In today’s fast-paced business world, the ability to make quick and informed decisions can mean the difference between success and failure. A well-executed impact assessment is crucial, whether you have minutes to decide or months for strategic planning.

In this article, I’ll introduce an innovative approach to conducting an impact assessment that aligns with today’s rapid business decision cycles. Specifically, I’ll outline six key steps to ensure your assessments are both rapid and thorough. This approach will help you prioritize critical events, set confidence levels, diagnose issues, assess probable impact timing, compile necessary information, and identify mitigating factors. By following these steps, decision-makers can quickly understand complex situations and make better business decisions.

First, What Is An Impact Assessment and How Does it Support Day-to-Day Business Decisions?

Most of us have heard or used the term “Impact Assessment”, but what does it really mean in the context of business decision-making? First, let’s start with a definition of an Impact Assessment.

“… a fact-finding mission that seeks to look for and address root causes that change certain aspects of the business before they happen.”

simfoni

So at its core, an impact assessment is a fact-finding mission to enable informed decisions. Events or changes in the business environment trigger an impact assessment. For instance, these events can include anomalies, new trends, or launching a new product line to name a few. Also at the start of the assessment, the team diagnoses the root cause and surrounding factors. From there they then assess the anticipated change’s impact and identify mitigation factors. For example, mitigating factors can include service impacts, risks, constraints, and long-term effects. As a result, the impact assessment orients and equips decision-makers with the necessary information to make well-informed choices. Below are the key questions to address in an impact assessment:

An Impact Assessment Answers the Following Questions

• What? First, we need to know exactly what is happening? Also, what is the root cause and the mitigating factors?
• Who? Also, we need to know who is affected by the change?
• When? Additionally, we need to know when probable impacts will occur? Moreover, when will these impacts be felt and to what degree (e.g. long-term and short-term effects)?
• How? Lastly, how does this affect corporate performance if we do not adjust to the change or if we change the way we are doing things? 

For a more detailed discussion on what an impact assessment is, see simfoni’s article, Impact Assessment: Comprehensive Guide to Business Impact Analysis

“Act after having made assessments. The one who first knows the measure of far and near wins – this is the rule of armed struggle.”

Sun Tzu

A Rapid, Agile Approach to Assess Impacts for Faster Decision-Making.

In a fast-paced business environment, rapid, agile decision-making is becoming crucial. So more and more, businesses need an impact assessment to support decision-making designed for speed and flexibility. Indeed, this helps decision-makers to quickly understand critical changes, assess root causes, and predict potential outcomes. For example, if a sudden market shift occurred, a company would need to do a rapid impact assessment. This in turn would provide timely insights for informed decisions. Without a doubt, a rapid approach to impact assessments ensures swift orientation, informed decisions, and timely actions. To detail, below I’ll describe the six essential analytical components needed for a rapid, informed impact assessment.

1. Prioritize Which Event Needs an Impact Assessment.

First, decision-makers need to rapidly prioritize where to focus their decision analytics to include an impact assessment. Additionally, this rank ordering is usually based on time and information available to make the most impactful decision. For example, if a major supplier announces they are discontinuing a critical component, most businesses would prioritize this event immediately for an impact assessment. On the other hand, a minor delay in a non-critical shipment might not warrant the same level of attention. By focusing on high-impact events, a business can allocate their analytical resources more effectively and address the most pressing issues first.

“People who can focus, get things done. People who can prioritize, get the right things done.”

John Maeda

2. Assess Confidence Level of Data Sources Triggering Impact Assessment.

Also, it is crucial to rapidly evaluate the information received for its reliability in regard to the triggering event. Hence within the time available, the impact assessment needs to establish a confidence level for the key data points triggering the assessment. For instance, if a market report from a reputable research firm indicates a significant shift in consumer behavior, you can have high confidence in this data. Conversely, if the information comes from an unverified social media post, the confidence level should be lower. Unquestionably, assessing the confidence level helps you determine the reliability of the data and the urgency needed for an impact assessment.

“You gotta challenge all assumptions. If you don’t, what is doctrine on day one becomes dogma forever after.”

