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Leadership exclusive: Clem Sunter on how to face the future like a foxMankind has always been fixated on attempting to predict the future. Modern business is no different in its desire to understand what may lie ahead. The world is, after all, an ever evolving canvas of political, economic, climatic and geographic change – all of which can present opportunity and threat in equal measure.
Enter Clem Sunter, the former top Anglo American executive and a leading exponent of scenario planning – the discipline that allows organisations to foresee and plan for a range of different strategic scenarios, which could impact on their future. This differs from the approach of many companies that operate according to a single strategic forecast of the future.
Sunter, and fellow consultant and colleague Chantell Ilbury – who co-authored a series of three best-selling books between 2001 and 2007 called The Mind of a Fox, Games Foxes Play and Socrates and the Fox – label proponents of the single forecast “hedgehogs”, while those who use the multiple scenario approach are called “foxes”.
“The idea comes from the Greek poet Archilocus, who said the hedgehog knows one big thing, while the fox knows many little things,” explains Sunter from his leafy Johannesburg suburban home. “We thought it was a good way of showing our approach of looking at different futures and constantly examining the environment – like a fox – and not pinning all your hopes on a single future – like a hedgehog. Rather, you should keep your options open.”
A decade or so ago, the scenario planning approach had gone out of fashion at many business schools which, says Sunter, were preaching the philosophy of the single big (hedgehog) idea.
“They were saying a business must have a vision, support it with a mission statement, then align everybody within the organisation and march them collectively toward the vision. It’s not that we don’t believe you should have all these things, but you must also have foxes who are constantly scanning the environment to see if it’s changing, and adapting accordingly.”
He believes the shock of the recession has brought scenario planning back in vogue, with many organisations now realising that it is a good idea to look at alternative futures.
The model introduced by Sunter and Ilbury integrates scenario planning into the mainstream business process of strategic planning and decision-making. “It allows top executive teams to test the resilience of their strategies and tactics against different scenarios and implement alternatives faster and more effectively than their competitors, should the need arise,” explains Sunter.
“We have also added flags and subjective probabilities to the scenarios so that these can be used to warn people of imminent changes to their environment.”
Before the recession, the Long Boom – a period of prolonged global growth – had been in play since the 1980s. By mid-2007, however, this was being replaced by the Hard Times scenario. “Leading on from this, we have four possible scenarios and two key drivers,” says Sunter.
The one driver is whether we remain a One World economy or become a Divided World, the other is whether we are in a “V” economy (decline followed by rapid recovery) or a “U” economy (decline followed by a bottoming out and a slower recovery).
He and Ilbury classify the four possible scenarios as:
Universal (“U”) – Where all economies go through hard times, with occasional minor up and downs, but no sustainable recovery until around 2016.
Ultra-Violet (“UV”) – Where the world is divided by speed of recovery. Europe (other than Germany), Japan and possibly the United States go through a prolonged “U”, while emerging economies such as China, India, Africa and South America display a more rapidly recovering “V”.
New Balls Please – Here, 2011 is a mild recovery and 2012 signals a return to normality and a V-shaped recovery. However, there are critical differences between the old and the new game: the East will be the economic equivalent of the West; there is a growing scarcity of resources (including food and water); and technologies reducing or resolving scarcity will create the next big technological wave.
Forked Lightning – A double-dip recession (such as the Wall Street crash of 1929, which was followed by an even more severe crash in 1932). In this scenario, people could lose 80% to 90% of their invested wealth.
Based on their series of “flags” for each scenario (Editor’s note: due to lack of space, we are unable to discuss each “flag” here), Sunter and Ilbury give the following probability to each scenario: Ultra-Violet – 40%; Universal – 30%; New Balls Please – 20%; and Forked Lightning – 10%.
“We feel this is a better way of looking at the world right now, which is in the midst of the biggest uncertainty in my lifetime,” says Sunter. “It’s a more effective way of having a conversation about the future, rather than using a single forecast to say what is going to happen.”
‘The America of Africa’
So where does all of this leave Africa as a whole, and South Africa in particular? Sunter confesses that he and Ilbury are more bullish than many about its prospects.
“Africa has been reclassified by the world and has come a long way since 2000 when it was called ‘The Hopeless Continent’,” he explains. “At that time, the West decided that Africa was not the place to be, and left. But the Chinese saw opportunity because the continent is so rich in minerals, and began developing relationships that have led to some dramatic growth rates.”
Sunter says the global recession – and the fact that Africa was left relatively unscathed – led Western companies to change their attitudes. “They realised it would be tough trying to sell into America and Europe and they needed to get into emerging economies,” he notes.
Sunter believes business attitudes have now changed dramatically and prospects over the next 20 to 30 years are good.
“Like any continent, you can divide it into ‘winners’ and ‘losers’: the governments that are changing and becoming more pragmatic and democratic, versus those that are still stuck in history,” he says. “So it’s not going to be a universal advancement, but you’re going to have some real winners.”
South Africa will be one of those because of its status as, what Sunter calls, “The America of Africa” – producing 30% of the continent’s gross domestic product with less than 5% of the population. It is a natural gateway into the rest of the continent.
“So our prospects have never been better because we are the largest player on the third-fastest growing economic region of the world, after China and India,” he says.
“I always tell people that it’s better to be South Africa in Africa than to be Germany in Europe – surrounded by elderly and indebted neighbours.”
