Strategy: The Known Unknowns You Really Need to Know


STRATEGY THE KNOWN UNKNOWNS

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Overview:

The world is changing rapidly, but many of the assumptions that we use to think about the future have not. In reality we are now confronted with a range of ‘unknowns’ that could fundamentally confront and over-turn these common and widely-held assumptions. This briefing suggests that these assumptions should be strongly challenged. A range of questions, each dealing with one ‘unknown’, are presented to help you confront established thinking and build increased resilience in your organization.

No Longer a Moment of Miracles

The annual business planning cycle is upon us – it is of course that time of year when we turn our thoughts to consider the objectives and goals we need to achieve in 2017 and beyond. With bursting email inboxes, it could be tempting to rush in and start the usual business planning process, one that we probably used last year and the year before that, but that could be a very great mistake without first checking our basic assumptions about the way the world works.

The cold reality is that the world is now a place full more of unknowns than certainties.

It is not 1989 when the Berlin Wall fell and President Clinton declared ‘a moment of miracles’. At that time, we all assumed there was only one path that the world could follow, a path that we came to refer to as ‘The Washington Consensus’. Those days have gone and we are faced not with certainty about the future but just uncertainty and uncharted territories.

The real problem is that many of the assumptions that underpin our strategies and business plans were first born in the heady years that followed the ‘moment of miracles’.

The collapse of the BRICs (possibly we are only left with an ‘I’ and a ‘C’); faltering economic growth; BREXIT; dissatisfaction with established political parties; rumbling border wars – all now combine to challenge what we have previously taken for granted.

So instead of relying upon popular ‘certainties’ such as the ongoing march of globalization, a rising middle class and world-wide connectivity, we should explore the major ‘unknowns’ or more correctly, ‘known unknowns’ that face us. This is a process that can help to build a resilient mind-set and importantly, strategic thinking that could well be fundamentally different from that of your competitors.

We can start by exploring the ‘known unknowns’.

 

So What Are The ‘Known Unknowns’?

In a previous briefing Looking at the Future – the critical mistakes to avoid I made the point that it was dangerous just to rely upon popular certainties when crafting strategy without paying at least equal attention to the potential disruptors. By definition, disruptors can overturn our world and they are issues that we have little knowledge about. In short they are ‘known unknowns’. This thinking is summarised in the following illustration, extracted from the above briefing:

THE DISRUPTORS

The Disruptors or Known Unknowns: ‘Global Economy’ embraces fears for future growth, especially in advanced economies; ‘Fading States’ raises questions over the role, power and form of nation states in a semi-globalised world; ‘Inequality’ raises the question of whether or not capitalism can tackle inequality and ‘Co-operation’ concerns the issue of future conflict.

The five points shown vertically on the left side represent commonly accepted but, I would argue, largely untested ‘certainties’. The four potential disruptors or unknowns that were introduced in the above briefing run along the bottom of the illustration and can work alone or, more likely, in a linked, systemic cascade, to overturn or at least modify the ‘certainties’ (please see the box above for an explanation of the disruptors).

There are of course a number of ‘known unknowns’ and even ‘unknown unknowns’ that could overturn our thinking, but following further thought and research, I am going to suggest that you start off your business planning process, not by thinking about topics such as ‘what next moves can we make with social media’ or ‘what are our competitors doing?’, but by considering the following questions.  The questions are designed to introduce a small selection of ‘known unknowns’ and to challenge what may be deeply-held assumptions. I will be exploring the issues raised by each question in more detail in future briefings.

Daunting – but necessary

These questions might look daunting, but at the end of this briefing I give pointers to straightforward actions that any organization can take.

There are no agreed answers to the questions, but it is important that each is considered and the result is reflected in your strategic thinking and, even more importantly, the process you use to craft your organization’s strategy. When considering each ‘known unknown’ it is important to remember that there are positive as well as negative potential implications for each.

Question 1: What is the future of global growth? This question encompasses the worries concerning the robustness of future global economic growth. In my briefing Success in a World Without Growth, I discuss the problems that the advanced economies face. But we should not take the position that the emerged economies and the newly emerging economies are without their own challenges. These economies face the prospect of (i) the middle income trap and (ii) technology, AI (artificial intelligence) and robotics removing the traditional ladder of ‘agriculture to industrialisation’ that has allowed emerging economies to increase employment and to progress.

