What are the assumptions you use to base your plans for 2020?
It probably makes sense to be clear what assumptions underpin your plans for the coming year. After all, you need some foundations in place in order to take decision or create the framework on which others will take decisions. Here are a couple of assumptions that might impact information and technology investment decisions. These are my personal assumptions based on what I read and see (not part of what Gartner officially uses for its own business planning – I don’t know what they are):
- GDP/Growth: USA likely to hover around 2% and could well exceed this, perhaps to 3% or even 4%
- Interest rates: USA likely to remain flat for 1H and may start to nudge up in 2H. Year-end target:
- 30-year fixed mortgage: 7%-9% (currently around 3.7%)
- 10-year treasury note: 5-6% (currently around 1.8%)
- Inflation: USA likely to approach 2% but could well exceed this as labor/wages cost and interest rates increases flow through; supply chain complexity challenges; economic/tariff challenges. Target 4-5%
This may sound like a “glass half-full” point of view. After all, there are so many unknown-unknowns out there: China and US tariffs; political unrest all around; post-Brexit; and a US election at the end of the year. I assume here the trade deal with China passes and is built-on; middle-east tension remains muted; the UK, particularly in 2H 2020, kicks in with positive trade deals and proves the officials wrong about a crash, and most importantly of all, the business environment in the US becomes more socially responsible but also more free to compete and drive growth. This does not necessarily mean more taxes; it means more effective taxation; and more effective regulation and increased freedom to compete.
For an external view for why these forecasts could be valuable, at least as a hedge or planning tool, see Why the most important hedge is against unexpected inflation from the Economist(January 4th).
So, should we not always operate with a plan B? It would be smart to operate with a plan B in the top pocket.
Plan B Assumes a Recession
The point is not that we are planning for a recession; but we are putting in place what we need ready should the gloom turn to doom. In fact, this potential issue was noted in the press today. In today’s US print edition of the Wall Street Journal: Tech Executives Keep up Slowdown Prep. Our own Chris Howard is quoted referring to the efforts CIO’s and CEO’s are undertaking to ensure their investments, whatever the economic conditions, are targeted toward growth-driving opportunities. In fact this ideas was captured in the “winning in the turns” concept we recently wrote about during our keynote at our annual conference: Winning in the Turns — Leadership in a Digital Society: Key Insights From the 2019 Gartner IT Symposium/Xpo Keynote.
As Chris notes in the WSJ article: “In my mind, people are anxious about a downturn in the economy. What does it mean to be a leader when that starts to happen? They could shut down innovations and focus on operations. How do you keep the momentum going?”
This is the key question: What decisions can you take no matter what? What decisions can you take that will assure growth even if the economy turns sour? What can you not afford to invest in that will always and in every case drive improved productivity? We just concluded a survey that explores the business impact of the mix, sequence and size of investment in data and analytics. Is it possible to raise the odds of driving business value by following certain paths? Your assumptions will be key – and playing through scenarios will help you test the boundaries of those assumptions. These are the war games leaders get good at.
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