Step back from the war in Iraq for a few moments, if possible.
The larger picture -- a struggling global economy and no shortage of geopolitical tensions -- looks pretty dicey. Now, imagine that events veer toward something close to a worst case. What are the implications, and how could companies cope in such an environment?
That was the drill when a couple dozen business executives, academics and prognosticators gathered in New York for a two-day workshop conducted by the Global Business Network, a firm that specializes in so-called scenario planning. The resulting 36-page report, "The New World (Dis)-Order: Managing Risk in Tumultuous Times," has been sent to the firm's clients, including IBM, Ford, Coca-Cola, Procter & Gamble, UPS, Morgan Stanley, Goldman, Sachs and the government of Singapore.
Here are some excerpts from the gloom-and-doom script:
-- Japan goes bankrupt.
-- Al-Qaida cements alliances with Palestinian extremists and sets off a series of terrorist attacks, mostly in Israel, hoping to create a political split in the Western alliance to thwart Qaida-sponsored terrorism.
-- The belief in globalization as a benevolent economic force is shaken further, rendering the IMF and World Bank all but irrelevant.
-- In the US, a new government organization, the Home Security Advanced Research Projects Agency, is created to set the national agenda for technology research, shifting the emphasis from ubiquitous computing and biotechnology to focus on the security economy.
-- Major cracks develop in the world legal order protecting intellectual property rights, threatening the livelihoods of companies like IBM, Microsoft and Merck.
"It's all completely plausible," said Steven Weber, a political scientist at the University of California at Berkeley who wrote the pessimistic, if plausible, story line for the workshop.
Scenario planning is intended not to predict the future but to prod people to think more broadly, unconventionally, and perhaps view events with a new perspective.
"These kinds of exercises prepare the mind's eye to see change when it occurs," explained Peter Schwartz, chairman of the Global Business Network, a unit of the Monitor Group, a management consulting firm.
The peril of even fine minds thinking too narrowly, Schwartz said, was illustrated by the giant hedge fund Long-Term Capital Management, which nearly collapsed in 1998 because its brilliant traders and Nobel prize-winning economists did not foresee events beyond their risk models. Their efficient-market theories proved incapable of coping with the turmoil in the global financial markets after Russia defaulted on loans from international lenders.
A participant in the workshop, Andy Hines, a senior manager for business development at the Dow Chemical Co, said he benefited from listening to experts in geopolitics and others from disciplines far from his own.
"The real value is people who yank the conversation in places you never thought of," he said.
One such presentation came from Joseph Fuller, the chief executive of the Monitor Group's Action Co, who questioned the management assumptions of recent years. Fuller said that a generation of executives has been taught that "speed is good, commitment is good, make your decision and go for it."
Yet in more uncertain, turbulent times, the priority may be on keeping alternatives open instead of the speed of making single-path decisions. In 10 years, Fuller said, venturing a prediction, business schools will not teach topics like discounted cash flow calculations but will instead teach executives how to analyze their options.
A higher-risk world could require the rethinking of many tenets of conventional business wisdom. The canons of globalization included shopping the world for low-cost parts, developing tighter relationships with fewer suppliers, and deploying an itinerant corps of key managers and engineers who were willing to travel anywhere on a moment's notice to meet a customer or solve a problem.
Those assumptions would all be challenged if more developing nations, in particular, became politically unstable.
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