We may be witnessing an epochal shift in the socio-political context of advanced western economies. Brexit surprised; Trump shocked. But are these simply expressions of a broader shift in society, government and geopolitics? If this thesis is correct, organisations need to try to understand what this might mean for the international business environment.
But how do you make sense of this?
Our instinct is to create a narrative that reflects our ‘interpretation’ of events, and suggests a natural arc to the future. It is not our natural instinct to create multiple narratives. And when we think about the big shifts, too often we think about them independently, rather than as a series of potentially intersecting arcs.
Sober reflection tells us this is an inadequate response to shifts in the tectonic plates reshaping our world. The strategist – and the executive – need a tool to navigate this uncertainty[i].
Scenario planning remains the ‘tool’ of choice for most strategists when thinking about these levels of uncertainty. But even as we see scenarios as a tool, we risk losing sight of the underlying power of scenarios. It is more than just a process of creating a 2x2 scenario matrix (deductive method). Or the inductive method, which is more fluid, and arrive at, say, three scenarios[ii].
Indeed, I remember being in one scenario workshop where a senior executive asked the question: “Surely others with more expertise than us have done this before. Why are we wasting time building our own? Let’s just use theirs and get on with it!” And with that, he left. But we know that only scenarios built in the context of one’s own situation will be experienced as interesting and important.
The purpose of scenarios is to gather and transform information of strategic significance into fresh perceptions. We do this through carefully designed strategic conversations that surface and link unconnected insights, isolated experiences and observations, articles or conversations. This is tacit knowledge that has yet to be integrated into a structured knowledge space. The process builds a deeper understanding the macro forces which will shape the future.
Here are just a few examples of what can happen through the scenario process:
- We’re talking about the future of China’s economic growth when someone recalls seeing an article which made the case that China’s growth rate could suddenly collapse below 4% per annum. The conversation quickly becomes much more animated: we shift from presumptions to possibilities.
- Scenarios draw out interaction effects between the major macro forces. Many observers wrote about the increasing racial undertones in the Trump result. But people are more racially tolerant when they feel economically optimistic, secure and prosperous. Trump’s victory isn’t explained by economics or identity: it’s better explained by the confluence between the two.
- Scenarios develop a language and a narrative that shapes future strategic conversations. For example, the famous Mt Fleur scenarios envisaged four potential futures in a post-apartheid South Africa: viz.
- The Ostrich scenario … if white power stuck its head in the sand
- The Lame Duck scenario … the government becomes a ‘wounded bird’ with no capacity to deliver
- The Icarus scenario …. the new government tries to fly too high too soon and crashes
- the Flight of the Flamingos … the flamingos take off slowly but fly high together
Decades later, these labels and storylines are still evocative.
Scenarios are a powerful tool for connecting possibilities; exposing presumptions that are otherwise hidden; building a coherent narrative of an alternative to the dominant future mindset.
However, scenarios are not an alternate forecasting tool:
“studying the future is not the ability to see the future, it is the ability to walk away from part of the past” (Gary Hamel: Skandia Planning Conference 1996)
We are holding an ‘invitation only’ breakfast session on Friday 31 March (0715hrs – 0900hrs) in Perth CBD where we will explore possible future scenarios emerging from the shifting political trendlines. Could these changing patterns dramatically alter the future landscape of international business? Some of the trendlines and uncertainties we will explore include:
- Are we facing a crisis of democracy … the end of liberal democracy?
- How will the socio-cultural divide play out … Pluralism or populism?
- What is the future of trade agreements … continuing growth or unwinding?
- Have we seen peak globalisation?
- Is the Tech sector becoming public enemy #1? Or ‘just getting started’
- Can the EU be saved?
- Is China really becoming more open ... or becoming more repressive
We have a handful of (free) places which we have kept open for regular readers of my blogs and LinkedIn posts. If you are a senior manager and would like to participate in this forum, please email me on David@2ndhorizon.com.au. We will allocate places based on best fit given the mix of other participants.
DDB ... a strategist's view
[i] I’m using ‘uncertainty’ here as a catch all for VUCA: volatility; uncertainty; complexity; and ambiguity. Whilst VUCA may be fashionable it risks excluding executives who have a low tolerance for acronyms that sound like ‘consultant speak’.
[ii] In the scenario process I am speaking of here, the three scenarios are NOT base case, low case, high case. Each scenario is intended to be qualitatively distinct.