Holidays in Chevrolets, jewellery and rugby
“Are we there yet?” We have all asked the question as youngsters on a long car journey to a holiday destination. The only oases of relief were the stops to refuel along the way. Imagine a child who has seemingly endured this lifetime on the back seat persistently nagging his family that at the next stop he be allowed into the refreshment area to buy one item for the next leg of the journey. The family acquiesces to shut him up. As he excitedly enters the store, he is confronted by a veritable cornucopia of sweets, popcorn, potato chips and cold drinks. Shelves upon shelves of wonderful mouth-watering goodies and he is allowed to pick anything – as long as it’s one thing and he doesn’t make a mess in the car! Does he have a seemingly unlimited range of options? No. He has a tremendous range of opportunities but his options are limited. The difference? Opportunities only become options when they fall within your control.
One of the beauties of scenario planning is that it provides real choices for action. These choices are not random possibilities but are specifically relevant to our situation because they have been developed out of the earlier processes identified in our matrix. The richer the scenarios, the more varied the options. What makes options particularly important is that although they are derived from uncertainties outside our control, they are restricted to actions within our control. As such, the third quadrant is enthusiastically explored by foxes but is somewhat of a no-go area for hedgehogs. Whereas hedgehogs are dead-set on following a chosen path, foxes are guided by instinct. Consequently, whenever the path ahead forks and involves a choice, foxes are quite ready to venture off the straight and narrow to explore alternatives that are “beyond reason”. In that sense, the left-hand side of our matrix represents the (more intuitive) right-hand side of our brain.
Control is power. But the true nature of power is having control in times of uncertainty. That control comes in the form of options; so the person who can exercise more options in the face of uncertainty has more power. Pierre Wack once wrote two scenarios for the world of gold – “Plan” or “Be Planned”. His point was simple. Either gold-mining companies roll up their sleeves and get involved in the downstream retail market of jewellery and thereby influence demand; or they should expect to bob up and down in the ripples to the gold price caused by central bank sales. He maintained that the power of oil companies lay in the fact that they have so many options to play around with between the well in the ground and the filling station in the village. Vertical integration has its advantages – it turns you into a price-maker as opposed to a price-taker. This wasn’t bad advice, since a feature of mining is how long it takes to sink a shaft and come into production. All that money flowing out and the only relevant price is the one you get when you’re up and running! It makes sense to influence it, particularly with gold being the oldest brand around – signifying sun, sex, power, money and winning the race. What more do you want?
Now it’s time for us to give you our own tip. Keep your eyes on the rules of the game: if they change, then the options can change too. For example, until recently, the rules of rugby stated that if a side was awarded a penalty and they decided to kick the ball into touch, the throw-in was then awarded to the opposing team. This meant transferring control of the game to the opposition. When this rule was changed so that the team awarded the penalty could kick the ball into touch and still have the throw-in, it provided an exciting new option. If a team is now given a penalty close to the opposing try line, they can kick for the posts for three points; or go for touch closer to the tryline in the knowledge that if they score a try and convert it, they will obtain an extra seven points. The implication of this rule amendment is that rugby becomes a much more interesting game to watch when the score is close in the dying minutes of a match. Business has the same fascination for a different reason: the rules are changing all the time, creating new windows of opportunity and new options.
Stars and dogs and Apollo 13 continued
A way of getting managers to discuss strategic options is illustrated in the diagram below. If a company wants to assess the value of its underlying businesses, ask the board to post each business into the appropriate square. Is it a core star, a noncore star, a core dog or a noncore dog? We all know what to do with core stars – keep them. Equally, we know what to do with noncore dogs – get rid of them or, as they say in the veterinary profession, put them down. But what do you do with noncore stars and core dogs? You might wish to hang on to the former because they consistently contribute to your financial results. On the other hand, with focus being in fashion, you might decide to sell them for a decent sum and use the money to invest more into your core businesses.
Core dogs are different. So much management time is spent trying to turn a core dog around that, after the 51st restructuring, everybody is sick to death of it. Basically, you can re-engineer a dog as much as you like and it still barks! So as Jack Welch, Chairman of General Electric, puts it: the options are fix, sell or close. Then, just to make matters complicated, the rules of the game can change, turning a dog into a star (a dog-star!) or a star into a dog.
Speaking of stars, let’s not forget about the three astronauts still hanging in on board Apollo 13. The three scenarios of possible outcomes described earlier – “Close but No Cigar”, “Tin Tomb” and “Sweet as Apple Pie” – would have provided the astronauts and the support team in Mission Control with the most realistic options available. The objective was obviously to bring the astronauts home alive. However there was no instruction manual for what should be done under such circumstances. In this unique life threatening situation, therefore, the range and detail of the scenarios were essential in order to develop as many options as possible to help them make the most effective ongoing decisions. So what options within their control would they have had? Among them were to:
–conserve power by shutting down all but the critical systems;
–conserve water by rationing;
–reduce carbon dioxide levels by attempting to adapt the filtering system in the lunar module;
–use the sun as a navigational point of reference, debris around the lunar module having made it virtually impossible to see the stars;
–try and increase speed around the moon to give them enough momentum to sling them onto a path back to Earth;
–try and redirect power to critical systems; and
–exercise a “burn”, which would use power, to correct their path at the right moment.
Although, in retrospect, the options for the crew of the Apollo 13 may have seemed logical and orderly, the crew’s method of implementation certainly wasn’t. This is an essential point to bear in mind: options are only effective if they can be implemented; otherwise they’re just “good ideas”. Time was not on the side of the crew and Mission Control, so the implementation depended on close teamwork. For example, a whole new flight plan was needed to put the astronauts on a fresh course for home. This would normally have required three months. Mission Control managed it in three days. The exact time and duration of a “burn” to change their alignment so that the orbit around the moon would slingshot the spacecraft back towards the Earth had to be calculated. This was one of those rare moments that maths teachers will forever boast about, as it showed the importance of a healthy knowledge of vector calculus! The problem of connecting the square lithium hydroxide canisters of the command module to the round openings of the lunar module environmental system to remove carbon dioxide build-up required creative thought on the part of engineers on Earth. They had to do a dummy run with materials similar to those that were available on board the craft. This was achieved using piping, plastic bags and cardboard, all connected and sealed with tape.
Interestingly,