|Introduction The Legend Conversation Model Catastrophic Risk Management Scenario Gameboards Latest Scenarios The Flags Related Articles Letter to Pres. Bush The 2010's China's Game 21st Century Megatrends The Books Chantell Ilbury Clem Sunter Services / Contact Us||
The World and South Africa in the 2010s
(Article for Leadership by Chantell Ilbury and Clem Sunter, February 2008)
IntroductionWe live in a world that is constantly evolving, and yet within this evolution history seems intent on repeating itself. This paradox has been driven by our continued use of history as a source of experience to improve ourselves, but also by our remarkable refusal at times to learn from it. Interestingly, our world has remained relatively predictable in one aspect for the last few centuries. The West has been the dominant force in global politics and economics - a veritable superpower apart from the former Soviet Union.
But the game has changed quite dramatically over the last three decades, with the emergence of new, and highly influential, players answering to different rules while tilting the global playing field their way. First it was the re-emergence of Japan, then the arrival of the Asian tigers and now the ascent of China. All in all, we are at a significant moment in the long time frame of human history because real change is happening literally before our eyes. One prominent American industrialist said: "I feel like the British did 100 years ago. America is still good at producing missile guidance systems, but how many of these can you sell compared to fridges and cars where the expertise has moved elsewhere?" This quotation suggests that a future in the 2010s - which is just around the corner - may be very different to the world we are used to; and as such, standard procedures in planning may be invalid.
This article examines the global game in the 2010s and constructs a variety of possible outcomes to it. Within these a set of scenarios that could play out in South Africa are depicted, which hopefully will take us beyond our current fixation on the 2010 Soccer World Cup. Given the immense complexity of the new global game and its influence on South Africa, no analysis can capture the true extent of what might happen. However, we are confident that our material will provide an effective framework within which people can ask themselves the pertinent questions, debate the future as they see it and act quickly and judiciously on their insight.
In order to put South Africa into context, we shall consider first the external (global) picture and then the internal (national) one. In so doing, we shall be following the classic methodology of scenario planning which comprises three steps: the rules of the game, the key uncertainties and the possible scenarios that emanate from them. The rules of the game are defined as those propositions that are virtually certain to apply under all scenarios. The key uncertainties are surprises that are lurking in the woods around you. They include shock events that can have a sudden impact on the game; or gradual threats that increase over time. The scenarios themselves are the possible outcomes to the game. Whereas the global scenarios are a chain of events which lie largely outside the control of a single country, each country does have some measure of control over its own destiny. This means that the desirable scenario for South Africa is, to an important degree, in its own hands.
The Global GameWe start therefore with the way the global economy might look in the 2010s.
The Rules of the Game
The rules of the global game are as follows:
The Key Uncertainties
The chief uncertainties that could reshape the global game are listed below:
The Global Scenarios
On the scenario gameboard designed below, we have chosen globalisation and fragmentation as two opposing forces on the one axis and high/low global economic growth on the other (ranging from 3-5% per annum on the right to 0-3% per annum on the left). This format yields four scenarios.
Basically the world has been in the 'Long Boom' scenario since the beginning of the 1980s with mild recessions in 1991 and 2001 and the odd bear stock market temporarily spoiling the party. The boom has been driven by the conversion of most countries to free market economics, as well as the sheer energy of the Eastern newcomers. Microelectronics and all the products it has spawned, ranging from PCs, VCRs, mobile phones to the internet and IT generally, have been propellers of note. A future characteristic of this scenario is that completely new winners will emerge, Africa being an example. With its reputation for being the most mineral-rich continent on Earth, Africa will play an important role in prolonging the 'Long Boom'. The irony of course is that the total wealth derived from the raw materials rarely finds its way back into Africa. Should, however, beneficiation become a rule of the game in Africa and individual countries become more competitive, they could inspire an 'African Sunrise'. In that sense, a 'Long Boom' scenario requires that countries re-examine their own playing fields or, as we prefer to call it, economic spaces so that they play to their strengths and points of speciality and differentiation.
