Blog

2012

Fear Most? Not the Right Question

One of the better edited digests of information I read regularly is the Wall Street Journal’s “CIO Journal.” It’s a compilation of news items that affect businesses from the perspective of the increasingly integrated information and communications technology side of enterprises.

This morning a question was posed. “…which of the following Black Swan events you fear the most: natural disaster, cyber attack or hack, a loss of top talent, or that one of your strategic vendors gets acquired.” The column will compile the results.

A laudable effort. I will be interested. But as a practical matter it’s not enough to be looking only at the obvious future events that will affect your organization. If it had been me, I would have used a widely flung and well-informed network like CIO Journal has in its readers for even more useful purposes.

Subject matter experts who’ve arrived at their conclusions independently can be the best forecasters of the events ahead that are NOT on the radar screen yet. That was one of the central tenets of the fine James Surowiecki book
The Wisdom of Crowds.

Will we see a natural disaster that will affect companies? A major cyber attack or hack? Loss of top talent? Changes in the competitive landscape? Of course. They’re givens, not forecasts. And we need to be prepared for all of them, not rank ordering which we fear most.

For the last two years I’ve moderated the largest worldwide meeting of information security professionals. When I poll that group about the probability of a major cyber attack 75% agree it’s imminent. The other 25% respond that it happened already or is now occurring regularly.

The overlooked future events are the ones we’re not thinking about right now. They’re hidden around the corner or over the horizon.

That’s why I use techniques in strategy sessions to draw them out. Lay them in front of leadership. Examine their place in the spectrum of what’s ahead. Contemplate the after-effects and consequences of their occurrence. Develop a range of approaches to deal with them. Perhaps even compile contingency plans to address them.

Should you plan for the obvious? Of course. A mark of a truly robust organization, however, is one that looks for the unseen, the hidden, the events ahead that are not obvious.

Trigger and Cascade

Trigger events are those with long term after-effects. We’ve seen one recently in the technology sector. Apple prevailed in its patent infringement suit against Samsung. It’s not the billion-dollar award that’s most significant. It’s the implications of the decision.

It was a complex issue, perhaps too complex for a jury of laypeople to decide. Apple was charging infringement not only on how their devices work but how they look. This includes software features, hardware and high-speed communication ability, as well as something called "trade dress," the overall look and feel of a device.

My work with clients and executive education sessions often involve an “implication cascade” – thinking about the after-effects, results, perhaps consequences of a future event. Here are potential implications from the Apple vs. Samsung decision.

  • There is a new wave of creativity in handheld and tablet technology potentially leapfrogging Apple products.
  • Innovation in the handheld sector is stymied as inventors and small companies fear a suit from one of the big players.
  • Companies increasingly build rings of patent and copyright protection around their offerings, discouraging technology transfer and creating unique, differentiated offerings.
  • Copyright law undergoes a shift toward “trade dress” – the unique look and feel in a range of product areas including automobiles, appliances, furnishings, dress, and consumer products.
  • “Apple Island” – where the “i-market” segment increasingly becomes handcuffed to the technology.
  • Design trends upward as the base of market differentiation.
  • More mergers in the handheld and tablet marketplace as large competitors snap up smaller players with unique features.
  • A market where 3-4 companies (Apple, Google, Microsoft, one unknown) are left standing by the end of the decade.
  • A one-year delay in enforcing an injunction enables Samsung to turn around its product line and introduce new devices late in 2013.
  • Apple’s share price goes over $800.
  • Agreement on the GATT is delayed further by this new emphasis in intellectual property protection, hamstringing WTO talks on trade and subsidies.

The DMV

The true melting pot of California might not be the metro centers of its cities. I believe it’s the state’s Department of Motor Vehicles.

I’m a new resident. Everyone coming into the state, transferring title on a vehicle, or required to renew a license in person has to come to a few offices. My city, San Diego, only has a few despite being the third largest city in the state and one of America’s top 20 metro areas.

You see everyone at the DMV. Everyone. It’s not like your neighborhood or the grocery store or the freeway where most people are behind tinted windows or even the voting precinct that is limited to a geography. Your fellow citizens are right there in line or in a chair inches away. Here are some observations about the most populous, and arguably legendary, state in the Union.

It’s really diverse here. Really diverse. As an old white guy I stood out as different, a distinct minority. Latino, Asian derivations, Eastern Europeans, blended races of all varieties are the heritage of my neighbors. I heard at least 8 different, distinct languages during my hour and a half in the maze.

Everyone is polite and personable. Although there are obviously language differences we all were able to make ourselves understood. The situations were great levelers of class distinctions. I think of myself as a middle class American. I was standing in one line between what I perceived to be a very well-off Latino mother and her teen-aged son and a woman I believe was a Bosnian-American who spoke broken English. We were all enchanted by the DMV employee who was thoughtfully giving people second, third, and fourth chances to get a better driver’s license photo. We chatted, smiled, and joked while we waited. Coming into the maze at the beginning of my visit several people pointed me in the right direction.

