Planning for wild cards

Should Northern Rock’s board have seen the credit crisis coming? And what should we be looking out for next? Alan Standley, CEO of TASK Executive Communications, follows up last month’s article, Stay in touch with the future, with tips on how to anticipate the unexpected

The very title of this article is a dichotomy. How can you plan for something about which you have no knowledge and which might even never happen?

In my previous article (Stay in touch with the future – Lending Strategy, March 2008) I looked at the need to incorporate future thinking into the strategic planning process. I discussed the need for an organisation to look ahead, to ‘scan the future’ to understand the total environment in which it hoped to do business in the next five to 10 years.

In this article I’d like to examine the most challenging aspect of future thinking – the area of wild cards.

A wild card is a description of an occurrence that is assumed to be improbable, but which could have large and immediate consequences for organisational stakeholders if it takes place. Usually such events are serious, destructive, catastrophic or anomalous and essentially not predictable.

We might be used to using wild cards in Google and other search engines – usually indicated by an asterisk in the search term. But the identification of a wild card in future thinking is complex.

Some future directions are easy to pick up. Others are less clear. Some are not yet even on the horizon. Switched on organisations understand this and look for those changes which will shatter the status quo – the ‘paradigm shifts’. Any serious work to understand the future needs a process to monitor and identify these ‘unknown’ or ‘wild card’ events as early as possible.

As French economist and professor Michel Godet says talking of wild cards: “… a factor of change which is now barely perceptible but will make up tomorrow’s heavy or mega-trends”.

By their very nature, wild cards appear to come out of nowhere. They strike fast, they aren’t what are usually called ‘unintended consequences”. They can be global, local, social, economic, technological, and political – in fact anything.

In America, one of the leading experts in wild card theory is John Petersen, head of powerful American think-tank, the Arlington Institute (www.arlington institute.org/), which receives much of its funding from the US military.

Petersen is an old hand at thinking outside the box. A few years ago, he was championing wearable computers and the building of aeroplanes out of spider webs. He defines wild cards as “punctuations in the systems. They disrupt the equilibrium”.

Sometimes, he notes, “they are the result of a series of events that, in and of themselves, have not produced any noticeable change – but, suddenly, boom! A wild card emerges out of the blue.”

In his book Wild Cards – the Nature of Big Surprises, Petersen says: “In the coming years, the world could experience a series of massively transformative events, or ‘wild cards’, brought on by radical developments in areas such as AI and nanotechnology. Wild cards are low-probability, extremely high-impact events that are social or technological developments or natural phe- nomena sharing four characteristics.”

He says that wild cards are:

  • global in scope and directly affect the human condition;
  • potentially disruptive (negatively and/or positively);
  • intrinsically beyond the control of any single institution, group or individual; andl rapidly moving.

“Wild cards… force the limits of human capabilities abruptly. Because they approach so quickly and reach so far, there is not a predetermined mechanism in place to effectively deal with the ensuing changes,” Petersen adds.

In his world these changes might be:

  • An energy revolution triggered by a breakthrough in leading edge science.
  • A global epidemic causing a soaring death toll across the planet.
  • Rapid transition of Africa into poverty, famine and anarchy or open, democratic institutions and a leading role in world affairs.
  • Global water scarcity leading to an escalation of regional tensions.
  • Artificial intelligence narrowing the gap between humans and machines.
  • Nanotechnology bringing about revolutions in medicine, manufacturing and almost every human activity.

Arguably the most recent wild card event that has affected each of us in some way both at a global and personal level was 9/11 – the suicide attack on the World Trade Centre in New York.

Wild cards are difficult to anticipate but are there ways of identifying, of predicting wild card events that could have a serious impact on our business?

The answer lies, like all future thinking, partly in looking ahead – scanning the future horizon, looking for weak signals – and partly by having in place an evaluation process to establish any potential impact. This strategy appears obvious but requires an open and enquiring corporate mind-set to implement.

