Even without paying close attention it’s easy to see the world we live in is a volatile one, marked by shifting global power dynamics and continually changing business environments. A.T. Kearney recently released its global “Views from the C-Suite” survey of 400 global executives at companies with revenue of $500 million or more. The results showed characteristic optimism from those in leadership positions, even in the face of numerous rapidly emerging global challenges or threats. We sat down with Paul Laudicinia, Chairman of A.T. Kearney’s Global Business Policy Council, who helped us sort through the executives’ responses and offered advice to leaders everywhere about how to prepare your business for the unpredictable.
Consulting: The survey predicted volatility, and it looks like that’s what we’ve had since then.
Laudicina: Not only have we had our fair share, but it’s increasing it seems every day. Certainly recent developments in Turkey add an additional dose of volatility to the mix, not that we need anymore, but it demonstrates this is a steady state phenomenon, something we’ve been talking about since the inception of the Global Business Policy Council 25 years ago, requiring the need for a more dynamic view of looking over the horizon and trying to understand how these forces might develop.
Consulting: What are some of the negatives and positives the survey results portend over the next 12 months?
Laudicina: The survey is a barometer of executive attitudes and understanding of global business dynamics. What it demonstrates is that business leaders really have to always look for opportunities even in the midst of the most bedeviling and difficult business environments. Businesses in order to be successful need to grow, and growth comes from finding opportunity. That’s the positive side. The negative side when we surveyed them didn’t exactly assess the global environment and business conditions in the ways they’ve developed. They were frankly unable to discern a lot of the key trends. Certainly on a question like the future of the EU and the challenges we’ve seen from Brexit, questions that relate to monetary policy and the likelihood of continued easing that has indeed developed, the likelihood of additional challenges from terrorism, on the likelihood of things like the trans-pacific partnership trade pact to be ratified, and importantly, on the likelihood that globalization and integration would continue to move forward when in fact we at the Global Business Policy Council have been saying for some time now that globalization is not just reached a bump in the road, we may be in fact moving into a period of deglobalization as reflected in the report.
My fear is that business executives, because they’re often blindsided by these kinds of developments that come out of a volatile world, might wrongly conclude therefore we should not plan for the future because it’s impossible to forecast which future will emerge. In reality, we need to double down the way we assert or look at future prospective developments by innovating with a more dynamic planning process which sketches out what the alternative futures might be so we can prepare for them if and when they emerge.
Consulting: How can companies hedge against all the uncertainty on the horizon?
Laudicina: The whole process of scenario-based strategic planning and risk management that emerges from it allows you to plot out both the likelihood of certain developments emerging and then the severity of the impact. As you look out over the horizon of the likelihood of events that could affect your business dramatically, it compels you to make plans to be able to deal with those developments as they emerge.
Consulting: Is it a safe bet that in this climate the most nimble, agile, and comfortable with change companies are going to be the winners?
Laudicina: Without question. That’s the key—the art of the pivot. It’s being able to shift as conditions shift, and it’s understanding and looking at what the drivers of future business conditions are. When we do our assessments of the future we look at five principal drivers and then one superdriver (the impact of technology). But the other drivers are globalization, demographics, changing consumer preferences, natural resources and the environment, and finally the question of government policy regulation, the question that has to do with the ability of our institutions to deliver on the promises or needs of their constituents and the extent to which individuals are going to be sufficiently empowered to behave and differently as shareholders, as voters, and across the board. We look through that prism, and turn the kaleidoscope to see what kinds of patterns emerge, then develop a series of alternative futures that then you can understand how those futures might affect their business.
Consulting: How would you categorize the survey results? Optimistic? Pessimistic?
Laudicina: I think the survey is frankly overly optimistic. I think the state of C-suite thinking back in April when the survey was conducted was more optimistic about many of the major questions weighing on the global community and business environment than has in fact emerged. I say business leaders typically are optimistic about the future because they have to place bets. In this case I think business leaders have gotten many of the major questions wrong and I think it means they need to be spending more time thinking about alternative futures rather than trying to discern which one future is forecastable.