Everyone is patient. This is bureaucracy at it’s finest. Forms, fill-ins, obscure instructions, confusing lines and groups, piles of paper, opaque procedures. I didn’t hear a cross word. The patrons handled advice in many instances because the workforce is overwhelmed.

As I waited for my test results and temporary license I wandered the facility, observed the patience, politeness, and personal interactions. And I couldn’t help thinking that it would be preferable if our nation’s governance could work together as effectively as this melting pot of strangers in a strange place.

A New View of Oil

Several entries in this blog have focused on oil prices. It’s an overarching driver of future factors that range from consumer behavior to geopolitical influences.

Lately I’ve studied oil prices more carefully and drilled into (forgive the inadvertent pun) the data that looks ahead. I’ve been a forecaster of a long-term rise in prices due to supply and demand pressures for a commodity with declining output.

I’m now adjusting my views in line with advice I give clients. A forecast is foresight that takes into account uncertainty and adjusts with time and new information. Time has passed since I began forecasting a rise and new information is available.

Frankly, the Bakken is making me a believer that more oil that will be available over the next two decades than we’d been able to forecast before. There’s been evidence of this in the past but now it’s being put into practice to a greater degree.

For many years I lived and worked throughout California’s Central Valley. The oil-producing fields to the west of Bakersfield were a constant source of amazement to me as someone who minored in geology in college. The estimates of the field and its productivity continued despite the forecasts of depletion. The Kern River Field was supposed to have fallen off in production in the 30’s, 40’s, 50’s and especially the 70’s and 80’s.

Today Kern River still forms a foundation of the strategic national reserves. Chevron began injecting steam underground in the 60’s and today the formation still yields about 80,000 barrels per day. It was a harbinger for what we see today as the unprecedented emergence of “tight oil” – petroleum that is brought to the surface through new technology both in new discovery fields and old fields that were thought to be defunct.

That’s what’s going on in the Bakken which I doubted was a significant or long-lived contributor to oil production. Today we know that it is and while so-called “cheap oil” – where you punch a hole and oil and gas flow to the surface – could be gone the creation of new reserves is going to be with us on an increasing basis.

Oil over $200 a barrel? Less probable if geopolitical events don’t cause problems in the Gulf. But I think the planet may have been blessed with some more time to use fossil fuel reserves while it makes the transition to sustainable sources of energy.

A Conversation

I was the closing keynote presenter and moderator at a worldwide information technology conference a few months ago. One of the attendees and panelists was a very knowledgeable fellow from Canada, Stephen Ibaraki. Stephen is a founder and chair of a global information processing council. He approached me at the event about doing an interview.

We had a 90 minute conversation recently. Stephen provided thought-provoking questions in advance that ranged well outside the IT field to the global economy, trends, human adoption habits, and many others. You may find it interesting.

The
podcast can be found here.

The Drought and Farmer Viewpoints

It’s been almost two decades since I first worked with a bunch of smart farmers who lead their state associations for the corn and soybean commodities. I’ve learned their business, watched them navigate a series of farm legislations, try to wean themselves away from government subsidies, and then prosper as prices came up dramatically over the past five years.

This year I returned to the same gathering for a fresh class of state association leaders. I didn’t know quite what to expect in a severe, brutal drought. I talked with some producers who were not going to harvest much of a crop. A very few lucky farmers located further north in the country or in the relatively moist East are going to do extremely well. But even the unlucky were optimistic as one can only be when you put almost everything in your business on the line every year and throw yourself on the mercy of nature.

If you want to see an example of resilience listen to these men and women as they talk about their ground, the crops, and their plans for the future. Certainly crop insurance plays into the situation. But they firm their jaws, speak frankly about the risks, and when asked about another drought “event” (that’s the term they use) they become gravely contemplative.
“That would take us back to zero,” one farmer told me. Another said, “We could deal with that but we’re probably going to sit back and see how the winter reestablishes our moisture before we even decide to plant next year.” The implications are serious for food supplies, energy prices, global trade.

If the breadbasket of America was to see anything similar to the conditions that have ravaged Texas for almost a decade we might look at food security suddenly becoming a strategic concern. The executive branch might need to step into the farm situation instead of allowing Congress to continue to argue over food stamps for the poor instead of providing a safety net for the people who feed the country.

Technology Trends from the Trenches of Enterprise IT

I’ve moderated and presented the closing keynote at the largest global gathering of information security professionals for the past two years. It gives me insight to what they see as emerging technologies, issues, and dangers.

This is an unusual conference. A task force guided the producers to stage a three day global meeting that departs from the typical talking heads and death by PowerPoint. Incisive interviews, extremely well-moderated panels, and audience interaction are the norm. This year there was an especially intriguing hands-on session co-led by IDEO and Deloitte on how to provide the right space for innovation within organizations.

