Looking for weak signals


Introduction
In his book The Art of the Long View, Peter Schwartz[1] talks about the concept of looking for weak signals to help form ideas about the possible shape of future worlds.

In this briefing I would like to examine two signals (and, some of you may argue, quite strong ones) that have appeared over the last couple of weeks and discuss what they might mean for business strategy.

Looking for a new “generic strategy”
First off, I will start with a US survey-based study, The National Leadership Index 2009 [2] that tracks Americans’ confidence in their leaders, in both the political and business worlds. Here is a selection of findings:

  • Confidence in Wall Street leaders has, unsurprisingly, sunk to an all-time low. This sector too has the lowest of all leadership confidence ratings recorded (the survey looks at sectors from the military, through to charities, business and media).
  • In addition to leaders in Wall Street, confidence in national leaders plummeted too.
  • Americans only have above average confidence in leaders in three sectors, the military, medical, and not for profit/charity.  Note the absence of the business world.

And here are some (summarised) answers to specific questions addressed in the survey:

How much do you trust what leaders in these sectors say?
How much do you trust what leaders say

To what extent do you agree that today’s leaders in these sectors share your values?
Leaders sharing values

Which would you agree with most, that leaders in these sectors generally work for the greater good of society, generally work to benefit themselves or generally work to benefit a small segment of society with special interests?
Working for the greater good

The really important message out of this is that only 10% of Americans think that business leaders work for the greater good of society. And it gets even worse when we learn that only:

  • 2% strongly feel that business leaders share respondents’ values (22% of respondents strongly  feel that business leaders do not share their values).
  • 3% strongly feel that business leaders are in touch with their needs (over 70% of respondents either disagree or strongly disagree that business leaders are in touch with their needs).

All this goes to demonstrate:

(a) the steep hill that businesses have to climb and
(b) deficiencies in the way that businesses think about competitive strategy.

For well over two decades strategic thinking has been dominated by two questions – how can we drive down costs and how can we make our offerings (products) different from the competition? Both these questions really assume a rational, economically driven marketplace. Frequently, they are referred to as “generic strategies”.

But neither of these questions really addresses the problems that this survey reveals.

In a world that is increasingly concerned about the environment, security and human rights, businesses need to move from this thirty-year old view of strategy and seek out a new “generic strategy” that says more about what the organisation and its offerings really stand for.

The age of localisation
So much for global strategies. A growing mass of research is pointing us towards thinking locally, not globally. A report issued earlier this month from the think tank Centre for Cities[3] clearly indicates the need to take very much a localised approach to strategy-making.

Some key points from this report:

  • Many of the cities in the UK that are suffering the most from the current recession are those that have not yet recovered from the last two recessions. In short, some areas such as Hull and Grimsby, are now in the grip of a 35-year period of decline and stagnation. These locations are experiencing the worst scenario of all – an “L” shaped recession.
  • Many cities where we have seen large increases in public sector employment have yet to feel the impact of public expenditure cuts – these areas could well experience the double-dip “W” shaped recession.
  • However, there will be some that will experience a relatively short downturn – the “V” shaped recession. Cities in this final category include London, Brighton, Luton and Crawley – very much a South-East UK picture.

Nationally, the report tells us that five years must elapse before employment levels recover. For some, it will be shorter. For others, it will be an extension of the last three decades.

Don’t think that this solely a UK issue.

Localised depression and recovery is an issue reported in the US[4] too and probably exists to some degree in every developed economy.

Putting the signals together
When I opened this briefing I said that some may view these reports as more than weak signals. Indeed, I would argue that the findings discussed here are emerging certainties.

We can be sure that the recession will bring enduring pain for many. An enduring pain that will permanently change attitudes, perceptions and behaviours.

We can also be sure that attitudes to big business are deteriorating. Indeed, there is such an gulf to be filled that we must now strongly question the efficacy of established approaches to competitive strategy that merely deal with costs and what the offering (product) does or does not do.

A new generation of customers, a recession hardened Generation Y, is emerging that will make up their minds using different criteria. And the rational economic logic that has traditionally underpinned strategy-making will not provide the answers.

Finally, these are type of signals that we should pay attention to – they are the new signals that will help us to see what capitalism in the post-recession world will really look like.

References
[1] P. Shwartz, The Art of the Long View, New York: Doubleday, 1996.
[2] S. Rosenthal, S. Moore, R. Montoya, and L. Maruskin, National Leadership Index 2009: A national study of confidence in leadership, Cambridge, Massachusetts: Harvard Kennedy School for Public Leadership, 2009.
[3] Cities Outlook 2010, London: Centre for Cities, 2010.
[4] L. McPheters, “Unemployment’s Uneven Impact,” Knowledge at W P Carey, Jul. 2009.

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