In the never-ending mountain of corporate waffle, surely this is the summit? Why spend time and resources on thinking about what might happen 38 years from now when even the 5-year-future is effectively unpredictable?
In an exclusive interview with Forbes, Senior VP for Communications Strategy at Deutsche Post in Germany, and management executive directly responsible for the project, Dr. Jan Müller, said the 2050 scenarios started as “a pure play in communications strategy. It was a thought leadership exercise. We put the scenarios out there to energize the societal debate.”
In other words, this is DHL’s “heads-up” to the big issues driving world change over the next few decades, and its reference document for steering the future away from two bogeys: (1) national trade protectionism and (2) indiscriminate resource use and resulting climate change.
Said Müller: “DHL is well advised to constantly insist on the benefits and relevance of liberal world trade.”
So far, so normal, in using ultra-long term alternative visions of the future to urge the world to become a better place, including for the company concerned, while polishing the public image of the firm and providing something new to show at Davos.
What’s particularly interesting about this project, and more-or-less unique in the field of industry foresight, is the scenarios will have what Müller calls a “second life” inside the firm. In something of a tour-de-force in scenario construction, the scenarios appear ingeniously formed to span both their external corporate “save-the-world” function and an internal strategy-formation role.
According to Muller, colleagues in Deutche Post corporate strategy have become active with the scenarios, and the Deutsche Post Management Board recently spent a day analyzing the project’s implications.
The work “has ramifications that reach deeply into the strategic and entrepreneurial thinking of the company,” said Müller.
All the way to 2050? Well, no. “There is a follow-up project trying to calculate development perspectives that are closer than 2050, and derive more concrete options from that exercise,” said Müller.
This version will obviously not be for public consumption.
But even as it stands, the project as applied to internal executive decision making is a challenge to the linear planning culture at Deutsche Post. Presenting the work in-company over the past weeks, Müller has argued to colleagues across the firm that “in the current age of volatility, it is not useful to apply linear prognosis. We have to think in alternatives.”
This was also the tenor of CEO of Deutsche Post DHL Frank Appel’s opening address at project launch in Berlin last month. In an increasingly complex world filled with uncertainties, short-range projections would no longer be of much help in setting the appropriate long-term direction and devising robust strategies, said Appel.
The Deutsche Post DHL 2050 scenarios are:
1. Untamed Economy: untamed growth and unchecked materialism cause a mounting number of natural disasters, putting the world on the brink of a collapse.
2. Mega-efficient Cities: cities emerge as the world’s power centers, with radically altered consumer needs, while an urban low-wage class is entrenched and rural areas stagnate.
3. Customized Lifestyles: individualization and customization shapes people’s everyday lives, requiring decentralized and regional production structures.
4. Paralyzing Protectionism: the world is hobbled by economic hardship, excessive nationalism and trade protectionism.
5. Global Resilience: resilient production and logistics structures gain a higher priority than continued efficiency maximization, after repeated natural disasters and supply chain failures earlier in the century.
Even by the standards of modern political media prattle, this was odd: the Guardian yesterday invited and ran a “response” to Barak Obama’s State of the Union address, from Jed Bartlet the fictional president in The West Wing.
One should immediately add that the response was not that of Martin Sheen (the actor who played Bartlet) or anyone from the show. It was that of an unnamed tweeter who can be found here.
The reader vox-pop box was quick to cry foul, asking what next: a piece on space exploration by Captain Jean-Luc Picard, or 007’s analysis of the War on Terror?
Fair enough. But if there is a serious point to be made, and I think there is, it is that fictional leaders do have a role in real world business and policy leadership.
Fiction and storytelling is important and enduring in all human societies because it is an excellent vehicle for considering complex human situations, reflecting on competing motivations and interpretations, assessing choices made with incomplete information, and following these through to their win-or-lose conclusion. Fiction allows multifaceted situations to be captured without losing the complexity.
Incidentally, this is why scenario method, which tells stories of alternative future situations, is such an effective planning device. But the point here is that fiction captures complex human situations and senior executives would be the first to recognize parallels between the challenges that imaginary leaders are put through and what they do in a real working day.
If fiction captures and communicates tricky situations well, it therein becomes a learning vehicle. Whether reading a difficult modern novel or watching a soapy TV show, we put ourselves in others’ shoes, vicariously experiencing their conundrums and learning from the outcomes of their decisions.