So, if we're in the 'Long Boom', why worry? Surely, everything's fine? Actually, no. Global warming is a reality, as is the spectre of rising inflation caused by supply/demand imbalances in certain essential raw materials (like iron ore). Also, in response to the increased competitiveness inherent in the 'Long Boom' could come a measure of protectionism and political tension. This leads us into the second quadrant on the right entitled 'Divided World'. Indeed, some experts would maintain that we are now oscillating between a 'Long Boom' and a 'Divided World', induced by the polarising effect that the current American presidency has had on the world as well as renewed Russian belligerence. Moreover, the anti-globalisation lobby seems to be growing stronger amid signs in countries like Venezuela of a reversion towards old-fashioned socialist policies. Nationalism, especially surrounding the resources countries possess, is also on the up and up. Nevertheless, the momentum of globalisation is shrugging off many of these challenges, so fragmentation at the moment is most noticeable along the fault-lines appearing between rival trading blocs, to which individual countries choose to belong.
The harsh reality of the subtle interplay of scenarios on the right-hand side of the gameboard is that it does create winners and losers; and the losers face the potential threat of becoming failed states. If there is this schism and it combines with a shift in the overall fortunes of the global economy, the 'Divided World' scenario could quickly be engulfed by a 'Perfect Storm'. Whereas the terrorist attacks of 9/11 and those on London, Madrid and Bali shone a light on the 'Divided World' waiting in the shadows - and the delicate threads that connect the global economy - they didn't instigate a global meltdown. However, in the event that a sequence of negative events in both the political and economic arenas converge, there could be a huge shift in the fortunes of the world.
The resultant collapse into a 'Perfect Storm' would be quick. Triggers could include an act of nuclear terrorism in a major Western city; a significant clash of wills between Russia and the US; a financial meltdown in China followed by widespread unrest; or the kind of incident that occurred the other day when Iranian gunboats buzzed some American warships in the Strait of Hormuz and were within a hair's breadth of a serious naval engagement (oil would have immediately rocketed to well over $100 a barrel). The point is that bad military or political stuff can interfere with the normal recovery processes that come in the wake of a recession. The consequence would be a downturn in the global economy which would resemble the long drop of the 1930s! You may recall that the US stock market only recovered its pre-1929-Crash value nearly 20 years later in 1948. Who said that wars are good for markets?
The last scenario is the one that the financial pundits are betting on in the short term. We call it the 'Hard Times' scenario. Flags are popping up all over the place suggesting that this is indeed on the cards in the near future. It would take the form of a conventional global recession brought about by a US economic downturn followed by a knock-on effect around the world. Even though there are suggestions that China may decouple from the US, it is still largely reliant on the US market for its exports, and therefore it could not escape the effects of a US nosedive. However due to the strength of China's economy, as well as that of India, a 'Hard Times' scenario would be short-lived and have more of a V-shape than a U-shape; but the depth of the V is unknown. Coincidentally, a 'Hard Times' scenario provides an opportunity for the East to buy equity stakes in Western companies. Sovereign wealth funds will have a field day so that, when the good times return, major changes in share ownership could signal a new game altogether.
The bad news for Africa is that whereas China can probably absorb a V-shaped knock, many African countries are vulnerable to commodity price shocks. At best, they might find it difficult in the short term to satisfy the developmental aspirations needed to maintain stability. At worst, some African governments will simply not survive the V.
As the strongest economy in Africa, South Africa is better placed than others on the continent to survive any change for the worse in the global scenarios. Having said that, South Africa is not a significant enough player on the global gameboard to wield any measure of influence; it can only respond to external shifts by seeking new economic spaces where it has special leverage and competitive advantage.
The South African GameNow we shall concentrate on South Africa's possibilities within the global context.
The Rules of the Game
As a player on the global gameboard, South Africa is subject to the external uncertainties that shape the international game. Yet, in addition, there are important uncertainties that are specific to South Africa, and as such could determine the possible outcomes for the country in the 2010s.
The South African Scenarios
The aforementioned key uncertainties can be grouped into two pivotal uncertainties that we have chosen to use in formulating different scenarios for South Africa. These are its competitiveness relative to the rest of the world and its cohesiveness as a nation.
