Strategic Plans Gone Awry

Over fifteen years ago, a small region railway wanted to borrow $2 billion to expand from the north central states into Wyoming. Their plan included repayment through hauling approximately 40 trains of coal out of there. Some of us who heard about the plans thought, "Why would the current railroads hauling this coal today allow this small rail line to come in and take almost half of the business away?" Some estimates gave the life of the project to be 30 years also, then the coal was going to be gone.  The rail company got federal approval for the expansion but couldn't get the loan. Since then the rail line has been sold, the expansion killed and in fact, most of the track heading west towards Wyoming was sold to another regional carrier. Coal hauling has dropped off 10% in the last five years.

Instead in the last three years, oil hauling out of North Dakota has gone up 20x or more, from 50,000 barrels/day to nearly 1,000,000 barrels/day.

Could the railroad have anticipated going into North Dakota instead of Wyoming in 1996 when they started planning their expansion? Hydraulic fracturing and horizontal drilling was coming into the foreground for the industry in the 1980's and 1990's making the Bakken Oil Field more exploitable. It was already known that Bakken would be a huge play if companies started getting into it. That didn't really happen till 2010, but it might have been worth the wait to borrow money to put lines in North Dakota ready for this decades bust out of economic boom times.

How long is your horizon for strategic planning? How many what-ifs are you exploring? Quite a few years ago, Royal Dutch Shell was touted as looking out many decades ahead and developing several scenarios. Perhaps your business doesn't need to do this, but it should consider spotting some early indications in the business world. You might want to develop some 'trip wires' that will tell you if one of the scenarios is becoming more likely. If you do this, stay poised, haven't put all your 'assets in one basket', then you might be able to respond appropriately and catch the economic wave.