Would-be successful leaders could do worse than take note of the leadership attributes of winners such as Sherlock Holmes or Superman or Andy Dufresne; or unpick the illusions and ultimate failures of dark lords such as Voldemort or Mr Kurtz.
Furthermore, a good way to learn is to judge real performance against an ideal template. (Judging me against my clarinet teacher, for example.) Whether your politics aligns with the positions and preferences of The West Wing White House or not, there is no denying that Bartlet is set up as a model president in a model administration. He is thoughtful, caring, effective; manifests an ideal balance of intellect, EQ, and decisiveness; is respected and loved by his staff who will go to the ends of the earth for him. He is a template leader.
So it’s hardly off-the-wall to wonder what Bartlet would have made of Obama 2012. That said, it would have been far more interesting to know what West Wing screenwriter Aaron Sorkin or even Sheen, rather than abitrary unnamed tweeter, thought of the State of the Union address.
For the record:
The Lion: President Obama. Mangy, patchy, apparently underfed. Definitely caged. But he has a heart. Whether it is the lion heart of the ruler of Narnia … time will tell.
The Witch: Here we have to go with Shakespeare; in fact there are three witches: Romney, Gingrich, Santorum. On Tuesday Obama called for a fairer country. Notice they responded: fair is foul, and foul is fair.
The Warmonger: he that exited the presidency in 2008, having wasted 4,000 lives and $800,000,000,000 on a war as poorly judged as that of Douglas Haig at Somme, 1916.
Interesting times we live in, when most of the world’s business media has a front-page tab on their Web sites that says something like “Euro Crisis – Live – Follow Here” as if there was a hostage drama or bank heist on the go.
Perhaps it is a bank heist of sorts, in the frantic run up this week and next to the Brussels summit in on 8-9 December, where the 27 Eurozone leaders are expected to make some binding, if not bold, decisions.
There has been short-term market relief following the US and China’s undertakings to make dollars more easily available into the European banking system. But everyone knows that liquidity, while a problem in itself, is a symptom of the larger problem of sovereign debt. And sovereign debt is only a problem when lenders don’t see future growth such that loan capital looks safe at less than, say, 7%.
In the world of foresight we talk about the need to “think the unthinkable,” a phrase coined about Herman Kahn in the 1960s when he was making scenarios about the road to US-Soviet thermonuclear war. So I was curious to see this exact phrase pop up in various media analyses where implications of Euro-demise, such as redenomination risk, cross-border contract liability, and so on are getting a thinking through, at least in the media, for example here in the WSJ.
This is scenario planning “lite”: thinking down the path to, and implications of, a plausible operating environment — even if it is highly unlikely — and determining best responses, necessary hedges, and other adaptive measures. (Non-lite would be to do the background work, not just the journalistic summary.)
As the unthinkable forces itself to be thought, even the Corporate Executive Board was motivated to put the injunction to their executive partners as follows: ”As the threat of a potential euro zone breakup looms, we strongly advise companies to enhance their scenario planning disciplines. Leading companies in our network begin by documenting project assumptions and building scenarios off of those variables to test profitability under a range of outcomes before committing capital.”
But to this they add the intelligent real-world rider, often missed by scenario-ists: ”Don’t make the mistake of assuming that entire projects, P&L’s, or budgets need to be reconfigured under volatile outcomes. Instead, build your contingency plans around critical, controllable line items.”
This week the Association of Research Libraries in Washington D.C. released The ARL 2030 Scenarios: A User’s Guide for Research Libraries.
Now it would seem that a 20-year-future-gazing process for libraries is a world away from the concerns of managers making today’s critical decisions, but it is not, for two reasons:
First the study deals with the critical trends and forces changing the operating environment in just about every industry today – digitization, sustainability, social media, China, etc. The scenarios are instructive because they lay out forces changing the operating environment not only for libraries but pretty much every significant organization or company going forward.
Second, while four different “futures” are described and investigated, the organizational subject (libraries) are not explicitly written into them. As the user guide comments: “Scenarios created for use in scenario planning intentionally leave the organizations that are planning out of the picture. This allows the organization to better focus on the main forces that are shaping the environment around it. Thus, each scenario has a blank where the library can fill itself in through the planning process…
“This approach means that other kinds of organizations might also find blanks that they can explore through a scenario planning process. ARL can consider its future as an association using these scenarios, but other kinds of libraries, other actors in the research enterprise, or other participants in the scholarly communication system could find value in using this scenario set and the user’s guide.”
