Trust me on this one. I’ve seen too many “bulletproof” strategies crumble to believe in certainty anymore. But I’ve also seen the power of preparation, and that’s something you can control.
The Real Cost of Getting It Wrong
Let me tell you about a mistake that still haunts me. Five years ago, I was advising a medical device company on their expansion into Eastern Europe. We had the data, we had the projections, and everything pointed to a single manufacturing hub in Poland. Low costs, skilled workforce, EU access – it was textbook stuff.
Then Russia invaded Ukraine.
Overnight, our “perfect” location became a geopolitical liability. Energy costs spiked 300%. Key suppliers evacuated. The workforce was distracted, understandably, by having a war next door. What should have been a $50 million investment became a $120 million lesson in the importance of building in uncertainty from day one.
That’s when I realized something that changed how I approach every location decision: the cost of being wrong isn’t just the money you lose – it’s the opportunities you miss while you’re scrambling to recover. While we were firefighting in Poland, our competitor quietly opened three smaller facilities across different regions. When the dust settled, they had the resilient network we should have built.
The Data You’re Not Looking At (But Should Be)
Most executives I work with are drowning in traditional metrics – labor costs, transportation expenses, tax incentives. But they’re missing the data that actually predicts resilience. Here’s what I’ve learned to track:
Political Stability Indicators That Matter:
Forget the World Bank’s governance scores. I look at three things: how often the country changes major trade policies, the consistency of regulatory enforcement, and – this one surprises people – how the local business community talks about the government in private settings. I’ve learned more from dinner conversations with local CEOs than from any consulting report.
Supply Chain Concentration Risk:
I map every supplier’s suppliers, two levels deep. Sounds obsessive? Last year, this analysis revealed that three of our “diversified” supplier options all relied on the same rare earth mining operation in Myanmar. One political hiccup there would have taken out our entire backup plan.
Climate Vulnerability Beyond the Obvious:
Everyone checks for flood zones and hurricane patterns. But I also look at water table stability, agricultural output trends (they affect local wages), and temperature variance over the past decade. Climate change doesn’t just bring disasters – it brings gradual shifts that can quietly erode your cost assumptions.
Labor Market Elasticity:
This is the big one. Can the region scale up skilled workers by 50% in two years without wage inflation? Can it scale down by 30% without social unrest? I’ve seen too many location decisions fail because nobody asked these questions upfront.
My Step-by-Step Scenario Planning Framework
After refining this process across dozens of projects, here’s the framework I use with every client. It’s not theoretical – it’s battle-tested.
Step 1: Define Your Planning Horizons
Short-term (1-3 years): Focus on operational risks and immediate cost volatility.
Medium-term (3-7 years): Emphasize technology disruption and regulatory changes.
Long-term (7-15 years): Center on demographic shifts and environmental changes.
Most teams skip the long-term horizon because it feels too speculative. That’s a mistake. The decisions you make today create lock-in effects that last decades.
Step 2: Build Four Core Scenarios (Not Three, Not Five)
I’ve tested different numbers, and four is the sweet spot. Three doesn’t capture enough variation. Five becomes unwieldy and dilutes focus.
Scenario 1 – “Steady State Plus”: Current trends continue with modest acceleration.
Scenario 2 – “Disruption Cascade”: Multiple systems break down simultaneously.
Scenario 3 – “Technology Leapfrog”: Automation/AI advances faster than expected.
Scenario 4 – “Regionalization Wins”: Global trade fragments into regional blocs.
Step 3: Stress-Test Each Location Against All Scenarios
This is where most teams get lazy. They develop the scenarios but don’t rigorously test each option. Create a simple scoring matrix: How does Location A perform in Scenario 1? Scenario 2? Do the math.
Step 4: Identify “No-Regret” Moves
These are investments that pay off regardless of which scenario unfolds. Maybe it’s building extra utility connections. Maybe it’s designing modular production lines. Maybe it’s developing relationships with suppliers in multiple regions.
No-regret moves often look expensive upfront, but they’re insurance policies that pay dividends when crisis hits.