John Boyd

3. Use Diagnostic Analytics to Determine What Happened.

The Truth About Diagnostic Analytics: A Forgotten Way To Better Business Performance

In this step, the assessment team leverages diagnostic analytics to drill deep into the data to determine the root cause of “what happened” and why. For example, let’s take the case that your sales have dropped suddenly. Here, diagnostic analytics can help you identify whether the cause is a change in market trends, a new competitor, or an internal issue like a supply chain disruption. Now beware, it is easy with diagnostic analytics to go down a “rabbit hole” resulting in much analysis, but little insights. So to prevent this, leaders need to clearly state the priorities, objectives, and time limitations to maximize analytics results. 

For more tips on diagnostics, see my article, The Truth About Diagnostic Analytics: A Forgotten Way To Better Business Performance.

“A correct diagnosis is three-fourths the remedy.”

Mahatma Gandhi

4. Apply Predictive Analytics to Assess Potential Impact of Not Acting.

As part of the impact assessment, the team uses predictive analytics to gauge the probable impact of inaction. For example, if a new regulation is imminent, predictive analytics can estimate the financial consequences of non-compliance. If the potential impacts are catastrophic, the business must quickly make a proactive decision to mitigate negative outcomes. Conversely, if the consequences of inaction are minimal, the business can move on to other priorities. For more information on predictive analytics, see my article, Predictive Analytics Types: The Best Opportunities For Supply Chains.

Predictive Analytics Types: The Best Opportunities For Supply Chains

“Foresight is not about predicting the future, it’s about minimizing surprise.”

Karl Schroeder

5. Identify What Information is Needed to Make a Good Decision and Then Gather Missing Data.

To actually complete an impact assessment, you will need to identify the critical information you’re missing. For instance, for a new market entry initiative, you find that you need data on local consumer preferences, regulatory requirements, and the competitive landscape. Hence, the assessment team gathers this data through market research, surveys, or expert consultations to ensure a comprehensive understanding of the situation. Moreover, this can be a tenacious cycle for the assessment team in that many times it involves continuously clarifying requirements and distilling information. At the time, decision-makers must balance the time to gather better data that delays a decision versus making a quick, risky decision with incomplete information.

“Orientation isn’t just a state you’re in; it’s a process. You’re always orienting”

John Boyd

6. Complete Impact Assessment Determining What Is Most Likely Affected, When Will It Happen, and Mitigation Factors.

Finally, you need to determine the scope and timing of the impact, as well as identify potential mitigation factors relevant to the problem. Indeed, these are the key components of the impact assessment that decision-makers need to know before moving forward with a decision. For instance, let’s take the example where an impact assessment reveals that a new technology is expected to disrupt your industry. In this case, the assessment team will need to detail which aspects of your business are likely to be affected, when the impact will occur, and what factors can mitigate the risks or capitalize on the opportunity. 

Moreover, it is important to understand that when it comes to decision-making an impact assessment can occur over many months or can be a split-second process. In fact in this data-driven world, frequently businesses are driven by real-world constraints and tight deadlines. Hence, the urgency and complexity of each business scenario will ultimately shape the impact assessment in terms of analytical resources applied and timing. Remember in the final analysis, the key is that the impact assessment enables the decision-maker to grasp both the challenges and opportunities before moving forward with their decision.

More References.

For more on how impact assessments are best used with in a rapid decision cycle, see my article, OODA – Enabling Business Agility: The Best Way To Disrupt Competitors, Seize Opportunities, And Overcome Obstacles.

OODA – Enabling Business Agility: The Best Way To Disrupt Competitors, Seize Opportunities, And Overcome Obstacles

Lastly, if you are in the supply chain industry and have a need to supercharge your decision-making cycles, please contact me to discuss next steps. I’m Randy McClure, and I’ve spent many years solving data analytics and decision support problems. As a supply chain tech advisor, I’ve implemented hundreds of successful projects across all transportation modes, working with the data of thousands of shippers, carriers, and 3rd party logistics (3PL) providers. I specialize in proof-of-concept and pilot projects for emerging technologies. To reach me, click here to access my contact form or you can find me on LinkedIn.

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