In 2011 the huge buzzword was “Cloud.” It was so pronounced that by the third day we were joking about avoiding the “c-word.” This year the cloud was taken as a matter of fact, a reality that all executives (CIO’s, CISO’s, VP-level info security types, and consultants) take in stride and provide for in information security tactics. Here are some other salient tech trends from the conference:

  • SAAS – using the cloud, “software as a service” is now reality in many organizations. Google’s penetration with Google Docs into large enterprises or sales departments’ non-IT-aided implementation of SalesForce are both examples.

  • BYOD – lots of acronyms, right? “Bring your own device.” Workers want to use their personal technology-du-jour on the job. That means organizations can’t mandate Berries but have to adjust to iPhones, Droids, and the various tablets as accessing sensitive company information.

  • Big Data – this has been around in various forms, most often in the term “data-mining” for well over a decade. But now there are accessible, pragmatic tools to allow organizations to probe their mountains of data for patterns, opportunities, and profit generation.

Six years ago, on the eve of the Great Recession, a financial services CEO criticized me bitterly for engaging her board in scenarios that forecasted the possibility of individual customer experiences or products. Today large financial institutions can use Hadoop to gather information and do exactly what I posed as a possibility. That exec, incidentally, no longer heads that organization.

2012 - The first half in the practice

2012 began as our busiest year in a decade. For the first six months of the year I’ve been on an almost non-stop schedule of strategy sessions, conference presentations, retreats, decision-making meetings, and consulting projects. Financial services, telecommunications, agriculture, executive education, information technology, and healthcare have been the most prominent sectors.

Among the highlights:
  • An interesting decision-making project for a financial services client. The eventual outcome will establish a path for the organization for at least the next two decades. Like all of my best clients this group is taking time and a major due-diligence discipline in order to choose correctly.

  • Executive education sessions in strategic leadership and “anticipatory habits.” I’m usually in front of a few hundred mid to top level managers from corporate environments and a similar number of governance participants from the association and cooperative space. This is some of my most rewarding work.

  • National-level strategic planning for resource-based industries in North America. The global focus of my work and scope of my forecasting background helps provide a baseline for advising and facilitating planning in this environment. Two very engrossing projects stand out in the first half of 2012. Both involve organizations with huge upside opportunities in a world with growing populations and burgeoning middle classes.

  • A deep dive into government agencies as advisor and strategic advisor. While I’ve done advising work with government clients in the past (look here) I worked on a project that broke new ground in the past six months. It was a government agency that had never gone through a formal strategy process before. It was a combination of education, facilitation, and development. Very interesting to see the group take to the processes under a highly respected leader.

  • I moderated professional society meetings recently that gave me a global perspective and insight to the intersection between business considerations and those of specialized expertise within organizations. Every organization needs professionals that generate the intellectual property, streamline the workflows, manage risk, and protect the most precious assets. As an attendee/reporter/moderator/presenter I was able to see connections, take away lessons, and pass along advice from a high-level observer’s perspective.

Energy Prices: Why Have They Moderated?

It’s seldom that I work with a client not affected in some way by energy prices. Whether it’s the shipping costs of manufacturing, input costs of agriculture, or even the impact of higher transportation expenses on business to consumer organizations this question about the future often plays into strategy and preparation for the future.

Everyone wants to know the future price of a barrel of oil or of a kilowatt of electricity. Like most forecasts the calculation is complex and the range is wide depending on the timeline. OPEC policy, supply, demand, new discoveries, emerging technology, consumption behaviors, geopolitical events can all have a bearing or effect on energy price.

For several years I’ve been tying the price forecasts to global economic performance. This has been especially true as the globe goes through the most dramatic economic cycles since early in the last century. In fact, I’ve been forecasting a semi-permanent rise above a $100/barrel price floor sometime between 2011 and 2015. I still hold to it.

Many will ask what’s driving down short term spot prices in oil. Good question. Typically these short term fluctuations are driven by buildup in supply and the hidden effect of economic downturn and consumer behavior. That’s what’s been going on lately. I believe it also has to do with the discoveries of fairly large but very expensive sources of oil in the Western Hemisphere. Bakken oil (or “tight oil”), Alberta tarsands, and offshore Brazilian potential are all examples.

These “tight” and “dirty” sources have put off the depletion of other sources in the recent past. Eventually, however, the inexpensive oil sources are going to wane further and the price is going up. I believe to a fluctuating, often volatile range from $100 to $150/barrel.

Whether I’m right or wrong about the forecast is less important than preparation. I’m fond of the statement denial is not a strategy. That’s why I’m bemused, surprised, or sometimes frustrated by organizations that find reasons to deny any possibility of what would be painful developments. Those that believe the relatively inexpensive energy we enjoy today is going to be with us for the foreseeable future are in that denial.