We feel that there is no sustainable scenario in the upper left hand corner where you can remain competitive and have internal conflict at the same time. A nation's total energy must be focused on the global game, not dissipated on internal divisions. Nonetheless, one opinion expressed to us is that South Africa has indeed been in that quadrant for some time because the economic imbalances in society have not yet been addressed. We're just lucky that the disharmony which lies under the surface has not manifested itself in open conflict.
We take a different view (like many others to whom we have given this presentation), and that is that South Africa vaulted into the 'Premier League' of nations when it became a full-blown democracy in 1994. It has remained there as a result of 14 years of stable government and disciplined macroeconomic policies, all of which took place in the context of the global 'Long Boom' scenario.
However, as the saying goes, 'the honeymoon is now over'. Staying in the 'Premier League' is proving increasingly challenging for South Africa. It demands a more vigorous implementation of the attributes of a winning nation. Greater efficiency in terms of Government delivery is key; as well as a dramatic reduction in crime, especially the threat to personal security and private property. Moreover, transformation of the health system and education system is needed. The reality is that other countries have now stepped up to the plate in the global game, accepted the conditions and challenges, and are outperforming South Africa. Among them are Sweden, Austria, Denmark, Switzerland, Hong Kong and Singapore, as well as developing nations such as China, Russia, India and the Slovak Republic. They have all closed the gap on the US. In fact, South Africa is now facing relegation, having lost ground to the US along with Indonesia, France, Italy, Argentina, Brazil and Mexico.
The proof is forthcoming in three reports released recently that have logged South Africa's decline:
The World Economic Forum's (WEF) Global Competitive Index shows a fall for South Africa from 36th position in 2006 to 44th position in 2007.
In the World Bank's Doing Business in 2008 Survey of global ease-of-doing-business rankings, South Africa has slipped from 29th position to 35th. This is the first time the country has fallen out of the Top 30 since the survey began 5 years ago.
The International Institute for Management Development's World Competitiveness Yearbook for 2007 highlights South Africa's 12-place fall from grace. It has descended from 38th to 50th position in a ranking of 55 countries.
So why, according to these surveys, has South Africa slipped almost to the bottom of the 'Premier League' - into the so-called 'Relegation Zone'? Maybe, it has to do with the haemorrhaging 'brain drain' and the increasing shortage of skills. Maybe, it is our rising cost base. Maybe, we haven't matched the productivity gains obtained by the countries in the ascendant. Maybe, the overseas perception of political risk in South Africa has changed for the worse. Whatever the causes, there's no denying that we are in danger of losing our 'Premier League' status along with all the perks that go with it (like a seat on the UN Security Council, being seen as the leading voice in Africa and being considered a partner of choice by China).
So the optimistic scenario is that we do a 'U turn' and advance our rankings to at least the middle position of the league by the time we get to 2020. This will require the development of new economic spaces, the most obvious candidate being the principal gateway into Africa. We are the most modern economy on the continent and have all the accoutrements to act as a springboard for any overseas company wishing to launch its bid to gain market share in Africa. And, as the Chinese know, Africa is open for business. Dubai is the gateway into the Middle East; Hong Kong and Singapore into China. It's a very profitable space to occupy, providing you're an excellent service provider. One could interpret the acquisition of a stake in Standard Bank by China's largest bank as a first step towards being acknowledged as a gateway economy. Other deals could follow which cement our relationship with the East.
Losing further ground in the competitiveness stakes will see South Africa knocked out of the 'Premier League' into the '2nd Division'. The latter is occupied by countries that are euphemistically described as 'poor but peaceful'. It applies to the bulk of the developing world. In this scenario, there is no chance of South Africa living up to the ANC's dictum of a 'better life for all'. The money simply isn't there. Furthermore, it's mighty difficult to get back into the 'Premier League' after one's position has been filled by another country which, you can be sure, will jealously guard its new-found status. South Africa's opinion on the issues of the day will no longer be sought by the international community and corruption is likely to spread as no other method is available to escape the trap of poverty.
A greater worry is a scenario where a relapse into the '2nd Division' is accompanied by internal disharmony and, eventually, overt conflict. South Africa would very quickly take a sharp turn left and join the likes of Zimbabwe, Myanmar, North Korea and Somalia in the 'Failed State' quadrant. Kenya's current political upheavals and violence demonstrate just how rapidly a country can tumble towards this scenario, and just how arbitrary the trigger can be. Pakistan, likewise.
