“Foxes are more likely to win the game in the extraordinary times we live in”

Interview: Clem Sunter – Best selling Author & Scenario Planner

‘Politics is the one profession which has more hedgehogs than all the others: politicians do not change and adapt’
‘Russia and America are getting quite close to the same kind of confrontation that they had in 1962 over the Cuban missile crisis’

Was a massive terrorist strike on Western soil imaginable before 9/11? Yes, if you read ‘The Mind of a Fox’, the No. 1 bestseller published in June 2001, which transformed scenario planning from an esoteric discipline into a practical model widely used in the business world. Now the authors, Chantell Ilbury and Clem Sunter, have extended their model “to allow companies to have an intense strategic conversation based on the idea that business is a game which you have to understand before examining different strategies to play it.”

In the early 1980s, Clem Sunter established a scenario planning function in Anglo with teams in London and Johannesburg. Using material from these teams, Mr Sunter put together a presentation entitled ‘The World and South Africa in the 1990s’ which became very popular in South Africa in the mid-1980s. In it, two scenarios were offered for South Africa: the ‘High Road’ of negotiation leading to a political settlement and the ‘Low Road’ of confrontation leading to a civil war and a wasteland. South Africa took the High Road. Two highlights for Clem Sunter were a presentation to FW de Klerk and the Cabinet in 1986 and a visit to Nelson Mandela in prison to discuss the future just before his release.

We met with Clem Sunter during his recent visit here to receive the Honorary Graduate award from Middlesex University Mauritius. Excerpts from the interview:

Mauritius Times: It would seem that of all the creatures in the Animal Kingdom, you have a particular fascination for the fox – not the lion or the eagle. You have even authored a book with the title ‘The Mind of a Fox’, which has been a bestseller for many years. Why this fascination for the fox?

Clem Sunter: It actually comes from a metaphor and goes back to a Greek poet Archilocus in 650BC, who made the following comment: “The hedgehog knows one big thing and the fox knows many little things.” I have no idea why he chosen those two animals, but the situation today, whether in business or otherwise, requires you have to be open like a fox in terms of looking at the world and seeing all the things that are changing and then figuring out about how to adapt to those changes — just like foxes in a forest who look outwards at the environment around them, and responding quickly to changes happening. Likewise businesses also have to adapt their strategy to the changes happening around them just like the fox. Hedgehogs are people who have only one vision and they stick to the vision. Sometimes they are totally correct but the problem with hedgehogs is when the game changes and they don’t see it happening, their business goes out of business. Probably the best examples are those so many big companies that are not renowned today because they had hedgehogs CEOs. That is why we talk about foxy CEOs – people who watch the game, see how it is changing, look at the flags and then adapt their strategy to those changes.

* How does it help to have the mind of a fox, especially with respect to scenario planning?

The reason Chantell Ilbury and I wrote ‘The Mind of a Fox’ (website: mindofafox.com) was because most books were promoting the idea that you had to be a focussed hedgehog and so many business schools in America and in Europe teach people that it’s all about having a quality vision and getting everybody to buy into the vision and having a mission statement which sort of spells out the vision. I do not mind that because ever since Peter Drucker wrote ‘Management by Objectives’ in the 50s, you use targets for organisations but you do need the foxes for watching the environment very carefully to see how it is changing so you can to adapt your vision to the market.

* Identifying flags that point to changes in the environment — isn’t this easier said than done?

The point about foxes is that you automatically have to play scenarios – just like we naturally do in our ordinary lives. We are all playing scenarios when we have a conversation with a person, and we do not know how he/she will react, so we play scenarios in our mind to make sure that we say the right things to get the right response.

What we have done is to formalise that which we do in our ordinary lives (in terms of the scenarios that we play with parents and friends) for the business environment. It is not something that’s spectacularly new because we do it all the time. You watch somebody’ face to see how he is registering your comment — that’s a flag. All we are saying is that just like you are watching somebody’s face to see the flag, in business you have got to see what the flags that are changing the market. And all you have to do is to adapt your strategy to the flags as they go up.

