Strategic Thinker Issue 5.2009 - Strategize For The Future Not For The Present

The Strategic Thinker

SM

PURE & SIMPLESM Advice To Gain Supremacy Of Your Sandbox

Issue 5/09:

Strategize for the Future, Not the Present More and more CEOs with whom we work tell us that it is not possible to predict the future, and it is therefore impossible to create a strategy for that future because changes are occurring faster and faster. Computer and biomedical technology, and political and economic conditions, to name a few factors, are changing faster and in more unexpected ways than ever before. As a result, many claim, no one can keep up with—much less predict—what else will happen in the future. To some extent, they are right. Although this claim is partly true, the notion that change happens too quickly to be anticipated is somewhat of a myth. Our experience leads us to a different hypothesis. In our view, there are two modes to deal with changes: proactively or reactively. Many executives deal with most changes in a reactive mode. Their skill is corrective in nature rather than being proactive or anticipatory. Proof of this is in the pudding. If their key skill was anticipatory, why were the CEOs and senior executives of thousands of corporations around the world caught by surprise by the advent of the Internet? We believe they just weren’t looking. The Internet had been around for years. We also contend that by using the following methodology, not only can you predict the future in your competitive landscape, you must predict it or your company will inevitably become a dinosaur. ENVISION THE FUTURE

In reality, the future business arena (or "sandbox," as we at DPI refer to it) in which any company will compete down the road consists of 12 discrete compartments from which disruptive trends, or indications of the future, might emerge: • • • • • • • • • • • •

Economic/Monetary Trends Political/Regulatory Trends Social/Demographic Trends Market Conditions/Trends Customer Attributes/Habits Competitor Profiles/Mix Technology Evolution Manufacturing Capabilities/Processes Product Design/Content Sales/Marketing Methods Distribution Methods/Systems Resources—Natural/Human/Financial

Once the complexity of the Future Business Arena has been deciphered into these 12 "building blocks," one can begin to anticipate what the future will look like. By placing yourself, and your key executives, in a "time machine" and moving yourself ahead x years and describing the characteristics you believe each compartment will have at that time, you will have a very good "picture" of the future. Then comes the next objection: "We don't have any futurists in our company. How can we foresee changes that will occur in the future?" The good news is that you don't need a guru to predict the future. Our contention is that most changes that will impact your business 10 years from now are in place in some form today. Most changes that will affect a company announce themselves well in advance of the time they will strike.

“How can anyone anticipate what the future will look like? The future is a big place, and no one has a crystal ball.” This is DECODING THE FUTURE TODAY usually the statement we hear immediately after we offer the above hypothesis. In fact, this reaction is Naturally, one can’t be 100 percent right about the The good news understandable, yet our premise has a very future, and totally unexpected events do show up. But, if simple and rational explanation. It has been one knows where to look, one can decode the future is that you don't shown that many things that look big and today. Our thesis says that the future is not one place, need a guru to complex at first glance turn out to be an but a collection of five places where you can get a predict the assembly of a limited number of smaller glimpse of the future that lies ahead. elements with a limited range of variables future when scrutinized more closely. © 2009 DECISION PROCESSES INTERNATIONAL ASIA PRIVATE LIMITED Address: 1 Sophia, #04-16 Peace Centre, Singapore 228149 Tel: 6235 1733 Fax: 6336 8022 Email: [email protected] Asian Site : www.dpi-asia.com Asian Blog : dpi-asia.blogspot.com Global Site : www.decisionprocesses.com

Your future lies hidden in these five "futures":

The Future Beyond

1. The Future Ahead

The future beyond the future ahead is one that is projectable because it comes with some predictable boundaries. In other words, this event or trend comes with some known constraints that will make its eventual outcome almost predictable.

2. The Future Beyond 3. The Future Behind 4. The Future Around 5. The Future Beside The Future Ahead This "future ahead" is a future that has already started but not yet arrived. Like a train, it has already left the station but has not yet arrived at its final destination. However, because it is moving along a set of rails the direction of which is pre-established, one can determine its eventual destination. This future ahead comes with a predetermined set of "rails" which allows one to foresee the eventual outcome. In fact, the future ahead comes on two sets of predictable "rails":

• The future that can be projected by extrapolating current phenomena • The future that is branching along two or more sets of paths or "rails" Let's look at them one at a time. The first is the future ahead that can be projected, or predicted reasonably accurately, because it is an extrapolation of current and predictable phenomenon. An example is demographics. Singapore has one of the fastest ageing populations in the world. There are an estimated 300,000 people over the age of 65. This figure is projected to quadruple over the next two decades. The second type of future ahead is the one that has started but is branching along two or more "sets of rails" or paths. As a result, its eventual destination, or outcome, is projectable but not totally predictable because the path that will eventually win out is not yet known. However, being able to project two possible outcomes is better than projecting 20 or no outcomes. An example of the "branching" future in today’s context would be the battle over eBooks’ readers. Clearly amazon.com’s Kindle, Barnes & Noble’s Nook, and the likes of Sony’s Reader are in the fray at this moment. Another example that has not yet played itself out might be the electric/gasoline hybrid ear versus the hydrogen fuel-cell car versus the gasoline-powered car. The political and environmental problems associated with burning hydrocarbons and the need for alternatives are obvious. But what branch will the future ahead follow—and how might that and other related changes affect your business?