Of course, South Africa is also at the mercy of the global game. If the world moves into a 'Hard Times' scenario, South Africa's position in the 'Relegation Zone' could be even more tenuous. It will certainly find it increasingly difficult to maintain its recent trajectory of economic growth or sustain its developmental and welfare policies. All is not lost, though. Should global instability see a shift towards a 'Divided World' scenario, South Africa can benefit from the goodwill it has accumulated in the East.
ConclusionIn conclusion, South Africa has definitely lost some footing in the 'Premier League' since the ushering in of its Cinderella democracy. Its fall in the rankings has been somewhat disguised by the beneficial effect of the 'Long Boom' scenario. Complacency, a certain degree of arrogance, a lack of service delivery and some misdirected government policies have taken South Africa's eye off the ball in a game where the demands on the players are unyielding. The country is now in the 'Relegation Zone' and faces possible ejection into the economic mire of the '2nd Division'. And this could happen quicker than we think.
We hope these scenarios have highlighted a sobering reality for the rainbow nation. It has a choice: do little and fall further swiftly; or put the brakes on the slide and reverse it by implementing brave and tough new policies. The latter are obviously linked to the formula for being a winning nation as well as the prime condition of being an internally harmonious society. Decisions in the immediate future will determine in which scenario South Africa will find itself in the 2010s. The country does have plenty of control over its destiny, and the choices are quite clear. We have to stop accepting the mediocre and aim to be the best. We must amaze the world for a second time.
Pockets of Excellence
One of the ways South Africa can stay in the Premier League of Nations is to celebrate its 'pockets of excellence', find out what makes them work and then benchmark other similar institutions against those pockets.
Let me give my prime example. Many people moan about the level of service delivery from Government departments, but there is one Government department that is world-class - the South African Revenue Service (SARS). Government should find out what it is about the leadership and organisation of SARS that makes it comparable to the best tax collection agencies in North America and Europe. They should then benchmark all other departments against SARS by determining a set of key performance indicators (KPIs) that will measure progress towards the excellence of SARS and then hold the leadership of those other departments accountable for meeting the KPIs.
Simple stuff. It's about replicating the good that already exists rather than bringing in yet another expensive firm of consultants with yet another ground-breaking model to confuse everyone even more. Take schools. In every province, some schools have made consistent progress in improving their academic results or have consistently had excellent results. What is it about them that makes them perform better than other schools in the neighbourhood? I would hazard a guess that it has something to do with the leadership style of the principal, the commitment and qualifications of the teachers and the role played by parents and alumni. But let's find out.
Hospitals are another area. Most large State hospitals have one or two brilliantly performing units whether it's oncology, ophthalmology or ICU. What makes them brilliant and how can one transport that brilliance across the whole hospital?
Then we come to the Private Sector. Which companies have done best in the South African market and why? Shoprite Checkers would be on my list to interview. Which companies have most effectively pioneered their way into Africa - a continent that is opening up for business? MTN is up there because it is now the largest cellular network in Nigeria and Sudan (as well as being a major player in Syria and Iran). What is it about its low-key CEO and his vision that have made the company a leader in enabling Africa to skip a generation in communications technology? Which company has the best corporate social responsibility programme in South Africa and is helping to create a better life for all? Who are the best entrepreneurs in small business and what principles have they applied in making it thus far? Obviously, one cannot force companies to copy one another but leadership by example can be pretty compulsive.
NGOs are another sector worth studying. Whether it's in the field of HIV/AIDS, community upliftment, enterprise development or assistance with dysfunctional families, what are our best examples in South Africa and how can we emulate them?
Finally we come to individual pockets of excellence - people who have personally excelled. What makes them tick? My favourite example is a young black student who matriculated last year and chose the formulation of a new energy-intensive fuel as his area of focus. His work is so stunning that NASA in America have named a minor planet after him and Harvard University have lured him onto their undergraduate programme.
