Adventure of Strategy

Strategy exists at two distinct levels:

The Macro Level, where the firm is not able to influence events but needs to be resilient to withstand them and even capitalize on them, and

The Market Level, where the firm can influence events to a lesser or greater degree and needs to do so in order to drive its competitive advantage.

Examples of the former include macro-economic trends like rises and falls of interest rates, war, Black Swans like 9/11 and natural disasters.

Examples of the latter include entry and departure of clients from the market, evolution of new services and maturation / stagnation of old, competitiveness with other firms in the market and penetration of new geographic markets.

Strategy can further be differentiated into deliberate strategy, which is planned for, versus emergent strategy where the firm reacts to something in the market that was not planned for (it may or may not have been foreseen, though) but which requires a change of direction (either an opportunity or a threat.)

One macro-strategic issue that has emerged as a possibility in the past few weeks, and that frankly scares the hell out of me, is the increased sabre rattling amongst senior people in President Bush's administration, about the possibility of attacking Iran. Perhaps even with tactical nuclear devices. The range of unforseen results that this could give rise to are truly frightening and extent to far beyond the Middle East. The global firms in particular, or others with global clients, need to be thinking about what this risk might hold for them. Let's play "what if" with the scenarios for a moment.....

To neutralize Iran's nuclear capability completely, along with its ability to strike back in retaliation, will involve upwards of 400 individual targets. Some of those targets are heavily fortified underground bunkers where conventional aircraft delivered ordnance will be ineffective; hence the talk of a "limited" nuclear option. The outcry worldwide at the use of nuclear weapons is likely to be immense and the world's attention would be very firmly focused on the Middle East.

Elsewhere in the world, this diversion of attention would create opportunity for others who want to engage in unpopular activities. A recent report from the Royal United Services Institute ("RUSI") in London about China's capability to attack and occupy Taiwan brings a very serious possible unforseen consequence to mind. The report is titled Shock and Awe With Chinese Characteristics: China's Increased Weapons Precision and the Taiwan Scenario and a summary can be accessed by clicking the hyperlink (purchase or subscription required for the full version.)

According to RUSI's report, China could now attack, subdue and occupy Taiwan in less time than it would take for the US to recall its aircraft carrier crews from leave. The USA has passed a law obligating it to step in to help defend Taiwan in the event of such an attack, though. The choice facing Congress would be invidious. Either step in late and try to mount a "Falklands" type campaign, under very different circumstances to those on the almost deserted Falklands Islands, or back down and "lose face" hugely in the process. Either way, the likely impact on Sino-US trade and other relations is likely to be disastrous.

With the world now focused on both Iran and Taiwan, with limited ability to focus or react elsewhere too, a copy-cat attack by North Korea on South Korea would also not be beyond the realms of possibility.

An attack on Iran, especially with nuclear weapons (however "limited" they may be) would quite probably change the dynamics of the relationship between the US and a whole range of other countries that are currently neutral; perhaps even some current allies. It is not a scenario but a certainty that the Department of Homeland Security would go on high alert and would probably need to stay there for a long time, making travel to the US an even more unpleasant experience for foreigners especially from non-aligned nations. This would have an impact on trade and the ability of the US to attract the best brains away from those countries even more than is currently the case. (The top universities and scientific institutions have been complaining about this since the post 9/11 clampdown.)

Finally, the possibility of the kind of suicide attacks that have been commonplace that have been commonplace in Israel for years, would increase exponentially. The national hysteria that could result from just a couple of suicide attacks in suburban American shopping malls, defies imagination.

The bullet that assassinated Arch-Duke Ferdinand and led to the outbreak of World War 1 in 1914 was also a very "limited" event. Yet it changed the balance of power in the world forever. I was relieved to hear President Bush on CNN last night, distance himself from the content of the New Yorker article on this topic, Next Stop Iran. Let's hope that cool heads prevail overall.

In the meantime, the questions that should be on the radar of the leaders of especially the major global professional service firms should be: What if this scenario plays itself out? What could be done to make the firm more resilient to both the directly forseeable and the unanticipated consequences? Would such a situation, however unhappy, result in opportunities that we could seize? What contingency plans could be put in place?

This is not about trying to predict the future. That is not the point of scenario analysis. The point is to identify events that could happen, and then assess the firm's the firm's likely resilience to that event if it does transpire. Also to think through what the most appropriate strategic response would be.

Comments, as always, are more than welcome and may be posted below.