The 5th Principle of Leadership

by futurist Richard Worzel, C.F.A.

This is the conclusion of a series, which started with two earlier blogs, which you can read here and here.

Fifth Principle: A leader must exercise foresight.

We’ve established that a leader must lead towards something, must help her followers to improve, and must promise and achieve victory. But to do these things successfully requires the ability to anticipate what’s going to happen in the future, and to prepare for it. Only then can she and her followers figure out how to achieve victory, decide what skills and abilities she and her followers will need, and find the route that will deliver them to their goal. And anticipating what happens next is the ability to practice foresight.

This is not to be confused with predicting the future. As a professional futurist, I know that the future is inherently unpredictable. It is too complex for anyone, regardless of how smart or well-informed, to calculate precisely. Instead, foresight means anticipating what might happen, preparing for those possibilities, and then using that preparation to develop the mental flexibility to improvise intelligently when reality finally does unfold, in whatever way it chooses. It’s not about having a perfect prediction, therefore, but of having the mental strength and agility to respond to whatever happens, quickly and constructively.

That being so, how do you exercise foresight? This is what I’ve spent my entire career learning and working to improve, first as an institutional investor and investment research analyst, and then as a professional futurist. I continue to seek new and better ways of learning how to improve my foresight, but offer these five fundamental tools as a start.

First, make use of environmental scanning. The great Lawrence Peter Berra, better known as “Yogi” Berra, whom The Economist called “the wisest fool in Christendom”, once remarked that “you can see an awful lot by looking.” Indeed you can. On the other hand, if you’re not looking, it’s quite possible to miss an awful lot, and, unfortunately, this characterizes the way many people, and many organizations, back into the future: without looking. When they consume “the news” offered (i.e., selected) by major media, they are almost always looking at things happening in the present or in the recent past. Worse, media news has, in many cases, degenerated into “news you can use”, which means immediate, personal, news, which likely consists of tips and titillation rather than looking at what might have important and long-term implications. And many people consume news as entertainment rather than as information on which to base decisions. That may be amusing, but it has almost nothing to do with foresight. In my practice as a futurist, I hardly ever watch television news programs, or listen to radio news. When I read newspapers, I’m often more interested in a small squib of an article on page 16 than the lead article on the front page. The front page, at best, represents today, but more usually yesterday. I’m interested in tomorrow, and so look for straws in the wind.

Environmental scanning means deliberately and systematically looking for things that will affect the future in general, and your group’s future in particular. There are specific techniques for this, but I will leave them for another day. For the moment, let me just say that you need to watch for change, and for the effects of the major forces that drive change. Such effects are called trends.

Second, make use of scenario planning. Most people have heard about contingency planning, of making plans to deal with a variety of possible situations. Scenario planning is the systematic means of deciding which situations are likely enough, and important enough, to warrant the creation of such plans. Rather than try to predict a specific future, and probably get it wrong, it’s usually better to consider the range of possible, important, and likely futures so that you have plans prepared to meet them. If a decision is needed immediately, you can always act in accordance with the scenario you believe is most likely, while keeping the others close at hand in case the world future unfolds in a different or even unexpected manner.

This is where the mental agility comes in, because if you do this, you will also have to be willing to accept that you were wrong in your original assessment, and quickly change direction. Most people make a habit of doing the opposite: they cling to decisions, as if it would do lasting damage to their egos to find out that the future was more complicated and unpredictable than they thought it was, that they were – horror of horrors – wrong. As a result, they get stuck in wrong decisions, and it can take them a long time to change with the circumstances.

Once you’ve developed a range of likely and appropriate scenarios, and decided what indicators you will watch to tell you which one is actually happening, then you can develop contingency plans in response. By doing so, you have already thought through that you want to do B when A occurs. As a result, when A happens, you don’t have to spend a lot of time pondering what to do; you do previously defined B. This substantially increases your ability to respond to changing circumstances, and increases your group’s nimbleness. This is always useful, but it’s particularly important in the private sector. I tell my clients that the future will catch you by surprise, but the companies that do best will be the ones that recover fastest, and respond most constructively when they are surprised.

The third tool to use in exercising foresight is Wild Card analysis. A Wild Card is a low probability event, which, if it happens, will have dramatic consequences. The classic example of this is the terrorist attack of 9/11, which was largely unanticipated, and which caused a major revamping of the way the U.S. federal government behaved and spent money, and which dramatically escalated the level of misery inflicted on air travelers worldwide.

As an aside, many Wild Cards are not low probability events at all; they merely represent situations that have been improperly evaluated. Hence, the 9/11 attacks were preceded by a major domestic terrorist attack, in Oklahoma City; a series of attacks on American properties and personnel abroad; and by a failed attempt to blow up the World Trade Tower using a truck full of explosives in 1993. Anyone who properly analyzed these attempts – and there were people who did – would have assumed that there would be more attacks, and would have prepared to prevent them. The “Powers that Were”, though, dismissed such warnings as alarmist and far-fetched, and so were “surprised” when 9/11 happened. This is actually fairly typical of the way most people approach the future: they assume life will continue as “business as usual”, even in the face of compelling evidence to the contrary.

