Today I was reminded of the perils of forecasting while reviewing a Department of Defense document, the Joint Operating Environment 2010.
“JOE 2010” as it’s called, is designed to provide the various branches of the US Armed Forces a joint perspective on likely global trends, possible shocks and their future operating environment. If you’re interested in geopolitics and strategy, I recommend that you take a look.
Apart from its inherent interest, JOE 2010 opens with a defense planning timeline that business and financial strategy practitioners – and anyone who consumes their work – would do well to bear in mind. I have reproduced it verbatim here:
1900 If you are a strategic analyst for the world’s leading power, you are British, looking warily at Britain’s Age-old enemy, France.
1910 You are now allied with France, and the enemy is now Germany.
1920 Britain and its allies have won World War I, but now the British find themselves engaged in a naval race with its former allies, the United States and Japan.
1930 For the British, naval limitation treaties are in place, the Great Depression has started, and defense planning for the next five years assumes a “ten year” rule – no war in ten years. British planners posited the main threats to the Empire as the Soviet Union and Japan, while Germany and Italy are either friendly or no threat.
1936 A British planner now posits three great threats: Italy, Japan, and the worst, a resurgent Germany, while little help can be expected from the United States.
1940 The collapse of France in June leaves Britain alone in a seemingly hopeless war with Germany and Italy, with a Japanese threat looming in the Pacific. The United States has only recently begun to scramble to rearm its military forces.
1950 The United States is now the world’s greatest power, the atomic age has dawned, and a “police action” begins in June in Korea that will kill over 36,500 Americans, 58,000 South Koreans, nearly 3,000 Allied soldiers, 215,000 North Koreans, 400,000 Chinese, and 2,000,000 Korean civilians before a cease-fire brings an end to the fighting in 1953. The main opponent in the conflict is China, America’s ally in the war against Japan.
1960 Politicians in the United States are focusing on a missile gap that does not genuinely exist; massive retaliation will soon give way to flexible response, while a small insurgency in South Vietnam hardly draws American attention.
1970 The United States is beginning to withdraw from Vietnam, its military forces in shambles. The Soviet Union has just crushed incipient rebellion in the Warsaw Pact. Détente between the Soviets and Americans has begun, while the Chinese are waiting in the wings to create an informal alliance with the United States.
1980 The Soviets have just invaded Afghanistan, while a theocratic revolution in Iran has overthrown the Shah’s regime. “Desert One” – an attempt to free American hostages in Iran – ends in a humiliating failure, another indication of what pundits were calling “the hollow force.” America is the greatest creditor nation the world had ever seen.
1990 The Soviet Union collapses. The supposedly hollow force shreds the vaunted Iraqi Army in less than 100 hours. The United States has become the world’s greatest debtor nation. Very few outside of the Department of Defense and the academic community use the Internet.
2000 Warsaw is the capital of a North Atlantic Treaty Organization (NATO) nation. Terrorism is emerging as America’s greatest threat. Biotechnology, robotics, nanotechnology, HD energy, etc. are advancing so fast they are beyond forecasting.
2010 Take the above and plan accordingly! What will be the disruptions of the next 25 years?
If you work for a firm that’s more than a decade old, you might consider making a similar timeline for your business. If you don’t, try it for your industry. The sharp shifts and reversals in strategic perspective that such an exercise highlights is precisely why I consider many so-called business “strategy” frameworks (e.g. the BCG Matrix, Porter’s Five Forces, et al) little more than tactical aides–memoir. (For a discussion of the difference between strategy and tactics, see “The Three Faces of Strategy“). In its place, Philippe and I tend to advocate non-predictive, integrated strategy. We also study the causes, consequences and possible cures for strategic autism – greatly diminished strategic awareness on the part of cultures, organizations and corporations.
JOE 2010 also contains a nice sidebar on what they call “The Fragility of the Future”; quite wisely, they use as a prelude to a discussion of Grand Strategy:
As Philippe wrote in June, if not treated with care, sometimes the worst enemy of your strategy is your own (either explicit or implicit) forecast. Therefore, I recommend that the next time you create or review your corporate or financial strategy, step back to ask some vigorous "What Ifs", and make some of them as improbable as the shifts recounted above. PS If you find this perspective on strategy, disruption and surprise interesting, why not subscribe to our blog?
Great post Milo. The Shell long-range planning approach was interesting. They purposely stayed away from specficity of the actual event, focussing on what impact the perturbation might have for the business. According to them, they were thus much better prepared for the oil crisis in 1973 than any competitors – they hadn’t predicted a war in the Middle East as the catalyst, but had a scenario where supply was suddenly severely curtailed.
This is a great insight! When strategy gets too detailed, precise and self assured, it isn’t strategy any more, but what I call “processes and operations.”
As a wise man/strategy prof said: “If you have a detailed view of the future five years from now, you’re not a visonary/genius CEO. You’re a psychopath.”
Superb article…………..scenario planning as a risk and strategic management tool has never been more important to developing the art of good strategy
Excellent post Milo. Strategy is about adaptable structures not about concrete tactical action plans. Regards,
Very good post Milo. The timeline highlights a form of “the Foresight Trap” – that paradox between mid-to-long term scenario planning and rapid chaotic short-term changes. Interesting commentary at the more recent end of the timeline about things happining too quickly for forecasting (and/or scenario planning)..
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