Prisoners of Geography and Prisoners of Change

Notes from the UK and European Operations of Fletcher/CSI.

 

With reference to the best seller, Prisoners of Geography, written by Tim Marshall, Businesses of all sizes in the United Kingdom (UK) & Europe are now forced to operate in a state of constant uncertainty. They have now, in effect, become, to paraphrase Tim Marshall, Prisoners of Change driven by the pending potential of what is called “Brexit” the UK’s withdrawal from the European Union (EU).

All of Europe, and the UK in particular, is living in extraordinary, volatile and uncertain times. The UK’s unique geography and relationship with the EU, is experiencing a series of daily events that are both historic and unprecedented. At the core is the issue of how the UK will exit, from a “hard” exit that ends all trade and customs agreements, to a soft version that keeps some of those agreements, or to a new referendum that ends in a decision to stay in the EU.

The UK Referendum on staying in the EU or leaving the union, held in 2016, produced a vote to leave with an extremely small majority. In the years since the result of the 2016 referendum, much of the world, and many opinions, have changed. Division and polarisation are the new norm. The result has been over two years of negotiation between the UK and EU over exit terms. Lack of clarity in the negotiations has led to uncertainly that many is now regard as unsustainable. The impact of this uncertainty has been deeply negative. Over £21bn has been wiped off the value of British stocks that are likely to be most affected by Brexit in just the seven days between November 20 and 27, with greater losses having been experienced subsequently. Further, many supply chain agreements throughout the UK and the EU are becoming exposed to greater risk.

The very process of leaving the EU has proved to be more difficult than many of those in favour the exit from the EU ever cared to imagine. The British public are now more educated as to the context and implications of what they were voting for in the referendum.  Vast numbers of teenagers, now eighteen years of age, were not entitled to vote in 2016.

From a business context, the impacts are creating more uncertainty. For example, a small business owner, seeking to import goods from France or Italy to sell in the UK, can no longer publish price lists with any degree of confidence. Likewise, a business in the EU that relies on UK exports faces the same issue. Major food suppliers on both sides now have to stockpile key ingredients as a strategy to protect their capacity to meet market demand. The lobbying group that represents the pharmaceutical industry has expressed concerns about this supply chain doubt and how to protect patients and keep treatments safe. The capability of the pharma industry to satisfy future demand and distribution of critical medicines is being endangered. As an example, insulin is not manufactured in the UK and must be imported from the continent. Throughout the UK and the EU, large swathes of consumers are concerned and feel vulnerable.

Diploma, a UK based engineering company has publicly acknowledged significant levels of stockpiling of inventory ahead of the Brexit date, in order to mitigate increased risk.  British Airways, the UK flagship airline and owned by a registered holding company, IAG, based in Spain, publicly acknowledges it has been having to plan for various scenarios as to the implications and complexity of a future post Brexit, and how the various exit possibilities will change the market dynamics.

From the small business entrepreneur to large company senior managers, business professionals have to constantly assess additional external risks and levels of disruption which are changing at a rate not experienced, arguably, since the 1st half of the last century.

In this kind of rapidly changing environment with many potential outcomes, there are several CI tools that can help leaders make informed decisions and develop robust strategies to face the future. Three that are of particular value are discussed below.

 

 

Scenario Planning and Risk assessment

Scenario Planning and Risk assessment are early steps in the mission-critical intelligence cycle.

Business do not react well to uncertainty. Business thrives when there is a secure, stable, and safe environment. In times of uncertainty, business leaders who are tasked to make serious investment decisions tend to delay or move toward a less risky best alternative. In such situations, Scenario Planning can play a vital role in reducing uncertainty and inform decision makers about the context and likely outcomes form which to build robust strategies that work in different scenarios.

Black Swan thinking

Competitive Intelligence, as a discipline, embraces Black Swan thinking. The need for this kind of thinking has rarely been greater than at present. The question arises: has the proposed exit of the UK from the European Union become the biggest Black Swan in modern times?

Black Swan theory has three components.

  • First, there needs to be an outlier, as an external threat lies outside the realm of regular expectations. There is nothing in the past that can convincingly point to this possibility.
  • Second, the threat needs to carry an extreme ‘impact’.
  • Third, despite this outlier status, human nature makes us find explanations for its occurrence after the fact, making it explainable and supposedly predictable.

Business academics discuss operating within a Volatile, Uncertain, Complex, Ambiguous (VUCA) environment as external uncertainty combines with inherent internal friction. The combination is often cited as one of the many reasons that execution of strategy is so hard and so rarely truly successful. In the real world, businesses leaders must respect their external and internal political imperatives, internal and external regulations, the constantly changing environment and the internal processes, market assumptions and values that have made their company successful, in the past.

Future orientation

CI is future oriented and must be responsive to direct and indirect competitors, shareowners, channel partners, suppliers and customers all with different needs and perspectives. Within many business ecosystem, many of these players have become prisoners of change, tugging in different directions with different priorities.

Business leaders, like the great explorers and sailors of the past, constantly and relentlessly seek to identify new opportunities and threats. They need to be aware of blind-spots which could signal a growing and serious disruptive trend. CI analysts now refer to “Grey Rhinos” that appear in almost all business contexts. This theory, created by Michele Wucker, helps us both recognise, and act on, dangers that too often are ignored.

The combination of external monitoring with disciplined risk assessment, almost to a paranoid level, is what enables some companies not only to achieve superstar status, but to maintain this status for the long term. These companies are constantly adapting and reinventing themselves in order to continue to outperform their competitors. Their focus is on long term economic profit, not simply on short term revenues nor, perhaps surprisingly, just market share.

Whilst the UK faces events and decisions of epic and historic proportions, the remaining 27 countries making up the European Union are constrained by their unchangeable physical geography. Companies operating within the UK and the European Union who will thrive in this most challenging of times, will be the ones that embrace the idea of constant change as a source of opportunity and positive motivation and not as a negative – a prisoner of change.

FCSI supports and advises its clients at all parts of the intelligence cycle. Setting up CI departments, external monitoring with analytical insight, scenario planning workshops, win loss analysis as well as primary research and consulting support.

Gordon Donkin is the Operations Director of Fletcher CSI, a leading strategy consulting group with offices in UK, the United States and affiliates in many parts of the world.

Please contact Fletcher/CSI for all your CI needs, including primary research, strategic workshops, trade show intelligence, and Win/Loss.

For European support, please contact Gordon Donkin managing director, Europe at [email protected]

For support in Life Sciences, contact Cinda Steele, VP Life Sciences at [email protected]

For support in technology industry contact Mark Gigiliotti, VP Technology Practice at [email protected]

For support in consumer packaged goods and manufactured products, contact Patrick Sturgeon, VP CPG and Manufacturing at [email protected]

For support in Finance and Insurance products, and all other service lines, contact Erik Glitman, CEO at [email protected]

 

– Gordon Donkin, Head of EU Office