We don't celebrate our pockets of excellence in South Africa like they do in America. We indulge in obsessively complaining about our faults which is the pathway to mediocrity and ultimately universal failure. In contrast to China which has built up enormous economic momentum by replicating the best of the West, we must replicate the best of what we have right here in this country. People are fed up with the endless analysis of our problems and talk, talk, talk. They want action. Identifying, celebrating and replicating our pockets of excellence will do more than anything else to make this wonderful country of ours work properly.
Triggers That Change the Future
One of the most important things in business is to have an effective radar system, whereby you pick up changes in the environment quicker than your competitors and act ahead of them. Chantell Ilbury and I have spent the last eight years developing such a radar system.
There are three steps to it. The first is identifying the trigger events which can tip the future a different way. The second is encapsulating the different futures that may eventuate in plausible and consistent scenarios (which highlight the causal chain in each case). The third is examining the practical consequences of each scenario so that you can modify your future accordingly.
It sounds easy, but in our experience very few organisations have effective radar systems because they never look into the future in a transparent, unprejudiced manner. Here are two examples. In June 2001 we published a book entitled The Mind of a Fox stressing how crucial it was - like the animal - to be quick-witted and responsive at all times. The book contained a letter to Mr Bush (when he first became US President) in which we identified his most worrisome trigger event as the quantum leap in tactics and skills of terrorist organisations bent on destroying the West. The scenario which might ensue was a massive terrorist strike on a city on Western soil, transforming him into a wartime president and causing the West to assume a 'Gilded Cage' mentality. It happened three months later though in a different way to the one we imagined (we talked of 'nuclear terrorism' in the letter); but the security agencies were caught completely unawares. As Pierre Wack, the guru of scenario planning, once said: "It's much better to be vaguely right than precisely wrong".
The second example is even more relevant today. In November 2007, we released the book Socrates and the Fox urging people to use the Socratic Method of self-interrogation in order to strip away their prejudices about the future. We identified four trigger events, two for the global economy and two for South Africa. The first global one was a fall in asset values (principally property) which would end the 'Long Boom' and precipitate a 'Hard Times' scenario. This would largely occur because American consumers, representing two-thirds of the US economy, would feel a lot poorer and reduce their habit of spending on credit. Well, here we are on the brink of, if not already in, a recession. Anyone reading our book last November who was also a specialist in the US property market would have recognised the trigger being pulled and changed their personal wealth strategy ahead of the market decline in 2008. It would appear that neither China nor India will come to the rescue in that they will be adversely affected too. Meanwhile, the US has some serious restructuring to do.
The second global trigger we mentioned was a military confrontation between Iran and America/Israel over its nuclear programme. This would immediately send the oil price into orbit (somewhere between $500 and $1000 a barrel), and plunge the world into a 'Perfect Storm' scenario. Globalisation would be indefinitely suspended by military events. The recent testing of long-range missiles by Iran means itchy fingers are on this trigger. Essentially, we would have a re-run of the 1930s and 40s. In other words, Iran is a completely different kettle of fish to Iraq.
The two South African triggers we selected were a drop in our global competitiveness rating and the appearance of internal conflict in one form or another. Well, in the last two years we've slipped a whopping 15 places in the annual World Competitiveness Survey undertaken by the International Institute for Management Development. We are now ranked 53rd out of the 55 nations listed. Moreover, we've recently experienced xenophobic violence as well as increasingly violent rhetoric from some of our more prominent citizens. What were the consequential scenarios we painted in the book?
The less painful one was that we would be relegated from the 'Premier League' into the 'Second Division', simultaneously losing all the fringe benefits we have hitherto enjoyed as the leading economy on the African continent. Another African country like Nigeria or even Angola would take our place in the 'Premier League'. The more painful scenario was that we descend into a 'Failed State' where the world writes us off altogether like Somalia or Iraq. Anyone with talent or capital escapes, and those that remain suffer hideously.