In fact, all kinds of organizations and businesses can use the study in this way: inserting themselves into the stories and asking themselves: do “we” still work? That is, is our value proposition, our business model, our resource or alliance base, still valid? Do our success recipes still apply? If not, what are the necessary new ways to be valuable and to engage with consumers and stakeholders? What would we need to do—how would we need to innovate to transform our organization such that it creates value for future users—given the overwhelmingly powerful external dynamics redefining our operating environment?
The organization deferred
Although the ARL doesn’t say it, it’s actually quite remarkable in the scenario world that the subject organization is NOT written into the story. Often scenarios are hamstrung by exactly this problem: Conflating what the world will do and what the firm can do in response, therein becoming no more than wishful-thinking stories. It is much better for the purposes of real-world decision-making when these two questions are dealt with sequentially, as they are here, and organizations can then think through the options and priorities they can shape within the larger future world they can’t shape.
Bearing in mind that scenarios are not predictions, and that the whole point is that the most likely future operating environment will combine elements from all, these are the four independent strands that the AFL comes up with:
In Research Entrepreneurs, individual scholars are central and their orientation matters more than institutional or disciplinary affiliations. Research institutions provide support services to these agents rather than driving the research agenda. Scenario 2, Reuse and Recycle, describes disinvestment in the research enterprise. With fewer resources, the crowd-cloud approach is widespread, producing information that is “ubiquitous but low value.” In Disciplines in Charge, “computational approaches to data analysis” force scholars “to align themselves around data stores and computation capacity that addresses large-scale research questions within their research field.” Global Followers describes a world similar to today, but where Asia is prominent in providing money and support for research, and Eastern “cultural norms” govern the process.
ARL 2030 Scenarios: A User’s Guide for Research Libraries is available for free athttp://www.arl.org/bm~doc/arl-2030-scenarios-users-guide.pdf. More information on the ARL project, “Envisioning Research Library Futures: A Scenario Thinking Project” can be found athttp://www.arl.org/rtl/plan/scenarios/.
I was lucky enough to have Future Savvy included in a lengthy review of critical thinking in forecasting & foresight, done on the SmithySmithy “info-savvy” blog. The post also included Nassim Taleb’s ‘The Black Swan’ (2007) and ‘Fooled By Randomness’ (2005); Kenneth Posner’s ‘Stalking the Black Swan’ (2010), and Chris Luebkeman’s Drivers of Change (2009).
As Stoyko’s is head-and-shoulders the most insightful and thorough assessments of the book itself, and the book in context, I’m reposting it here, with thanks. There are also fabulous graphics added, such as these (see more below):
“My search led to Adam Gordon’s Future Savvy. Like Posner, Gordon challenges Taleb’s blanket dismissal of forecasting. Gordon does not deny the existence of Black Swan events. And his book is a giant compendium of all of the things that usually go wrong with predictions. Moreover, Gordon offers a sceptical discussion of the subject that chastises simple-minded futurists, tech enthusiasts, and various other prophets of doom and boom. The difference between Taleb and Gordon is that Gordon doesn’t dismiss out-of-hand the usefulness of structured thinking about the future. Many important decisions require us to speculate about what the future might hold. Gordon wants us to be savvy in the way we anticipate the future instead of flying by the seats of our pants, so to speak.
“To set the stage, Gordon talks about how the forecasting industry is rife with problems. There are no standards, no accepted methods, no standard terminology. There are no penalties for failure given that people tend to forget forecasts by the time they can be proven wrong. And when dealing with the forecasts offered by pundits, stakeholders, and activists, Gordon reminds us, “we are knee deep in predictive wishful thinking, scare-mongering, or blatant self-promotion.” (p. 5) Buyer beware.
“Then there are the data problems. Forecasters use data from the past to project trends into the future. They rely heavily on data gathered for other purposes, not gathered for the task at hand. Availability is patchy. The data comes from multiple sources and is created using different methods. Important statistical caveats get lost. The context of the original studies gets forgotten. Variables are often defined loosely … and change over time … and are measured differently in different places. Data gathering methods often change over time in ways that exaggerate or obscure a trend. Sensationalist “newsy” data often commands the most attention. Some things are inherently difficult or impossible to measure accurately. All sorts of assumptions get embedded in data projected into the future. Furthermore, Gordon talks about the ways in which numbers can be finessed in an underhanded way. He advocates “number scepticism”, warning: “But no matter how scientific the data appears, choices have been exercised at every point about what to observe, what to count, how to measure it, and how to report it. … But numbers are not bedrock. There is no bedrock.” (p. 59)
“As an aside, statisticians have a snide nickname for analysts who mix’n’match statistics from a hodgepodge of sources to create complicated models or story-lines. That nickname is junk-yard dog. Gordon gives the impression that the forecasting business is, by necessity, heavily populated with these collectors.