There are of course no clear answers to the question of global growth. Schools of thought range from the perspective that AI, robotics and connectivity will usher in an era of renewed, sustainable growth to the position that we are flat out of ideas on how to stimulate global growth and that is 50% chance of a recession over the next three years.

Question 2: What future is there for the global middle class and democracy? Historically the growth of the ‘middle class’ has held an important position as being the catalyst for the emergence and development of democracy. But the outlook for the middle class is looking bleaker, especially in the advanced economies. There is talk of a ‘squeezed middle’ which embraces the inequality argument. Parents are worried that their children may be poorer than themselves. The middle class, at least in the advanced economies is shrinking. And this is even before it has its biggest shock – AI and robotics. This new technology is set, by some estimates, to remove 10m jobs in the UK alone and many of these will be the jobs of the traditional middle class professions. The great unknown is – what is the future of the global middle class and where does democracy go without it? Will democracy flourish and reinvent itself or decline?

Question 3: Which form of globalization will dominate? We tend to think that there is only one form of globalization – economic globalization – which we could simply define as the emergence of one globally connected marketplace, motivated by the need to create economic wealth in a liberal-democratic setting. As part of the research I conducted to write The Era of Global Transition I came to the conclusion that there were two other emerging forms of globalization that we have to think long and hard about. The second type of globalization I call ‘security globalization’. The attraction of security globalization is the promise of basic security in a troubled world – we can think of this as the lure of authoritarianism. The third form is values-based globalization, which is, critically, more virtual and less nation state-bound in nature than the other types of globalization. In values-based globalization the attraction point is a common set of values or beliefs (don’t just think of religion, consider large technology empowered social movements). The important points to remember are (i) the proposal that the coming decades could take the form of a jostle for supremacy between these three types of globalization and (ii) that there are indications that economic globalization as defined above may be in decline and the other two forms of globalization may be in the ascendancy.

Question 4: How will we get to the future? We are not, of course, referring to a time machine, but the characteristics of the road ahead. Will it be a peaceful road or will it be punctuated by conflict? Dominant thinking tells us that the world is too economically inter-connected for there to be major conflict. From a rational, economic perspective, this makes sense. But if we look at human psychology, then it doesn’t. Alternative thinking tells us that if there is dissatisfaction with the dominant global system and the benefits it provides then conflict will bubble up. Additionally, research tells us that decision-making in pre-conflict situations tends to be irrational – anyone with crisis management experience will probably be able to recall how difficult it is to maintain a ‘rational’ decision-making environment! The major point to consider is that dissatisfaction with the dominant system (in this case The Washington Consensus) and the promotion of alternatives may be a catalyst for future conflict, the power of which we can easily under-estimate. This may prove to be especially true in states and regions where the three forms of globalization come into direct confrontation.

Question 5: What is the future of connectivity? It is popular to assume that global connectivity (universal access to the ‘internet of things’) is a rock-solid certainty. It is, after all, a rational step from where we are today. But there are doubts – and considering the above questions may have already raised issues in your mind. Companies are acquiring huge data assets. Individuals and social movements have become empowered by technology. Will nation states tolerate this? Will insecure national leaders allow the public unfettered access to social media? Will the next big trend be privacy? In addition to the potential job losses that AI and robotics could produce, are there other ‘dark sides’ of a data rich world that we need to explore? These are examples of the questions that need to be raised to consider the robustness of the connectivity assumption.

 

A Starting Point

All very interesting you may well say – but what should we do?

There are several steps that organizations can take to encourage the development of resilience in an uncertain world.

A first step may be to consider now how the business can succeed if we entered a long period of very low or zero economic growth. Another step is to consider two or more alternative scenarios and in the briefing Looking at the Future – the critical mistakes to avoid you will find an example scenario set that covers many of the issues raised here. You can use these scenarios to answer ‘what would we do if?’ questions to help create preparedness and create robustness within future strategies.

Questioning assumptions others take for granted and considering ‘known unknowns’ is a major step forward in crafting strategic resilience in a world that is now very much at a crossroads.

 

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