The "Big Picture" Is Getting Harder to See
In business, warfare, or even personal life, determining an optimal path forward requires having an integrated view, the "big picture," of a myriad of factors, including an understanding of the impact of current and emerging connected devices and technologies. Forming this big picture has become increasingly more complicated.
Every once in a while, a military movie from the 40s and 50s will play on late night TV, and you'll inevitably hear a General say to his staff, "I need to look at the big picture." He was referring to the strategic positioning of his forces as they oppose the enemy, and in great measure, he was depending upon technologies developed in World War II.
Radar, sonar, high-altitude reconnaissance, and more sophisticated calculating devices, allowed strategic planners on general staffs to develop a view of the disposition of forces on a scale ranging from the local battlefield to the Theatre map. The latter were the large segments of the planet over which a General had command and control. Fast forward to today, and the strategic big picture is brightly illuminated with advances in GPS (global positioning system), imagery from satellites and drones, and powerful computing devices that can model and display possible enemy actions.
What generals from WWII down to today still do not know in advance are enemy intentions and unseen enemy technology that can disrupt battle plans. Spies help uncover these factors, but planners can never be sure what will appear on the scene without warning. A dramatic recent example is the use of stealth aircraft over Baghdad to disrupt Iraq's command and control centers at the start of the first Gulf war.
Put another way, seeing the "big picture" traditionally meant trying to understand how a situation was developing over the very short term, using reasonable and stable assumptions about the enemy's technological capabilities and your ability to respond to them.
Military planners have used war games (actual and virtual) to see how a battle plan could play out. A battle plan is a course of action chosen to defeat the enemy based on the knowledge of terrain, the size and type of enemy forces and other discrete types of information. As technological advances became more complicated, a methodology called "scenario planning" was developed and applied to strategic planning. Scenarios would include future factors from subjects like demographics, geopolitics, industrial capabilities, raw materials availability and access, technology, and military preparedness. Simulations based on these scenarios could be played as games with rules and time lines. The results of these scenario simulations revealed unexpected impacts, which could be factored into revisions of the scenarios. Scenarios could be updated and simulated whenever new data became available.
Businesses have long adopted scenarios and their simulations. One of the earliest adopters was Royal Dutch Shell. With exploration and production facilities across the planet, many of which were in geopolitically unstable locations, military planning techniques were adopted and modified to serve Shell planners as they looked forward to understand the consequences of where to explore and produce oil. Peter Schwartz, founder of the Global Business Network, took over Shell's scenario planning organization in 1982 and published in 1991 The Art of the Long View, which many leaders consider to be the seminal publication on scenario planning. It is a quick but eye-opening read.
In the mid-1990s, RAND Corp., researchers John Arquilla and David Ronfeldt defined a new form of low-intensity conflict, crime, and disruptive activism based on the use of emerging social networks, and coined the term "netwar." This has influenced military scenario planners, who have seen cyber-attacks increase, Arab Springs arise, and most recently, the developments in the Ukraine. The latest budget proposal to reduce the size of the Army and eliminate large scale warfare weapon systems reflects the influence of scenarios that address the shift to asymmetric warfare. Planning to fight netwar will be more important than planning for large scale tank battles.
Since social networks are major components of the "connected-world" ecosystem, and geopolitical issues have an effect on infrastructure capabilities (for example, blowing up cellphone towers in a conflict zone to deny social media access, or hacking a major retailer's database to steal credit-card information), it stands to reason that the breadth and depth of factors that must be included in a scenario are constantly expanding, adding to the complexity of clearly seeing the nearterm "big picture."
Once upon a time, businesses conducted an annual exercise called the five-year plan. The plan would forecast sales and revenue growth for the coming five years. This exercise established the company's path forward, proceeding with a high degree of certainty for the first year of the plan (which would typically include the formal budget for that year). The mid-point assessment would include the resources estimates that the company would require to meet the forecasted growth. At the far end of the plan, there was the expectation that products in development at the time the plan was made would be in the market and driving growth. Five-year plans were feasible because the pace of tech development and implementation was slower. It took at least a year or more to design and deploy a product that was appropriate to a mass market audience. Products were introduced into relatively stable ecosystems that did not require significant infrastructure change.
Today, I do not know of a single company that conducts a traditional five-year-plan exercise. Technology developments and continuous product introductions with an average time of six months between iterations have undermined the ecosystem stability upon which the five-year plan depended. I do see more companies adopting recurring or "rolling" scenarios, using more sophisticated software, with critical warning indicators flagging changing conditions that will impact the strategy. Using direct daily data feeds, rolling scenarios are like the canary in the mine.
Scenarios require rules to run in a manner reflective of the real world and allow for rule changes as they arise in realtime. They require planners to define key assumptions and to set parameters for each assumption that can be varied. This is the inherent strength of a scenario: Change a rule or parameter, run the scenario, and see what the outcome will be. This is contingency planning; if such a change occurs in the real world, you know the outcome in advance.
With the explosion of connected devices and the data they capture, you would think you could generate a high definition version of the big picture. Not really; the acceleration of change based on larger numbers of new products and services introductions clouds the view. It is not stable, and therefore more variables in scenarios change more rapidly. There are more technological developments in the product and services pipeline than before, most of which is invisible to the strategic planner.
This is where trends become a viable assist to scenario planning. A trend is a measureable change in something. When we hear the word, we probably think of fashion; a trend points to a design change that is capturing attention and will set the direction for the Spring or Fall look.
This is not the only way to understand a trend though. Technology developments and governmental policy can create trends that may have unintended consequences.
Let's start with a scenario that states that robotics will replace low-skill workers. One of the key variables is the relationship between the price of low-skill labor and the price of a robot. When we talk about robots, we are speaking of machines that automate a manual process and include burger making machines, pharmacy pill sorting and packing machines, and other applications. In this scenario, when the price point of a human reaches parity with the acquisition of a robot, then robots will replace humans, because robots have additional advantages over humans such as reliability, consistent performance, the elimination of poor judgment applied to the task at hand, and most critically, the one to many replacement value of the machine. What this means is that one machine could replace more than one human worker.
There is a trend in the U.S. to increase the minimum wage. Recently, the Federal government increased its minimum wage to double digits, and before that, California raised its minimum to be the highest in the country. The basis for this trend is to improve the living standard of lowskill workers.
With the clear data points (the new minimum wage) identified in the trend, they can be applied to the scenario in which the price point of a human is nearing, or has reached, parity with a robot replacement. If you were a fast-food service provider, your updated scenario would be advising you to acquire and deploy a few burger machines on a test basis. If you were the burger machine maker, your updated scenario would be advising you to consider doing an IPO and go public. If you were the Federal government, your updated scenario would be warning you that unemployment will be increasing as low-skill workers are displaced by robots. In fact, the government did release a study that forecasted a significant loss of jobs because of the increase.
Trends are how you help clarify the big picture that scenarios can provide.