For example, in the news industry, the biggest flag that’s has gone up is the Internet. I can go to virtually any website now, like The Guardian’s in the morning and read all about the latest news for free, or watch CNN or Skynews… It just means that the advertising revenues and the circulation of newspapers have taken a big hit over the last ten years. It is a flag that’s indicating that you’ve got to change your business game. Now those media organisations that have been like foxes have actually changed their game and embraced success. In South Africa, you have Naspers, and one of the things they did was to buy ‘10 cents’, a company based in China. Naspers is now a very successful multinational media giant. They are the guys who organise all the stuff that hotels make available to their customers – DSTV channels, etc. They have adapted their organisation, like a fox would do, because they saw the flags of declining newspaper circulation and the rise of the Internet.

One may of course copy what others have been doing, but it is always the case that those who adapt first to a new situation are the ones who are going to make the most money out of it. It’s a point that I make: you’ve got to have an entrepreneur mindset, one which naturally plays scenarios in the quest for new opportunities. Take the case of Apple: when Steve Jobs was in charge of Apple, he produced the MAC computer the first time round. Apple did very well and then he left and formed Pixar, a high-end computer hardware company. When Apple went down, he came back and launched the Ipod, Iphone, Ipad; he came out with new products all the time because he could see how the market was changing. Part of being a fox is to be ahead of competitors rather than behind.

* Would you say that scenario planning and the identification of flags are absolutely necessary in the world of today and perhaps more important now than ever before?

I think that right now the future is very uncertain. You look at issues like what’s happening in Ukraine, the deteriorating relationship between America and Russia and what that might do to Europe; you look at the recovery in the world economy, which is very fragile, and of course the flag here is interest rates… What will happen if the interest rates suddenly rise? Will that choke off the recovery? Nobody knows…

You can see it in Mauritius, with all the tourists coming down here looking for economy deals whereas in the old days they were prepared to go to virtually any hotel on the island. It means that the recovery is fragile at the moment, and obviously if you are in business, you’ve got to figure out how you are going to stay ahead of the game by coming out with new products, creating new markets so that you may continue to grow even though the recovery is very fragile.

All the other issues like, as I said, the politics of Ukraine, the flag that is climate change — I know that there was a terrible tragedy in Mauritius last year with the flood in Port Louis… all these beg the question: what are the scenarios for the future? And what are the flags to indicate that maybe sea levels are rising and maybe Mauritius has to do something to protect itself against rising sea levels. That is why you do scenarios to work out in advance a response before the crisis actually happens.

* What about scenario planning at the macroeconomic level? Does it work the same way as it does in business… at the level of the firm?

Scenario planning was started in America by someone called Herman Kahn who worked for the Rand Corporation in the early 50s; he was asked to look at future war scenarios for the US air force. He actually wrote the book ‘On Thermonuclear War – Thinking about the Unthinkable’ in which he played the scenario of an all out nuclear exchange between America and Russia. That proved to be a very popular book, which put scenario planning on the map.

My mentor, the guy who taught me scenario planning was Pierre Wack, a very clever French man who studied under Herman Khan, and became head of scenario planning at Royal Dutch Shell’s in London. He adapted the technique to companies and he looked at oil market scenarios to figure out what could happen to oil prices. Thereafter we hired him as a consultant in the 1980s in my company, Anglo American, a mining company in South Africa, and we actually reverted to using scenario planning for figuring out future political scenarios for South Africa. We then wrote the “High Road” – a scenario which saw the ANC and the National Party getting together and negotiating a political solution, and the “Low Road” where they didn’t and which would result in civil war and South Africa becoming a wasteland. That really helped the conversation in the mid-80s become more positive. In a funny way, we took the methodology of scenario planning to look outwards – at the country.

* Mauritius has moved from a monocrop-based economy to an export-oriented one. The financial crisis affecting our principal markets coupled with competition from other countries have had an impact on the economy. How can scenario planning help?

