Global Risks: World Economic Forum: 2014

World Economic Forum Global Risks 2014

It is time for Davos again and the WEF have just released their latest global risk report. As always, it is an exceptionally well-written and well-thought through report – and I personally feel privileged to have access to research of this quality. This post is not intended to replicate or summarise the report, rather to encourage readership by mentioning a few highlights. Also to suggest some ways that you may use this in your own organisation.

If you were to skim-read the report I would suggest start with the executive summary and then the early section on inter-relatedness of the risks. The strong message coming through is the potential for events in one area to catalyse or reinforce events in other areas – and this is incredibly hard to predict and defend against.

Global Risks Chart WEF 2014

Global Risks Chart WEF 2014

The main chart showing all the risks and their impact and likelihood forms the basis of the research. A copy is shown to the left of this text where the major risks in terms of impact and likelihood are revealed in the top right-hand quadrant.

Later in the report, there are two charts showing differences in perceptions between younger and older respondents;and male and female respondents is fascinating.

 

A little later the diagram showing the interdependency emphasises the need for a global response to these risks to reduce the potential for the “tragedy of the commons” taking place.

There is much more in the “blue-boxes” as well as some of the clusters of interdependencies that are reviewed in the part 2.

In terms of using this in your own business, I would suggest a getaway for your executive team where these are reviewed and consideration given to the potential impact of the major (high ranked impact-likelihood) risks on your strategy and business. If you are operating in one or a few regions only, you might also consider the more local risks you are facingĀ  in conjunction with the global ones. It is particularly important to consider both the opportunities that might be created as well as the downsides.

You can find the report at: WEF GlobalĀ  Risks Report 2014

Contact me at sgifford@genesis-esp.com to discuss how we might facilitate a strategic risk session with your management team. I promise for an entertaining, interactive and visually powerful event!

 

 

 

 

Time to scrap those special projects?

Interestingly, on the same day I came across two articles with a similar message: “scrapping ongoing projects is one of the toughest decisions to take – even when we know they are no longer aligned with our direction and strategy”

Extreme example: Iridium phone – idea scrapped after billions of dollars spent

The one article came from the Financial Times and was called “Killing projects is the hardest innovation” and the other came out of the introduction to Bain’s Decision Insight series called “Decisions during change“. It is particularly relevant to us here at Genesis as we hold conversations around our “Brave New World” campaign. Here we are talking to our clients about how their world has probably fundamentally changed since the recent economic and social turmoil – and they can no longer simply afford to continue along the old track. Well, at least without checking if it is still going where they want it to take them!

Path to nowhere

Within this context, we are advising that strategic objectives are changed or at least refreshed – and that ALL projects underway or reviewed to see if they still fit within the new strategy.

Although often there is a clear need to scrap them or at least change them dramatically – the resistance to do so is immense.

The CEO hears many reasons why the projects must stay in place:
“Lets just get to the next milestone and review it again at that stage.”
“We could change the direction somewhat and it might be a better fit with what we are trying to achieve”
And our favorite: “but we have invested so much in this already … ”

The trouble is as long as useless or suboptimal projects continue, the less resources we have to invest in the new more critical ones. So we advocate a robust process that includes:

  • Review context and strategy
  • Refresh / change strategic objectives (maximum five, so you cannot simply add more to what you already have)
  • Make an inventory of all (yes, ALL) projects underway and map them back to strategic objectives and to each other.
  • Put each one through a clear assessment and decision process to decide what to drop
    • Note: none of the decision objectives includes consideration of sunk costs – only future costs
  • Develop a new set of initiatives aimed at achieving your new objectives – with appropriate prioritization and resource allocation.

Playing the devils advocate

Put like this, it sounds really straightforward. But there are underlying behaviors that hinder the process. These include: project ownership, knock to pride in reversing a previous decision, sunk cost fallacy, reputations attached to projects, – to name but a few. This makes the simple process very hard to implement. This is a compelling reason to get some independent facilitation and support to make it happen. This could include facilitating (and adding to) the strategic review, identifying and listing the projects, setting up the decision process and helping you drive through to implementation. But as important, being that external voice that challenges some of the reasons given as to why projects should continue.

Project spring-clean

So – perhaps it is time for your “project spring-clean” and focus on new strategic initiatives better aimed at your changed business environment. You will find the process refreshing and it could invigorate your team as well.

 

Mail me at sgifford@genesis-esp.com if you would like to discuss how we might assist you in this process.

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Irrational behaviour and Dan Ariely

Understanding behavioral economics is a key element in helping us to make good decisions – so this is a short blog to let people know about the free course that is about to begin:

A beginners guide to irrational behavior by Dan Ariely.

I have read a few of his books and seen a number of his lectures. Not only does he know a lot about behavior economics and why we act and decide the way we do – he also conveys it in an entertaining and amusing fashion. I am really looking forward to the course.

The course is hosted by Coursera, an organisation offering free courses who have linked up with 33 other institutions – pretty impressive ones at that …. the likes of Stanford, Princeton, IE and Michigan.

I cannot vouch for he quality of all the courses, but have done one course on systems modelling (Michigan) and can only say it is excellent. You do not need to pay a cent or even buy the professors book. Content is delivered in videos between 5 and 15 minutes long – so it is easy to fit the occasional study period between tasks. It also only takes about 8 hours a week that even the busiest people should be able to manage, given you can listen to the videos whenever you feel like it.

