This is part two of our dialogue with Aurora WDC on how executives should be approaching scenarios, wargames and other sophisticated tools to decode the rapidly changing market.
An important facet covered here is the dynamic between using facilitators from within the organization versus working with trusted outsiders to provide intelligence and analysis.
This dialogue with Arik Johnson, Derek Johnson, and Dr. Craig Fleisher details how executives can improve their foresight through more sophisticated analytical techniques than have been demanded in recent years.
Yesterday, the barista at our local Starbucks said, “That Rapture prediction was wrong for everyone but those in Joplin, Missouri.” That seemed like a cryptic comment until we heard the news and saw the terrible photos. Then, later yesterday, one of the most ominous purple and green cloud formations we’ve ever seen crested over Busch Stadium and the Gateway Arch, in front of the large bank of plate glass windows of the new Competitive Futures offices in downtown Saint Louis.
They tell us that April was Missouri’s worst month ever for tornadoes, and that Joplin is the most destructive tornado in history. The mainstream media is tapping into this fear, as per usual, asking why the weather has gone “cuckoo.”
Has weather gone “insane?” Is something happening? Is something wrong? Is something different? These kinds of questions make us at Competitive Futures turn off the television and go searching for long-term trend data to give us, and our clients, some guidance.
Risk management firm Aon has a team of climatologists, meteorologists, engineers and mathematicians that try to answer these questions for the reinsurance industry. Their recent report on global insured-loss weather events tells us that while last year featured the highest average temperatures on record since 1880, the longer-term trends do not indicate a significant change in weather patterns overall.
The trend global temperature is undeniable (National Climactic Data Center)
Let’s check the trends in storm systems elsewhere in the world.
Global tropical systems with winds lower than 74 miles per hour remain around the 25-year average:
Eastern Pacific hurricanes hover around the 25-year average, tracking a bit low in the past few years:
Western typhoons are following similar trends:
Finally, let’s put American tornadoes into that same perspective:
There are clearly some years of sharp spikes in tornado activity in the past decade, but if you look back a quarter-century, a clear trend of more numerous tornadoes is not yet emerging. This year could simply be an outlier. It is far too soon to tell if climate has “gone cuckoo.” The overall trends remain close to the global averages for the past twenty-five years.
This isn’t to say that the scale of the “damage” isn’t on the rise. Look at this graph from Munich Re describing the increase in insured-loss events:
The damages are clearly increasing – but then so is population and urbanization around the world. So when these events come up, they seem to be increasing in impact, since the total number of humans and the gross amount of their assets affected by these events are indeed getting larger. Once again, this does not mean that the world is by definition a more “insane” place to live.
There are two points to add here. First, the total increase in temperature is undeniable, and its future impact is poorly understood. This is why insurance companies all around the world are vigilant about the trends in these very kinds of events. We will be revisiting these issues constantly in the decades to come.
The second point is the human element to these disasters. We should be in awe of the destructive power of nature. We should mourn the dead and tend to the homeless. It was ever thus with humanity, constantly in the hands of the Gods.
Yet as leaders, we must think clearly about the actual trends at play.
I’d like to underline the most important point from our podcast with World Future Society president Tim Mack yesterday. The study of the future is about fifty years old at this point, a fact that might escape you given the astonishment of major media every time they mention it. Futures is almost as old as most of the serious disciplines of modern management: market research, marketing/PR, some kinds of finance.
That said, the discipline is growing up rapidly. The point Tim Mack makes with such eloquence is that much of the interest in foresight during past decades came from technophilia and pure optimism. That is to say, people wanted to know about the future because of how much more awesome it would be, from a scientific and social point of view. This makes complete sense when you think of the number of people who died in childbirth, died from simple infections, suffered wildly during surgery, went hungry and then…didn’t. Every decade there were miracles that represented remarkable progress in the ability of the human race to control its environment and shape its own destiny. It would only stand to reason that one would expect the future to full of nothing but such success.
The past couple decades have been telling a different story. It is becoming increasingly clear that our modern technology and social outlook can produce failure and catastrophe right along side progress and miracles. Today, you must learn to study the future to appreciate its implications both good and bad. This is not as much fun as anticipating awesomeness. But so what – that’s life. Maturity is all about taking the good with the bad. If foresight is to be a serious discipline that provides real value, this must be its destiny.
And we’re getting there.
It could be the most important time to be part of this discipline.
The political unrest in the Middle East brings up some geeky thoughts about the techniques of strategic analysis. This is not from the “Hey, you should dig megatrends!” book of the future, but direct from the canon of heavy geopolitics and game theory. E.H. Carr‘s realism versus Walt and Mearsheimer’s Neorealism versus Alexander Wendt‘s theory of constructivism. It happens to be about the current geopolitical situation, but the techniques referenced come to bear on all forms of competitive analysis. (In other words, business readers, don’t click out to espn.com just because this stuff is government-y, please. It involves you.)
One of the biggest implications of the past few weeks of major unrest in the Arab/Middle Eastern world is that the units of analysis are being scrambled. Remember: foreign policy experts use the nation-state as the key unit of analysis. Cold War realpolitik, for example, hinged entirely on big ol’ nation states as the way we analyzed the world. There were two big units, the United States and the U.S.S.R., both of who were distinct actors with stable central decision makers and defined borders. They units went out and affected other units, namely countries, to try to “win” geopolitics without killing people and breaking their stuff. When one of these units went and tried to influence a third, say, Vietnam, then the other came out to also influence it. Very clean, in terms of analysis, even if the reality was a complete misunderstood mess.
September 11th screwed things up by suggesting that non-state actors would no longer play bit parts, but could influence the whole geopolitical game. To wit, the 9/11 attacks allowed/motivated the United States to take over two nation-states, Afghanistan and Iraq. But notice – the analysis here was still about nation-states, their legitimate governments, and force-based realpolitik. The United States has attempted to use the newly-minted nation states to provide a counterbalance to its strategic competitors in the region, notably Iran (and probably Pakistan, if we are honest.) Not much has changed.
The revolution in the Middle East is different. Changing Mubarak, a long-time ally of the United States and a moderate actor on Israel’s western flank, for a popular revolution is a complete scramble for the strategic analyst. For example, Western nations give “Egypt” military aid in the billions. Well, actually, it’s not Egypt – it really has been Mubarak’s regime. They aren’t handing out AEGIS cruisers (or whatever) to random Arab taxi drivers in Cairo, they are handing power off to a group that they assume will act in a way similar to all the other regimes out there. It enables things to be nice and neat, or at least to keep some form of balance.
The huge weakness of this analysis is that it assumes complacency on the part of the huge percentage of the population that isn’t part of the government elite or the military. A nation-state is truly the result of a social contract, and when the millions of people who form that contract decide it’s no longer for them – it’s not the same thing anymore. It can’t be used as a unit of analysis in the same way. Let’s say the people of Egypt follow through on their popular revolt and elect a parliament of all taxi drivers. Can a foreign policy analyst in Paris seriously expect the same type of future behavior that it got from foreign-educated elites who understood what was expected of Cold War nation states?
Nope, it’s a whole new world.
Why is this useful for business? It’s no different than what the record companies went through when the MP3 came out and destroyed the value chain. Competitive analysis might never look the same. Why, customers were now fulfilling the roles of marketing AND distribution through the Internet. How could you possibly assume the same dynamic once the units were different?
When people say, “This is a game changer” this should be the level of dynamic shift to which they are referring.