“The sources of potential error don’t end with data. Our biases cause us to misinterpret and misreport the data.
“Some bias is intentional manipulation. Rascally analysts ignore or downplay countervailing evidence. They give evidence less scrutiny if it confirms the desired result. Emotionally charged language and associations are used. Terms are defined in leading ways. Extreme cases are used to represent the norm. Forecasts that don’t accord with an agenda get ignored, especially if the forecast is sponsored by a powerful interest. Organisational incentives can cause those being scrutinised to fudge the numbers. When forecasts are presented to the media, the most extreme trends get attention and important caveats remain unreported. Gordon is particularly critical of the so-called futurists who use “stretch thinking” and “big-picture thinking” to imagine a world full of only big changes. Many have a technophile bias, or the assumption that technology is the sole motive-force of large-scale societal change. Gordon’s advice is to keep your guard up and be wary of motives.
“Setting aside the thinness of this advice, Gordon has a strange attitude when talking about manipulation. He makes a distinction between forecasts that attempt to be accurate and forecasts that attempt to influence. Employee-prodding managers, partisan policy wonks, and alarmist activists use loaded forecasts to move minds. Humility, qualification, and tentativeness don’t have a place in these circles. There may be a legitimate reason for using leading forecasts, such as communicating the art-of-the-possible or giving someone an ambitious target to strive for. However, leading forecasts without full disclosure are instruments of underhanded manipulation. Gordon is eerily agnostic. His advice and tone of voice suggests that he is oblivious to the ethical problems posed by the manipulative use of forecasts. It’s a strange contrast with Gordon’s advice about being careful and pragmatically sceptical. [Editor's note: Agnostic? Moi? Hardly, but perhaps the chill of my irony was not chilly enough.]
“Back to the sources of error.
“Gordon itemises a number of cognitive biases that are inherent to the way we think. We often miss Black Swan events and abrupt changes in prevailing wisdom (“paradigm shifts”), he argues, because we are always filtering information based on perceived relevance. This “inattentional blindness” causes us to not notice important influences on the future. We also overemphasize recent happenings over older events (the recency effect). We’re susceptible to herd thinking and faddish ideas. A few chance events are often mistakenly interpreted as a trend or other pattern. Gordon places particular emphasis on how our current context frames the way we see and think (situational bias), especially how the prevailing mindset and preoccupations of an era skew the way we think about the future (Zeitgeist bias). For example, nuclear-powered airplanes may have seemed inevitable to someone living in the 1950s, a time preoccupied with thoughts of nuclear technology, suggests Gordon. That notion seems absurd today. To counter this problem, he argues for the need to extract the assumptions underpinning our expectations. Those assumptions need to be questioned and tested. And one good test is to reverse the assumption; that is, consider how the future would be different if the opposite (or very different) assumption were used.
I would add that people habitually rely on lazy assumptions about the future in general. As Howard Segal points out in his book Technological Utopianism in American Culture (2005), late-19th and early-20th-Century intellectuals assumed a technological plateau when describing the future. Even today, we assume our arrival at some destination—a future steady state—instead of a world of on-going change that is unevenly distributed and erratically paced, as exists now.
Gordon invites us to consider the utility people derive from a particular technology before jumping to conclusions about how it will revolutionise everyone’s lives. Tech-happy futurists are too quick to assume broad public acceptance of a new technology while ignoring the trade-offs of adoption. There are costs to be considered. In many cases, the price is too high and existing technologies do a good enough job. Or old technologies have an inertia, such as when users are “locked in” to a particular technology. Or social values change. Or switching creates undue inconvenience and aggravation. Or the technology has uneven appeal across diverse groups in society. Or, or … Gordon reminds us that simple technological domino effects almost never happen. The pace of change is usually slower than anticipated. A variety of factors determine how successful an innovation will be.
That leads us to the dynamics of change. I’m not going to describe each dynamic in detail. Gordon devotes a lot of space to them. Instead, I’ve listed them iconographically in the following diagram. Note that the darker lines signify consequences (and consequences of consequences; a.k.a. second-order and third-order events).