But, as Chantell and I are wont to say, Martin Luther King did not persuade people to change by proclaiming "I have a nightmare". So what's the dream? Obviously, it is to get back to the middle of the Premier League where we rightfully belong. In order to do that, we need brave leadership to steer us through the global turbulence that could endure for some time to come. By brave leadership, we mean the kind practised by Lee Kwan Yew in resurrecting Singapore after the Second World War - not the charismatic, populist kind. Secondly, we need to go back to basics and fix the problems which currently deny us the status of being a 'winning nation' in the international game. We know what the problems are - we've talked them to death. Now action is required. In particular, we have to do far more to promote entrepreneurs who want to make it out of the informal sector into the economic mainstream. China has uplifted 350 million people from abject poverty by cultivating the entrepreneurial spirit. That's more than seven times our total population.
Thirdly, and above all, we should seek greater domination in those economic spaces that play to our natural strengths - resources, tourism and being the gateway into a continent which is rapidly opening up for business. Two positive triggers in this regard are the 2010 Soccer World Cup which provides a huge opportunity to market South Africa as the tourist mecca it deserves to be. The second, and much more important trigger in the long run, is the potential turnaround of the Zimbabwean economy which would consolidate our position as a 'gateway state'.
We will leave the tactics to the experts who are much better versed in these matters than ourselves. Our role as scenario planners is to go on identifying the triggers and the possible futures that can flow from them. All in all, South Africa is not a bad place to be to see out the 'Hard Times' and possibly dodge the bullets of a 'Perfect Storm'. We shall keep you posted.
Sun setting on prosperity?
Take a plane and one thing is certain: gravity. Run a business and another thing is certain: cycles. You need fuel to combat the one and a sound balance sheet the other.
Cycles are as universal as gravity for three reasons. First, two of our most basic instincts are greed and fear between which we can instantaneously switch. Second, we tend to behave like a flock of sheep. Very few of us live out Warren Buffett's words: "Be fearful when other people are greedy and greedy when the rest are fearful". That's why he is the richest man in the world and we are not.
Third, economies have feedback loops. Rising employment means rising income means rising employment and vice versa. These loops steepen the rise and aggravate the fall. So it is no surprise that we are where we are. Stuck deep in a scenario which we call "Hard Times".
The key uncertainty now is the length of the downturn. Is it a "V" of a classic recession or a "U" of something much deeper and longer? Opinions are divided, so let's play two scenarios which we'll call "Setting Sun" and "New Balls Please".
"Setting Sun" evokes memories of the property bubble bursting in Japan in early 1990. The Nikkei stock index in December 1989 was almost touching 40 000. Today it is around 8 000. Who said that investors are bound to make money out of holding equities for more than 10 years because you would have lost 80% of your money if you had invested in Japan 20 years ago? For those who did, it certainly wasn't the Land of the Rising Sun!
Yet Japan hasn't done that badly. It is still the second largest economy in the world. But it has been a slog. No more economic growth rates of 8% per annum. On the bright side, world-class businesses like Toyota have managed to buck the trend by expanding their geographical footprint overseas.
In a "Setting Sun" scenario for the world as a whole (which implies a long night before the sun rises again), it's a similar deal. The property bust of 2008 means that markets will be exceedingly tough till at least 2020 and only the fittest will survive. No more easy returns on capital; the emphasis will be on grinding out better results based on improved efficiencies and innovation. Meanwhile, the corporate losers will disappear or, if they are large enough, be nationalised. Such is the extremity of the "Setting Sun" scenario that the experience will be passed on to future generations as a cautionary tale.
"New Balls Please" is a much nicer scenario to contemplate over the festive season. It implies a recovery in markets in the second half of 2009 with the global economy returning to a 3% per annum growth rate from 2010 onwards. The "V" will have been short and sharp and everybody will have learnt his or her lesson. Nevertheless the title of this scenario implies a new game requiring new balls. For a start, banks will be more regulated and won't lend so easily. The East will play as significant a role in the new game as the West. Moreover, global warming will shift the emphasis from communication technologies to energy-saving technologies and new energy sources.
So what are the flags indicating which scenario we are moving towards? Certainly any major military event, such as a strike against Iran to stop its nuclear programme, nuclear terrorism, Russian aggression, renewed conflict between India and Pakistan or civil war in China, will increase the probability of a "Setting Sun" scenario.
International trade will be too disrupted to recover. Any more national defaults like Iceland could also be interpreted as a red flag, particularly if they involve countries or banks which come as a complete surprise.