Scenarios for South Africa
When it comes to scenario planning for South Africa, Sunter and Ilbury put three possible scenarios on the table and have turned to football to explain them. Key to this is the annual “World Competitiveness Yearbook”, published in May each year by the Swiss-based Institute for Management Development and which rates the competitive status of 58 countries.
“South Africa has been in a Premier League scenario since the 1994 election,” explains Sunter.
We were in a mid-table position in the survey until 2006, when we began slipping and, by 2008, we were around the relegation zone – 53rd. The reasons were a loss of talent through violent crime, emigration, HIV/Aids shortening the average lifespan, and an infrastructure showing signs of disrepair.
“Then we began to climb back up the league and, in 2010, we were 44th. The reasons are that we weathered the recession, our banking system didn’t have to be bailed out, we did better in terms of GDP growth, and Africa has been reclassified in the eyes of the world,” he says.
Sunter believes, going forward, there are three possible scenarios facing South Africa:
“The first is that we remain in the Premier League and attain a league position around the mid-30s, perhaps rising one day to the 20s,” he says.
“The second scenario is that we eventually slide graciously down into the Second Division, where we join the bulk of the Third World – poor but peaceful.
“The third is that we become a Failed State, unstable and violent like Somalia and Afghanistan.”
Sunter and Ilbury give a 60% probability to remaining in the Premier League, 30% to relegation to the Second Division and 10% to a Failed State scenario, a likelihood they regard as negligible.
They list three flags that will determine the country’s Premier or lower league status:
Inclusive Leadership – “We looked at nations that have gone up the Premier League fastest and they all had inclusive leadership,” explains Sunter. “At the moment, we give Jacob Zuma a tick on inclusive leadership. We think that he has – in terms of his appointments inside and outside of the Cabinet, his general conduct, the theme of his speeches – shown a level of inclusivity, which we think is good.”
Pockets of Excellence – Sunter believes this is a critical flag because of South Africa’s hybrid first world–third world economy. “We have lots of pockets of excellence in the public and private sectors, and using them to improve the performance of the entire team is a good flag; but if we dumb-down those pockets, it’s an unbelievably bad flag,” he states emphatically.
“Take government, as an example. SARS [South African Revenue Service] is excellent and rated as one of the most Internet-savvy tax departments in the world. If other departments can use the SARS model to improve, then that’s very positive.
“It’s similar with schools. We have some excellent private and state schools, and if we can apply that model to all the dysfunctional ones, it would be a good flag. But if we dumb them down it would perhaps be the worst flag of all,” notes Sunter.
A Balanced Economy – Here the objective is an outward-focused economy that earns sufficient foreign exchange to pay for imports and an inward-focused one that creates jobs.
“As far as the outward economy is concerned, for us the good flag is if we concentrate on the three areas where we have the strengths,”
says Sunter.
“Number one is in resources. Despite the decline in gold and diamond production, we’re still dominant in platinum, chrome and manganese, and have lots of iron ore and coal. If we can add value before we export, all the better.
“The second area is tourism. During the World Cup, we showed that we could handle an amazing number of foreigners with hardly any incidents. We can become a much bigger tourism destination and are still cheap by world standards,” he continues.
“The third area is being the gateway into Africa. We really must take advantage of that.”
On the internal economy, Sunter believes there is one flag – small business. “The only way you’re going to create a participative economy, where everybody’s having a go, is the promotion of small business and the informal sector. Rather than Zuma’s objective of five million jobs by 2020, we would have preferred the objective of one million new businesses by 2020,” he says.
“If you’re going to create jobs, you have to create new businesses; public works programmes are paid for out of private sector tax.
“We need to take informal businesses and create a bridge to graduate them to the formal sector. Through doing this, they will add, say, five to 10 jobs. And if we can graduate 20 000 of the top entrepreneurs from the informal sector over the next two to five years, then you are looking at one to two million new jobs.
“But it means having realistic regulation around small business and not too much red tape. This applies particularly in terms of recruiting and getting rid of labour. If you’re a small entrepreneur, you have to have that flexibility, which obviously is unpopular with the unions.”
Sunter believes this flag is neutral at present. While the government has not been hostile to small business, neither has it announced a strategy that favours entrepreneurship and the small business sector.
But, given South Africa’s well-documented array of problems, is his and Ilbury’s assessment of a 60% probability of remaining in the Premier League perhaps too optimistic?
“A lot of people criticise us,” Sunter concedes. “But we feel that the economy hasn’t done badly and that we should be able to achieve the 6% to 7% growth rate called for in the New Growth Path.”
Mike Simpson
About Clem Sunter
Born in the UK, Sunter studied at Oxford University before joining Anglo American and rising to become chairperson and chief executive of the gold and uranium division from 1990 to 1996.
In the early ‘80s, he established a scenario planning function at Anglo and later put together a popular presentation entitled, ”The World and South Africa in the 1990s”. In it, two scenarios were offered: the ”High Road” of negotiation leading to political settlement, and the ”Low Road” of confrontation leading to civil war.
Sunter was invited to make a presentation to then president FW de Klerk and his Cabinet in 1986 and, in the ‘90s, visited Nelson Mandela prior to his release from prison to discuss the future of South Africa.
He holds an honorary doctorate from the University of Cape Town for his work in scenario planning and has authored a number of books, including three with Chantelle Ilbury on scenario planning: Mind of a Fox, Games Foxes Play and Socrates and the Fox.