Step 5: Create Decision Triggers
This is the step everyone skips, and it’s why scenario planning often fails. Define specific indicators that would trigger a pivot to different strategies. If tariffs exceed X%, you activate Plan B. If automation costs drop below Y, you shift to Plan C.
Without clear triggers, scenario planning becomes a filing cabinet exercise.
The Mistakes I See Over and Over
After watching dozens of companies navigate these decisions, certain mistakes appear with depressing regularity:
Mistake #1: Optimizing for the Last Crisis
I call this “fighting the last war.” Teams become obsessed with supply chain risks after COVID, or cyber security after a major attack, while missing the next threat entirely. Every crisis teaches valuable lessons, but don’t let it blind you to different risks.
Mistake #2: Confusing Diversification with Resilience
Having facilities in five countries doesn’t make you resilient if they all depend on the same shipping lanes, use the same supplier network, or rely on the same technical expertise. True resilience requires diversity in dependencies, not just geography.
Mistake #3: Underestimating Cultural Integration Costs
The financial models always show smooth integration curves. Reality is messier. Different regions have different work cultures, regulatory expectations, and business norms. These “soft” factors can sink location decisions just as surely as hard cost overruns.
Mistake #4: Treating Scenario Planning as a One-Time Exercise
Scenarios evolve. New risks emerge. Technologies mature faster than expected. If you’re not revisiting and updating your scenarios every 18 months, you’re planning for yesterday’s uncertainties.
Mistake #5: Focusing Only on Direct Costs
Indirect costs – coordination complexity, quality control challenges, knowledge transfer difficulties – often exceed direct savings. I’ve seen “cost-optimized” networks that actually cost 30% more to operate once you factor in all the hidden complexity.
Your Executive Checklist: Before You Decide
I’ve boiled down everything I’ve learned into a simple checklist. Before making any major footprint decision, walk through these questions:
Strategic Foundation:
□ Have we defined success metrics that go beyond cost reduction?
□ Are we clear on which capabilities must stay close to headquarters?
□ Do we understand our acceptable risk tolerance for this investment?
□ Have we identified our non-negotiable requirements vs. nice-to-haves?
Scenario Robustness:
□ Have we tested this decision against at least four different future scenarios?
□ Can we articulate the two biggest assumptions our plan depends on?
□ Do we have specific trigger points for major strategy pivots?
□ Have we identified investments that make sense across multiple scenarios?
Operational Reality Check:
□ Can we realistically execute this plan with our current capabilities?
□ Have we stress-tested our timeline assumptions?
□ Do we have fallback options if key suppliers or partners disappoint?
□ Are we prepared for the cultural and organizational change this requires?
Risk and Resilience:
□ What happens if our biggest supplier in this region disappears tomorrow?
□ Can we maintain operations if this location loses access to key transportation routes?
□ Have we mapped dependencies two levels deep in our supply network?
□ Do we understand the local political and regulatory trajectory?
Future Flexibility:
□ Can we scale this operation up by 50% or down by 30% without major redesign?
□ Are we building capabilities that could serve multiple markets?
□ Will this decision enhance or limit our strategic options in five years?
□ Have we considered how emerging technologies might change the game?
Making It Real: Your Next 90 Days
Look, I know this sounds like a lot. But here’s the truth: you’re going to spend months on this decision anyway. The question is whether you’ll spend that time building a robust strategy or just making the comfortable choice feel justified.
If you take away one thing from this post, let it be this: start with small steps. Pick your most critical location decision – maybe it’s a facility you’re already considering, or a supply chain relationship you’re reviewing. Run it through this framework, not as a comprehensive strategic exercise, but as a pilot to see what you learn.
I guarantee you’ll uncover assumptions you didn’t know you were making. You’ll identify risks you hadn’t considered. And you’ll start building the muscle memory that will serve you when the next crisis hits.
Because trust me – there will be a next crisis. The only question is whether you’ll be ready for it.
The companies that thrive in the next decade won’t be the ones with perfect predictions. They’ll be the ones with robust preparation. And that preparation starts with accepting that uncertainty isn’t a problem to solve – it’s a condition to design for.
Your competitors are still optimizing for efficiency. While they’re busy perfecting yesterday’s playbook, you have the chance to write tomorrow’s. The question is: are you going to take it?
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