One of the prime factors about Mauritius is its geography: it’s right there in the middle of the Indian Ocean, and that makes it the ideal hub between Africa (which is now the most exciting continent economically) and Asia. The IMF recently stated that 7 of the 10 top fastest growing economies are to be found in Africa, the reason being that they’ve got the youngest population on the continent and they have embraced things like entrepreneurship and capitalism like in Kenya. On the other hand you have India, an emerging economy, and China wanting to get into Africa. If Mauritius places plays its cards right, as the kind of hub where you could start campaigning either in Africa or in India, less so in China because Hong Kong is already a hub for mainland China, this country has a spectacular future in view of the need of Chinese and Indian companies for a French connection in French-speaking African countries. Mauritius can play a very good intermediary role in that equation.

* In fact there is now greater interest here to tap new opportunities in Africa. The Chinese regard Africa as their “continent of choice”. Is that indeed the case?

I got that phrase when I went to the Central Party School, the inner sanctum of the Chinese Communist Party in Beijing, where all the leaders of the Party are trained. They said that Africa offers them the resources that they really need – like oil from Angola, Nigeria and Sudan, three very big exporters of oil to China. Also Africa has land, which the Chinese require to secure food production. The deal they have successfully proposed to many African countries is to improve their infrastructure (ports, roads, etc.,) against a 25-year guaranteed supply of their resources to China.

In fact, the big change that has happened in Africa over the last 20 years is the Chinese revolution taking place all over the continent. You go to any small town in South Africa now, and you will come across what’s called a China shop; it’s not just a big company in Johannesburg or Cape Town – it’s all over the place. The West is now waking up and saying: we better get back into Africa again!

* To come back to your meetings with the ANC and National Party leaders in South Africa: your CV states that you made a presentation to President De Klerk and his Cabinet and also met with Nelson Mandela in prison to discuss the future just before his release. What was it like to be involved in that process?

You don’t choose when you are born and when you’ll die. I feel very lucky and privileged to have lived a very historic moment during the transition of South Africa to a new country and played a very small role with the High Road and the Low Road scenarios. I talked to De Klerk and his Cabinet in 1986, and thereafter I was asked to see Nelson Mandela in January 1990, about a month before his release and we had a long conversation in the morning, just he and I discussing about the future. That was a most fantastic experience, because few people get to meet Nelson Mandela one-on-one for hours. It also showed how powerful the process was in actually changing people’s mindset. The thing about playing scenarios about the future is you are saying: here is a possible future, and you can contribute to it. If you can make a contribution to it, we can then make the High Road happen. In a sense, a scenario can be used to encourage people to take the High Road.

* Is it possible that the regime at that time had come to terms with the fact that it had reached the end of its tether and that there was no other option than to seek a honourable exit rather than face the impending crisis?

There was a great sense of crisis in the late 80s because of sanctions isolating South Africa and with the government basically saying there’s really no future if we just leave things as they are. There was indeed that sense of crisis which made them take the honourable solution. But it should always be remembered that they might not have taken that option, so full credit should go to Mr De Klerk for he saw the high road and he took it; he stepped down and allowed Nelson Mandela to take over.

However, and there’s a big however, that was the political crossroads; we now have an economic crossroads for we still have an economy which is very exclusive with a very high youth unemployment rate, probably around 50% and lots of people who really take no part in the economy at all and obtain welfare grants from the government. If South Africans want to stay on the High Road, they have got to do something now about reorganising the economy so that it has the same level of freedom that the people are being given in the political dimension. One of the problems today is the people do not have the same sense of crisis now that they had in the mid 80s when they were really worried about things that could happen to South Africa. Most of the people are now just getting on with their jobs… but actually the economic crossroads is just as important as the political crossroads.

* Can we say that the “high road” scenario proposed to South Africa then amounted in fact to taking the moral high ground?

Indeed. You have got to give the people full voting rights so they can actually decide who they want to govern them. We said it’s no good trying to form a kind of forced government between white and black people in South Africa which is not representative. That won’t work. A lot of people in the mid 1980s said our High Road scenario was but a fairy tale, there is no way the ANC would ever sit down with the National Party and negotiate a reasonable settlement, but they actually did it.

