic measures.

 

2.                  The second class of measures stops short of changing familiar relationships.  Nevertheless, they are drastic enough: an unusual major sales promotion, a drastic price-cut to revive flagging sales, a major write-off of assets, disposal of large amounts of obsolete inventories, replacement of obsolete plants, a freeze on hiring, arresting management development programs, or cutback in R&D expenditure.  We shall refer to these as extraordinary operating measures.

 

In a majority of firms, while drastic in their impact, the operating measures will be familiar and acceptable, either because they have been tried before or because their impact can be forecast with confidence. Strategic measures will be acceptable only in a small minority of firms which have previously made drastic strategic change a way of life.  For the majority, which had historically confined itself to incremental strategic change, drastic strategic measures appear strange, risky, and threatening.

 

A strategy avoidance response is typical of reactive management.  The initial assumption is that the difficulty can be overcome through familiar, but drastic, operating countermeasures.  A series of measures is tried sequentially starting with ones which have been successful in the past.

 

If none of the countermeasures produces a sufficient improvement, the tendency is to conclude that, for the moment, the situation is out of the firm's control, but that the environmental disturbance is temporary, and that if the firm holds out long enough the recession will blow itself out.  The firm turns from countermeasures to retrenchment.  The `game plan' is no longer to arrest the threat but to weather it.  Typically, `non-essential' activities such as management development are the first ones to suffer.  Secondly, future oriented activities, such as R&D and capital investment, are decreased; thirdly, expenses supporting current operations are cut down.

 

It is only if the losses continue to resist both operating countermeasures and retrenchment that a reactive firm turns to strategic remedies.  Meanwhile, a great deal of time has been lost, substantial losses accumulated, and extra costs incurred.

 

For reasons discussed above, this sequence will not be changed substantially even if, extrapolative forecasting, and even long range planning, exist in the firm.

 

In the case of relatively infrequent used strategic management behavior.  Extrapolative forecasting is augmented by threat/opportunity searching environmental surveillance.  The initial diagnosis considers simultaneously operating and strategic remedies.  The organization has the capacity to execute both in parallel.

 

Table below brings together the three types of management responses to change. The question is what mode of response management should pursue.

 

 

Management behavior   Period	Reactive	Decisive	Planned
Pretrigger phase	Delay trigger past threshold until sure of threat	Act when rational threshold is reached	Act in advance of threat
Posttrigger phase	§         Assume threat as operating §         Respond sequentially §         Try past operational success §         Try retrenchment §         Turn to strategic response	§         Assume threat as operating §         Select optimal operating responses §         Try responses §         Turn to strategic response	§         Diagnose nature of threat §         Select both optimal strategic and operating responses §         Try strategic and operating responses
Conditions for best cost-effectiveness	Strategically and operationally continuous environment	Strategically continuous operationally fluctuating environment	Both strategically and operationally discontinuous
Appropriate turbulence level	Low	Medium	High

 

Table:  Comparison of behavior in confronting a strategic threat.

 

 

The answer, indicated in the bottom two lines of the figure, is that the cost-effective choice depends on the level of environmental turbulence.  Reactive response is adequate at low turbulence levels, when speed of change is slow and strategic discontinuities are rare.  At medium levels, strategic discontinuities are infrequent, but the speed of change makes advisable a rapid operating response.  Strategic discontinuities are frequent at levels high, and both operating and strategic responses must be made expeditiously.