“A trend observed today may not continue onward along a straight-forward path. Trends peter out … change course … hit limits … get caught in reinforcing loops … have side-effects … provoke reactions … et cetera. The same goes for underlying causes. Trends can be particularly difficult to track within the complex systems that govern our lives. Thus, Gordon offers a chapter on system analysis.
“As someone who studies organisations, I’m often seeing policies and strategies change with sadly predictable pendulum swings. Gung-ho leaders push in one direction with gusto only to get a lesson in humility. Their efforts hit limits and opposition. Their assumptions hit reality. Subsequent leaders see wreckage everywhere and push in the opposite direction, looking for balance. Balance alludes them and they go to far. Another pendulum swing begins. Some swings happen from season to season. Others happen over decades. These swings may be predictable, but their exact timing certainly isn’t.
“Gordon rounds out Future Savvy with a utilitarian survival-guide of sorts. His big advice is that “it’s better to be vaguely right than exactly wrong.” Success is being alert to important changes and being prepared to cope, not with having accurate predictions. Narrowing down the things that need to be prepared for is an important practical benefit. In that spirit, Gordon talks about the strengths and weaknesses of using multiple scenarios instead of pat forecasts. He steps the reader through the analysis of some forecasts while looking for weaknesses. A chapter-long battery of questions is offered to guide the analysis. These questions do a good job of summarising the book.
“All told, Future Savvy is an excellent textbook for those who want to discipline the way they think about the future. I disagree with Gordon’s tangents about the inherently subjective nature of truth. I also have a few qualms about his take on scepticism. But these tangents rarely get in the way of his stock-taking exercise. That exercise has led me to be even more suspicious of forecasting, especially forecasts in volatile industries where data is patchy and assumptions are legion. I’d love to know the success rate of high-tech cheer-leaders … er, research firms that peddle forecasting numbers. Gordon dismisses the tracking of forecast failures as “smirk lists”. I’m with Taleb and his tsk tsking. If these numbers are just part of the hype machine and have a dismal track-record, then what good are they? Validation for reckless investment strategies? Fodder for misleading PowerPoint slides? Numbers that give a false sense of being in-touch with the market? Tsk tsk.
“That said, Future Savvy has increased my interest in foresight more generally. Gordon’s guide left me wondering how I can better prepare groups of decision-makers to think about the future. How do we get them to see the many changes afoot with greater foresight?”read more
Preliminary results of the European banking stress test are to be published by the Committee of European Banking Supervisors tomorrow (July 23.) Although the exact nature of the tests have remained under wraps — not without controversy — the essence is clear. Regulators are simulating various forms of adverse financial conditions (GNP performances, interest rates, currency values and flows, and other money metrics) to see if important banks have the resources to withstand these conditions.
Controversy has resulted from lack of transparency in the tests, leading to speculation that they are designed to have most banks “pass” in order to boost confidence — as clear an example of mixing up judgment and advocacy as one is likely to get.
The key measure for determining which of the 91 banks fail the test — and need to raise capital — is whether their Tier 1 capital ratio would fall below 6% under the “loss assumptions” imposed by the test. This is the same level that was required in the stress tests of U.S. banks in its similar May 2010 test.
Anyhow, what is particularly interesting to this author is that the concept “scenario planning” has not been used through the bank test process, but these tests are fundamentally future scenarios, this is what scenarios are all about: creating model future worlds that express the evolution of important uncertainties towards somewhere at the limits (but not beyond) of plausibility, with the specific intent to use these worlds to stress test current decisions as to what a company is and does — from its business model to its resource base to product line to marketing, and so on.
If the organization’s key decisions would hold up (produce profitability or however success is defined) in different, alternative tests, this tells managers theirs are probably good decisions for the future. If they would flop in any test, this points to what needs to be urgently addressed. In this way an organization explores and becomes robust to its unknowable and unpredictable future.
Notably, it is precisely the stress-test purpose of scenarios that stops this foresight technique becoming (as it does all-too-often in the wrong hands) a “wishing well” for better times. When scenarios cease to be direct stress tests of present decisions, they become floaty indeed.
Having said all this, the difference between the US and European banking stress tests and full scenario work is the bank tests are considering only economic factors, only adverse (risk) conditions, and only “known unknowns.” Full scenarios would include the full range of important drivers of change — and potential surprises — outside of economics or finance in their construction. In operating as stress tests, they would look at threats to the status quo as the bank tests do, but also provide a testbed for exploring opportunities in change.read more