* Do you think that the same “high ground” scenario, as proposed to South Africa, could be successfully applied in other conflict areas like Palestine, Iraq, Afghanistan, etc?

Absolutely. I think that the kind of formula that we had in South Africa could be applied in Israel at the moment and in places like Iraq, Syria, etc. But I do not think that you will get the political leadership of Israel and Palestine right now to sit down and negotiate realistically with one another. I would like to see another negotiating forum comprising lawyers, academics in Jericho and the Gaza Strip and other influential people getting the show on the road which then creates the momentum for the leadership to join. What worries me at the moment is that nobody wants a solution, they just want to fight.

The other reason being that you just don’t have at the moment the same kind of relationship between the leaders of Israel and Hamas that Mandela and De Klerk had. That’s why I would like the start to be made by people on both sides – Israelis and the Palestinians who are very influential but who really want a solution. It’s also not just having a sense of crisis, it’s having the relationship, and the great thing about Mandela was that he was very special. He could have been so different, very angry. But he wasn’t… Even when I saw him, he wasn’t angry at all, he just wanted to know about the future. And he developed a relationship before he was released with FW de Klerk, which made the latter trust him. And right now, do I think there is any trust between the Israeli leaders and the Hamas? The answer is no. It’s not just the crisis, you need the trust. That unfortunately is missing, but there are other people who trust each other and who can start the process.

* You also warned President Bush in June 2001 of impending terrorist attacks on Western cities. What were the flags which pointed to those threats?

When we wrote ‘The Mind of a Fox’, which we published in June 2001, we thought we’ve got to include an example of our methodology. We decided that the best way to get this methodology across was to write a letter to George W. Bush when he first became President, wherein we said that his biggest threat as President of the United States was a massive terrorist strike on a Western city. In our view that would completely transform his presidency and possibly lead America into what we called a gilded cage where it shut itself off from the rest of the world. That happened three months after we published the book. Thanks heavens, we didn’t talk of planes going into buildings in our letter, we talked of somebody planting a nuclear device in the middle of a city. But what we got right in retrospect was the flag that made us rank it as his No. 1 threat.

In fact we had three flags – the first one being the growing confrontation in the early 90s between the major religions of the world – Christianity, Islam and Judaism. The second flag was the equipping of organisations in places like Afghanistan and the reorganisation of those movements which were dedicated to the downfall of America. But the flag that convinced us it was a serious threat was the two attacks on American embassies in Africa in 1998 – one in Kenya and the other in Tanzania by the Al-Qaeda. We just felt that that was a dress rehearsal for the real thing in America. We put it in the letter and it happened three months later. If you asked me whether we would say it would happen three months after we published the book, the answer is no. Because that’s what a scenario planner can do; he cannot get the exact timing and date or the type of the event, he can only capture the idea of the event. This is what we did.

* It would seem the Americans did not take heed of your warnings. Is it because those warnings sounded as most unlikely?

Absolutely. I think they did a literature search but there wasn’t a single book in America which said this could happen. So here are we, Chantell and I, two South Africans, putting forward a scenario which no American came out publicly with. In fact, when they did their literature search, they found that ours was the only book published anywhere in the world that in a letter to the President said this is your biggest threat. The thing about Americans is that they do feel that they are in control. When you are in the world’s biggest economy and the most powerful country, you could be quite hedgehog-like – we’ll set the vision, and we’ll shape the world to our vision: that’s what the average American think. But if you live in Africa, you are always looking around like a fox to see how things are changing and you’ll adapt to the changes. That’s because basically you are aware that there are lots of things beyond your control. I think the reason Chantell and I could come up with this scenario, and not the Americans, is because we were brought up in a different environment where you know there are things out there beyond your control.

* Does Obama look like a fox to you or is he acting like a hedgehog?