This "future ahead" is a future that has already started but not yet arrived. Like a train, it has already left the station but has not yet arrived at its final destination

An example in retrospect would be Airbus's announcement then hat it would construct a Super Jumbo airplane. Without much effort, Boeing could quite accurately project the size of that aircraft and the number of passengers it would carry. The laws of physics have already determined that data. The laws of physics have determined that if the aircraft travels at higher than Mach 1 speed, the windows will shatter. Therefore, it would have to travel at slightly less than Mach 1 speed. At that speed, the optimum fuel-to-weight ratio would limit the size of the aircraft to approximately 800 passengers. Without any "guessing," this future beyond can be quite accurately projected since it comes with known constraints, or boundaries. The Future Behind

What can one learn about the future by looking at the "future behind"? The answer is simple: History repeats itself.

What can one learn about the future by looking at the "future behind"? The answer is simple: History repeats itself. The future behind is one that happened in the past, yet it provides a template for the interpretation of current events that will have future implications. By looking at the future behind, one can learn about the behavior of past events or trends. As Andrew Grove, ex-CEO of Intel, once said: "If you want to know what will happen in the technology in the next 10 years, simply look at what has happened in the last 10 years." One repeating phenomenon we can learn from is that of "disruptive technologies" that gather so much inertia that a temporary crash will not stop their momentum. Eventually, after an initial frenzy of speculation and a “bubble burst," they come roaring back. The following paragraphs give some examples. In the mid-1700s there was a canal mania in Europe, with hundreds of companies building canals all over Europe. Then, suddenly the bubble burst and many declared it a commercial disaster. Yet, 10 years later there were almost five times as many canals as there were before the crash. Canals became the backbone of commerce in Europe, and that inertia made the canal phenomenon unstoppable until years later when the railroads came along. In the mid-1800s in the United Kingdom, a rail mania took place. Hundreds of companies were laying down hundreds of miles of rails across the country. Huge and, it turns out, highly speculative investments were made. Again, the bubble burst and fortunes were lost, yet 10 years later there were thousands of miles more rails in use than there were before the crash. Like the canals before them, rails eventually became the backbone of the industrial revolution, and their inertia made that trend unstoppable until the advent of cars and trucks.

© 2009 DECISION PROCESSES INTERNATIONAL ASIA PRIVATE LIMITED Address: 1 Sophia, #04-16 Peace Centre, Singapore 228149 Tel: 6235 1733 Fax: 6336 8022 Email: [email protected] Asian Site : www.dpi-asia.com Asian Blog : dpi-asia.blogspot.com Global Site : www.decisionprocesses.com

At the beginning of 20th century in the United States there were over 100 manufacturers producing a few thousand cars. Then suddenly the industry crashed and most of the early producers went out of business. Yet, some 15 years later, there were half a dozen companies producing over a million cars per year. The introduction of the automobile was an event that came with so much inertia that it was unstoppable. What recent innovation, which has recently had a setback, but will coming roaring back? Right. The Internet! The Internet is a technology with so much inertia that it will eventually change the modus operandi of every company in the world. In fact, it's happening right now, and its impact will gradually increase for the foreseeable future, just like the canal, the railroad, and the automobile did in the past. Looking at the future behind can give us great insights about the future ahead. What changes or trends that are happening in your sandbox today might have blueprints in the past to help you to see where they might be going? The Future Around The "future around" is one that is already present in your sandbox but is not yet fully deployed. These are events or trends that are in your sandbox and will amplify over time. If you have not taken stock of these events, they will catch you by surprise and bite you badly. An example is the work going on in the area of human genomes. No pharmaceutical company in the world can afford to ignore the developments occurring in this area of their sandbox, as they will dramatically change the nature of their future products. Another similar area of development is bioelectronics—the convergence of biological and electronic and even mechanical technologies. What about “clean” technologies?

The Future Beside The fifth type of future you will encounter consists of events or trends already in place in adjacent sandboxes that will eventually migrate into yours—the "future beside." Unfortunately, these sandboxes are probably not on your current radar screen and if you haven't spotted them, they will catch you by surprise when they arrive. Social networking sites such as Facebook & Twitter have taken the world by storm. Of greater significance is the fact that they have proven to be effective marketing tools for consumer goods. NGOs and other non-profit organizations are increasingly leveraging on these social networking sites. Any guesses on the industries that would leverage on them next? Exploring adjacent sandboxes for events that are happening there will enable you to quickly assess the ability of these events to migrate into yours and, more importantly, enable you to take actions to manage and/or control these events to your advantage. FIVE PLACES TO LOOK FOR THE FUTURE It is in these five places—the futures ahead, beyond, behind, around, and beside—that the future stalks and may spring into your sandbox and catch your unprepared. Or, if you look, you may discover opportunities that others have not yet recognized. And that brings us to a wise quote from one of our clients:

You can’t predict the future, but you can prepare for and control the future.

© 2009 DECISION PROCESSES INTERNATIONAL ASIA PRIVATE LIMITED Address: 1 Sophia, #04-16 Peace Centre, Singapore 228149 Tel: 6235 1733 Fax: 6336 8022 Email: [email protected] Asian Site : www.dpi-asia.com Asian Blog : dpi-asia.blogspot.com Global Site : www.decisionprocesses.com