On the positive side, most slumps come to an end when prices get so mouth-wateringly low that people start buying again. A three-month rise in US property values is probably a green flag (just as the drop in late 2007 was a red one). Equally for a barrel of oil must be an indication of markets bottoming out.
In a funny way, the current stimulus packages being implemented by governments around the world are neither red nor green flags. They could be said to be prolonging the old game when it should be dead and buried.
One previous US Reserve Bank Governor once said that the role of a central bank should be to remove the punchbowl before the party gets too boisterous. Right now, central banks all over the world are adding extra shots of vodka to keep the party going.
Is that a good or a bad thing? Only time will tell.
SURVIVAL OF THE ADAPTED
By Clem Sunter
Google the phrase 'Survival of the Adapted' and you will find that it is the phrase that Charles Darwin used in the first edition of Origin of the Species. In later editions, he changed the phrase to 'Survival of the Fittest' which is the one we all know. Now until this fact was pointed out to me, I - like most others - thought that survival of the fittest meant survival of the strongest (i.e. the most lean and mean). Actually, Charles Darwin's intended meaning was that those species which most fit in with the changes in Nature are the most likely to survive.
The crucial difference between the popular interpretation and Charles Darwin's own meaning is around the concept of control. For adaptation presupposes that you have limited power and influence, and you therefore have to adapt to things beyond your control. You are certainly not the strongest on the planet. This neatly ties in with the analogy of hedgehogs and foxes first proposed by an Ancient Greek poet called Archilocus and expanded on by British philosopher Isaiah Berlin in a celebrated essay in the middle of the last century. Chantell Ilbury and I subsequently decided to continue the tradition with our 'fox trilogy' on scenario planning.
Hedgehogs are people who have one big idea; they simplify the whole universe around that idea; they disregard information that is not relevant to that idea; if they are leaders, they attempt to align all their followers in pursuit of that one idea; and then they go for it. Passionately and absolutely. Crucially, hedgehogs presume that they have sufficient control to implement their idea and their influence will always prevail. Know any political hedgehogs?
Switching to the world of business, hedgehog CEOs formulate a vision which they do not allow to be challenged. After all, it is the truth. Moreover, they only entertain possible futures that are consistent with their vision. Conflicting ones are not on their radar screen. Most of the world's top business schools teach the hedgehog philosophy as part of their MBA programme. The current management bible, Good to Great by Jim Collins, even contains a chapter called 'The Hedgehog Concept'.
Foxes, on the other hand, believe that life revolves around different ideas. You juggle them, compare them and above all you are prepared to switch to new ideas when the environment changes. Socrates was the foxiest philosopher who ever lived because he said you can never arrive at the truth. That was over 2 400 years ago. Athenians were so entranced with his teachings that the Authorities jealously made him take his own life. But he left a legacy: the Socratic Method of enquiry whereby you get closer to truth by constantly asking questions and seeking answers to which there are more questions and so the cycle continues.
The essential point, though, about foxes is that they assume that most of the events that take place around them are beyond their control and in many cases unpredictable. They keep several alternative futures in mind all the time - some good, some bad - and continuously assess their probabilities. To their way of thinking, the critical quality to possess is the ability to adapt speedily and successfully to change when it happens - as Darwin suggested. Indeed, modern foxes (the animal that is) have adapted to living in cities and towns by scavenging from rubbish bins. In a business context, foxes may well subscribe to a vision but they don't treat it like a religious creed. It can be altered.
Our conclusion is that Darwin would definitely have backed the foxes against the hedgehogs in surviving the recession we are in. Interestingly, military leaders have always been more willing to pursue the foxy approach because they know the tactics of the enemy are beyond their control and surprise is an essential element in winning the battle. It is time that CEOs adopted the same attitude of 'fitting' their vision to the changing reality, particularly when it involves the huge discontinuities we are seeing today.
In summary, Chantell and I propose a radical shake-up in strategic thinking that goes clean against all the stuff that is being peddled by Western business schools and business gurus. Even the West has to adapt. They no longer possess the power to do otherwise. So may the fox be with you, wherever you may be and whatever you do.