Wild Card analysis consists of asking the question “What event would have dramatic consequences that we are not currently considering?” and then following the train of logic to its conclusion. Let’s choose what many would consider a really wild, Wild Card: What could cause a dramatic increase in prosperity?

To answer this question, you would have to ask: What produces increases in prosperity? Well, a significant increase in economic activity would come from a big pick-up in GDP growth, among other things. What, then, could cause a big pick-up in GDP growth? GDP growth comes from two sources: labor force growth, plus productivity growth. We already know, from simply looking at the demographics, that the labor force of most developed countries is going to grow quite sluggishly. Indeed, in many countries, including China, it will stagnate or even begin to decline. Therefore, productivity growth alone would have to account for a significant increase in economic activity.

What could produce a significant increase in productivity? Well, there are several possibilities, including a big increase in R&D investment, or the accumulated effects of the rapid advances in technology. How would we know if there was a big increase in R&D spending? Simple: watch for statistics on this very point, and if it starts to happen, look for signs that productivity is growing more rapidly. How could we tell if the rapid advance in technology is increasing productivity? That’s not so simple; we might look, for example, for increases in the profits of companies that make use of cutting edge technologies, and then think hard about what else might signify such advances.

This is a simplistic example of the kind of questioning you would use to make use of Wild Card analysis, but for now I’m going to move on.

The fourth tool of exercising foresight is collaboration. No group moves into the future by itself. It works with other people, other groups. In business this would be suppliers and customers, so let me speak in those terms. In many ways, you are constrained by how quickly your suppliers and customers move. If you learn of their plans, and their expectations of the future, and share yours, then it becomes possible to move more rapidly because they have anticipated your needs, and you have anticipated theirs. This is pretty obvious once you think about it.

And the fifth and final tool of foresight is innovation, the ability to do new things and improve on the way you operate. Unfortunately, there is a whole mythology surrounding innovation in our culture, especially in the corporate world. Most organizations swear that they are dedicated to innovation, and seek to innovate at every opportunity. This is blatantly false, and most organizations are either fooling themselves, or lying to themselves (not the same thing).

The truth is that innovation requires organizations to do three things that they really don’t like doing: they have to do difficult, risky things; they have to do things they’re not very good at; and they have to be willing to fail. If they don’t do these three things, then they are not, almost by definition, doing anything new, but rather replaying their greatest hits in order to pretend that they’re innovating. In particular, being willing to fail is difficult for individuals as well as organizations. People who fail lose credibility, they don’t get promotions, and they may well be tossed out or fired from the organization. Ironically, properly harnessed, failure can be a way of accelerating innovation if your organization is geared to learn from it, and to manage it properly.

But if you do not truly innovate, but merely go through the motions, if you do the things you did in the past to respond to the changes of the future, you are asking to fail. The world is changing, and if you don’t change in response, the odds are very high you will be left behind – hence the need for innovation, in spite of the risks.

 

I’m sure there are other things you can do to exercise foresight, and, as I said, I am still a student of this art and science. But these five things will give you a big leg up on starting, and if I can help, contact me and ask.

 

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It’s taken me longer to write these three installments on leadership than I expected as my life became unreasonably busy. However, it has also allowed people to contact me to comment, suggest, and disagree. One of the comments that I have had most frequently is that there are many other facets of leadership, and many good books on the subject. I’ve been sent lists of Things that Leaders Do, and had interesting, worthwhile discussions with people on the subject.

But most of the people who have contacted me missed the point. I said early on that there are lots of books, articles, and discussions about leadership. It, like innovation, is one of the sacred cows of business today. My point is that if you read those books, they won’t tell you how to become a leader. They will offer you techniques and tricks that can be very useful, but they do not hang together, there is no center or organized process of becoming a leader. If you follow these Lists of Things Leaders Do, you won’t necessarily become a leader.

I’ve tried, over the years, to develop fundamental principles of leadership. If someone follows these principles, I believe they can become a leader. I don’t claim to have all the answers – I’m still trying very hard to learn. And I don’t claim to have the only truth or only path to leadership. But the principles I have set forth have been offered with the specific purpose of answering the question: How do I lead?

And, of course, let me not to forget to remind you that my opening statement of the first principle is that leadership is magic. Practicing magic – real magic, not magic tricks – is an art that involves making use of science and technique, but is also much more. At its core, the art of leadership requires diving in and doing. Theory alone is never enough. So with that in mind, let me leave you with a final thought on learning how to lead:

Lead.