Unlike the press, which has given him a very bad rating, I personally think he’s been quite foxy in terms of his response to the Syria crisis. I believe he was quite right to change his mind on a military strike against Syria after Putin got a deal with the Syrian President to decommission all the chemical weapons. That to me was a smart move to have stepped back whereas Bush probably would have gone straight in. I think Obama’s more nuanced approach does not betray a weakness on the part of the USA, but is instead based on a realistic appreciation of the fact that America simply does not command today the power it did 30/40 years back; it owes a lot of money to the Chinese and the Europeans, it has a huge national debt. China now is the second largest economy in the world and it’s manufacturing a lot of things that used to be made in America. The idea that America is the big military power that it was 30 or 40 years ago is today simply not true, and therefore it needs a leader that’s definitely more foxy because there are lots of things in the world today that are beyond its control. It needs to adapt like a fox rather lay down the law like a hedgehog.

* Could scenario planning have sounded the alarm as far as the Arab Spring or the new situation that has developed in Ukraine are concerned?

It was Nassim Nicholas Taleb, a professor at New York University, who stated in his book ‘The Black Swan’, published a few years ago, that there are certain events that come out of the blue. We called it in our book ‘The Mind of a Fox’ the “unknown-unknowns” – something you don’t know you don’t know – in other words, it just come out of the blue. I don’t think any scenario planner could have anticipated the Arab Spring.

As far as Ukraine is concerned, it’s different. I haven’t actually seen what has been written in the last year before the annexation of Crimea, but in my view Mr Putin is a flag. He’s talked about going back to the old good days of the Soviet Union… Given that Ukraine had the revolution which made it more pro-Western, you could have easily written a scenario to anticipate that the first thing the Russians would do is to take back Crimea because of its strategic importance for their Navy into the southern ocean. They are not going to lose that port because that would mean losing a huge amount of military power – it’s the equivalent to the Americans giving up Diego Garcia. The Crimea move could easily be captured in a scenario.

The other thing relates to an article that I have posted on the ‘News 24’ website on 28th July 2014. It’s titled: ‘28th July 1914 – Then and Now’. A century ago on this day, the First World War, also known as the Great War, started. The thing that really hit me is that nobody then thought that the First World War was going to happen, even after a month previously on 28 June 1914, the Archduke Ferdinand, the heir to the Austro-Hungarian throne, and his wife were assassinated in Sarajevo in a car just like John Kennedy. The world hardly noticed at the time. As one historian observed: “The crowds in Vienna listened to music and drank wine as if nothing had happened.”

However, the day after the archduke’s demise, anti-Serb riots started in Bosnia as it was felt that Serbian authorities were behind the hit. Austria-Hungary then presented Serbia with an ultimatum they knew it was impossible for Serbia to accept and on 28th July the first shots were fired. Thus began a war in which almost ten million combatants died, which drew in all major powers of the day and which only ended on 11 November 1918 with the defeat of Germany.

Right now, nobody thinks a third world war is going to happen. But what I say in the article is that, as a scenario planner, you’ve got to imagine the unimaginable. Russia and America are getting quite close to the same kind of confrontation that they had in 1962 over the Cuban missile crisis.

* What would be your advice to old-age politicians who seem unwilling to let go of their firm grip on the control buttons and to give way to younger chaps?

Very simple: stop being hedgehogs. Politics is the one profession which has more hedgehogs than all the others: politicians do not change and adapt… Because, you know what, they’ve got to represent their party. If you are right wing, you say this, and if you are left wing, you say that. Look at America where you’ve got all the Republicans saying that Obama is messing it up, and of course the Democrats all saying that he’s ok. Nobody is courageous enough to start being foxy and say: may be we’ve got to adapt. In today’s world, politicians ought to have a more flexible outlook just like foxes.

In ‘Games Foxes Play – Planning for Extraordinary Times’, Chantell Ilbury and I challenge the American orthodoxy that only leaders with a fixed, central vision (hedgehogs) can achieve greatness. We argue that leaders with a balanced set of beliefs and the capability of adapting to change (foxes) are more likely to win the game in the extraordinary times we live in.

 


* Published in print edition on 8 August 2014

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