The course starts on the 25th March, so sign up now! Click on the link to find out more and sign up at:

Dan Ariely: a beginners guide to irrational behaviour

I am a great believer in Covey’s “sharpening the saw” occasionally and can only encourage you to sign up to this course (or any of the other ones that grabs your interest) and sharpen your saw.

For interest – Coveys “sharpen the saw” video. Its wider than just education, but still worth watching.

Enjoy the course!

 

Think like an entrepreneur

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Saras Sarasvathy, a professor at Darden School (University of West Virginia), undertook some research to see if entrepreneurs thought, acted and decided differently. Her conclusion was that this is the case. At its most basic level, she says that rather than set a goal and work out how to get there, entrepreneurs start with the means at their disposal, collaborate with others and go on a journey to see where they end up. Her work has attracted much attention and is taught in many entrepreneurial courses the world over. The process is portrayed below (you may need to click on the picture for a clear view):

effectuationI have read her research papers and various other materials, but the best explanation of her process I have come across is displayed in this video from the University of Gallen:

The 10 myths of entrepreneurship

 

So, through trial and error, together with discussion with stakeholders and customers, and a clear understanding of the means at your disposal, you develop a new product or business even if your original goals need to shift substantially in the process.

At Genesis we have a view on Saras thinking – although it may go a little against the crowd at the moment. Although I am not certain how academically robust was her research, intuitively there are some great ideas embedded in the theory. Base your business on your own means (including competences), spend more time experimenting and market testing (than in-office analysis), share your ideas and get inputs, … these are all good. They also dovetail nicely with other entrepreneurial thinking such as that of Alex Osterwalder (Business Model Generation) and Steve Blank (The Start-Up Owners Manual). These concepts are particularly useful when dealing with “fuzzy” markets where you have really new products or are developing a new market or market niche.

Where do we think this could be dangerous? Taken to its extreme, we believe the process could lead to laziness and sloppy thinking if it is used totally outside causal thinking. We accept that a new start-up is not the same as a microcosm of a large enterprise, but there are some excellent analytical tools and strategic thinking that can play an important role in the entrepreneurial process. From the humble SWOT through Porters competitive strategy and on to Christensen’s disruptive technology – all could guide the process (depending on the venture) and could also help to reduce risks of ending up in the wrong place and/or with the wrong product.

Furthermore, one of the things that we believe is a characteristic of great entrepreneurs is to persevere and continue far beyond the point when other more “sensible” people have thrown in the towel. That attitude does not sit well alongside the idea that goals can be changed whenever things seem to be going against them.

 

Our conclusion, Saras has begun an interesting “movement” and there are many important principles that should be used in the “0 to 60mph” phase of the start-up. But do not throw the baby out with the bathwater – recognize that causal thinking, modelling and other scientific business principals can enhance the effectuation process.

We are about to launch a new company: Mashauri Limited aimed at helping entrepreneurs through the process from start-up to stable business where we have cobbled together a mixture of the types of thinking discussed above. We have produced a process that we believe will really enhance the entrepreneurial journey and greatly increase the chances of success. If you are an entrepreneur in the early stages of start-up and would be interested in trialling the product, contact me at sgifford@genesis-esp.com to discuss it.

 

 

 

Economist Global Forecast March 2013

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The latest forecast from The Economist Intelligence Unit

As always The Economist is able to cut through the fog and produce an insightful forecast for the globe and the regions. Economist UnitThe report borders on an overall positive note, although there are clearly huge differences between different areas; with the Eurozone still at a high risk level. We are reminded that the collapse of the Eurozone (which still remains a risk) would create turbulence greater than even the Lehman’s collapse.

In Europe, the split between German policy of insisting on austerity and France moving towards favoring a more stimulus-based recovery is an increasing problem. That compounded with public dissatisfaction with austerity (I only have to look out of my window to see the almost-daily protest marches) in peripheral countries means that the risk of a reversal to Eurozone crisis (and/or political stalemates) ensures Europe will remain a challenge to global recovery.

My South African readers will be interested in the notes on SA trailingĀ  the rest of Africa because of a number of factors including continual high levels of unemployment, unrest on the mines, uncertainty over government policies, corruption and poor management of certain parastatals.

Before leaving you with the link to the report, I would like to emphasize that just as the overall economic situation is the average of regional economies that have significant differences; so is the economic situation of any country, province or even industry, an average of the component parts. As companies, it is when we consider the granularity of these components, that we are able to find the gems of opportunity that allow some organisations to thrive even in the toughest of situations – without necessarily reverting to drastic cost cutting and the slashing of jobs. Part of our Brave New World programme assists organisations in identifying these opportunities.

The EIU March 2013 economic forecast report can be found at these links:

EIU March 2013 summary
EIU March 2013 presentation.pptx
The web-site containing links to the detail (this is the best source but you will need to subscribe to enter the site)

Contact us to discuss our Brave New World programme at BraveNewWorld@Genesismc.co.uk. We are able to assist you in a number of ways from a simple presentation of the global trends and issues relevant to your organisation through to facilitating a full programme with your senior executive team.

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