We are reaching an uncertain era of global health, climate change and volatile geopolitics. These factors are mixed in a cocktail of technological advancement on an unprecedented scale. This scenario calls for exceptional leadership both on the part of States and in the context of enterprise governance and strategy.
by Dr. Ruwantissa Abeyratne
Writing from Montreal
Over the past few years, business strategy has been an ambivalent uncertainty and this is with or without the Covid-19 crisis. Doubtless, it was exacerbated by the global pandemic where human activity that promoted global economic growth was unprecedentedly curtailed, be it in social intercourse in pubs and restaurants or in travel, tourism or other aspects of business. The massive job cuts across the world and the tightening of belts in big and small businesses added to the surge of technological advancement caused by Moore’s Law (that computing power grew twice every two years because the number of transistors in a micro chip doubles every two years at half the cost), geo political change in States receding into their own corners and global incoherence on interdependence in trade to bring to bear deep uncertainty with regard to the future of the business world.
J Peter Scoblic, writing for Harvard Business Review offers “strategic foresight” as the key driver of business strategy in this era of uncertainty: “The most recognizable tool of strategic foresight is scenario planning. It involves several stages: identifying forces that will shape future market and operating conditions; exploring how those drivers may interact; imagining a variety of plausible futures; revising mental models of the present on the basis of those futures; and then using those new models to devise strategies that prepare organizations for whatever the future actually brings.
Today the use of scenarios is widespread. But all too often, organizations conduct just a single exercise and then set whatever they learn from it on the shelf. If companies want to make effective strategy in the face of uncertainty, they need to set up a process of constant exploration—one that allows top managers to build permanent but flexible bridges between their actions in the present and their thinking about the future. What’s necessary, in short, is not just imagination but the institutionalization of imagination. That is the essence of strategic foresight”.
Scoblic gives many useful tools for managing uncertainty. The first is “backcasting” where leaders and managers could work backwards chronologically, from a time considered in the future. This process asks participants to work backward in time from a particular future to determine the cause of the critical issue that blocked business opportunity. Applying this principle to the Covid-19 pandemic which halted global activity and commerce, one could go backwards from July to January and ascertain the situations that prevailed in both time scales. This approach usually assists in avoiding negative factors that may have exacerbated the crisis and cope with an imagined future threat to business.
The second tool is “contingency planning” which essentially consists of adopting measures to confront possible events that may hinder business. A good example is the lapse of many European airports (particularly London Heathrow) which was caught off guard during the snowstorm of December 2010. Contingency planning is the response to anticipatory or predictive intelligence. Scoblic says “a contingency plan provides a playbook in case of emergency”.
Tied inextricably to anticipatory intelligence are simulations of crises which can be successfully addressed by tabletop exercises where participants are trained to respond to specific scenarios and then analyze their actions, with a view to assisting people prepare for exigencies of business reality.
A tool which assists the above measures is forecasting which gives a good idea of what the future might bring. Here, the use of relevant probabilistic predictions which assist strategists in managing uncertainty, by stringing quantitative factors to qualitative ones, would be of help in strategizing a business to counter uncertainty. Scoblic says: “predict what you can; imagine what you cannot; and develop the judgment to know the difference”. This sounds eminently sensible.
“Scanning the horizon” is another link in the overall chain of strategizing during uncertainty. “Horizon scanning asks participants to search for “weak signals” of change in the present with an eye toward monitoring their development and assessing their potential impact. The practice is guided by the idea that the future often first comes into view in places that most of us are not paying attention to, such as specialized scientific journals”.
Another strategy is careful scenario planning using plausible scenarios of future exigencies that may be presented to a business. Scenario planning should eschew certainty based on current trends and focus on “plausibilities”. These plausibilities would be driven by various factors that would remain with us over the next 30 years, such as turbulence; uncertainty; novelty and ambiguity (TUNA) and genetics; robotics; nano technology; and information (GRIN).
Whatever the business strategies are and however much they would assist in producing a sound strategy, there is no gainsaying that in an unpredictable world replete with unprecedented shocks, there may be instances where a total collapse would have to be either circumvented or managed beyond expert management and strategic enterprise governance.. In this context, risk is the key factor to be contrasted with uncertainty. A good example is air transport in the context of 9/11 where air transport had to shut down totally when the London insurance market refused to keep insured the airlines against war risk. The States stepped in to become insurers of the last resort of their national airlines which enabled the airlines to restart offering air transport services.
We are reaching an uncertain era of global health, climate change and volatile geopolitics. These factors are mixed in a cocktail of technological advancement on an unprecedented scale. This scenario calls for exceptional leadership both on the part of States and in the context of enterprise governance and strategy. Some have suggested that today’s leaders should have two main teams in their companies: one dealing with the current situation; and the other dealing with future scenarios, presumably using the key factors discussed in this article. However, the various elements of strategies are not a guarantee of success either for governments or for businesses in view of the unpredictable randomness of natural and man made events. For example, forecasting went terribly wrong with the onset of the Covid pandemic. As Harvard Business Review says: “no one knows for sure what is going to happen. Digging deeper, three key factors are causing forecasters particular difficulties.
First, the economic impact and speed of policy changes have never been higher. In normal times, most governments can be relied on to at least attempt to encourage economic growth and preserve employment. Today, however, they are deliberately provoking recessions to save lives, and containment measures are crushing domestic activity… second, the pandemic is undermining the reliability of economic data” …. The third reason the models are diverging so much is because economic forecasters are having to delve into the unfamiliar world of epidemiology to better understand the likely evolution of the coronavirus outbreak in each country”.
Difficulties notwithstanding, there has been no time like the present to face the reality that strategic foresight is essential to face a rapidly changing volatile world. This goes for both governments and businesses.
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