This, a characteristic of many leading organisations, can be difficult to identify in most. A simple test is to ask how many organisations have someone with ‘future’ in their job description, let alone their job title?

There is a hierarchy of weak signals that can be used as a basic template. These are based on work by Joseph Coates who argues:

Over time it is possible to see the early signs of new developments gradually strengthen and eventually become mainstream. These signs are:

  • A few cases of emerging issues being discussed by scientists, artists, radicals, science fiction and even lunatics – fringe interests.
  • Gradually more cases and interest emerge on specialised websites and journals.
  • As the issues become more mainstream discussion starts in lay magazines, broader interest websites and on TV documentaries.
  • These ideas are picked up by newspapers and general magazines.
  • Finally they become ‘owned’ by government institutions and business.

By the time they reach the public consciousness they have moved from being essentially localised to becoming global. By this time, business will be taking the implications seriously. How much better if the signs had been picked up earlier and organisations given more time to plan and implement reactions.

So, wild cards are going to happen. Some, if not all, will have an effect on you and your business – sometimes positive and sometimes negative.

But spotting weak signals of approaching wild cards is only part of the story.

“An ounce of action is worth a ton of theory,” according to German philosopher Friedrich Engels. But what sorts of action can you take to spot and evaluate potential wild cards? These can be summed up in three general rules.

Rule one. If you don’t think about them before they happen, all of the value of thinking about them is lost. If you accept wild card events are going to happen, the only effective defence is to think about them systematically. The more that is known about a future event, the less threatening it becomes and the more obvious are possible solutions.

Rule 2. Information is key. Whether you are identifying early warning signs or developing a response, effective information gathering and analysis is essential. This information gathering requires access to a wide variety of disciplines and individuals – constant outreach looking for new ideas.

Rule 3: Extraordinary events require extraordinary approaches. Some events will seem so big and scary that conventional problem-solving techniques will seem totally unsuitable. Perhaps they are. A new mindset is needed. To use a much favoured management-speak phrase “think outside the box”. Cultivate an attitude of innovation, of new thinking, of the unconventional.

For an example of a way of measuring the potential impact of wild cards, look at the analytical framework outlined in Out of the Blue, another seminal work by John Petersen. The framework scores each emerging trend, issue or wild card across seven characteristics and begins to give a measure of the relative importance of each one.

Repeated measurement will begin to identify those wild cards which have the potential for the greatest impact on the organisation.

In an organisation you might want to put some structure into the trend watching process. This could incorporate:

    The collecting post that collects information from all sources, making it available for others. Lufthansa, P&G and Volvo use this technique.
  • The observatory, a small unit or even an individual tasked to examine a specific – e.g. forecasting future traffic. These will use the collecting post and generate specific, new output.
  • The think tank, a much larger internal and external group or network with a wider perspective of the future which works on many tasks for many individuals or groups.

Large organisations might have all three of these structures, all interacting to provide long-term briefings for the board and planners to inform their strategic thinking.

Rick Eno, vice-president in the global management consulting practice at Arthur D Little, speaking about the importance of wild card thinking, says: “It allows you to understand potential risks, such as discontinuities that could dramatically affect earnings”.

The key, he says, is to identify “signposts” for each scenario – events or metrics that signal when a scenario is unfolding, such as a drop in the rate of adoption of a new technology or numerous debt defaults within a specific industry. When linked to a scenario, they serve as clues that allow companies to “move very quickly if you see things veering away, from or toward your assumptions”.

In this article we’ve thought a bit about largely unpredictable occurrences that have the potential to disrupt business. We’ve looked at a few global wild cards, weak signals and how to identify them, and how business could react to monitor and eventually manage these weak signals to help create advantage.

Finally, action not prediction is what matters. As my good friend Karlheinz Steinmuller of Z.Punkt, put it recently: “The easier forecasting is, the lower is the intellectual and practical benefit of it.”

Or as Mark Twain said: “Forecasting is very difficult, especially about the future.”