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How to Anticipate The Future (Nigel Lake, Part 7 of 10)

Anticipating The Future

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This is the seventh instalment of my conversation with Nigel Lake, CEO of Pottinger, a global corporate advisory firm based in Sydney, Australia. Nigel is the author of The Long Term Starts Tomorrow, a must have book “for any manager, leader or Minister.” The Hon Mike Baird MP, Premier of NSW

Tom: If you were the CEO of a bank, say National Australia Bank, and you see [innovation in the payments industry] coming, but you don’t have the capital to invest, and you don’t have the technology people. How do you respond to that?

Nigel LakeNigel Lake: You have to get in a darkened room where you feel very safe, and you have to say “what does the world look like when these people have taken over one of the most profitable parts of my business? What are we going to do? How are we going to compete?”

The payments part [of the banking industry] is somewhat invisible from the outside but it is a very high margin business. And so you have to say, “if we lose all of that, what are we going to do? How do we organise ourselves? How do we continue to be relevant in a very different world?” And you need to make all your decisions working back from that.

That’s an archetypal example of why thinking about the long term first is incredibly helpful because trying to work out what you might do incrementally starting from today is quite hard when you’re saying look it’s all too difficult. But if you say, okay, well, whatever is going to happen is going to happen let’s think about the world after that, then you can start making decisions where everything you do along the way lines up with making sure that you’re well positioned over the longer term. And you can then get out and start to tell some of that story publicly.

Tom: So in a certain sense it’s having the foresight to see what’s coming, accepting that, and then working accordingly.

Nigel Lake: Absolutely.

I spoke at a strategy conference a month or two ago, and I got there just a bit before I was due to speak and the last session was still going. It was a guy from the management consulting world talking about how companies couldn’t really deal with a strategy that looked out two or three years any more. It was all too hard; the world was moving too rapidly; they could only really deal with things for the next three months. And I just thought to myself, wow, how can I find companies like that which are only thinking three months at a time? I just need a client on the other side and we’ll go take their business because they have no idea where they are going.

People like to reassure themselves that understanding the future is just too difficult, so you had better focus on the near term. But there are all sorts of areas where actually the future is very very predictable over vastly long time horizons.

Anything to do with demographics you can predict quite reliably decades and decades ahead. If you want to know what the population of some country is going to be in the year 2050 we have already a pretty good idea now because most of the people have already been born who will be alive in 2050 in that country. Things like that are predictable.

The TVs that will be on sale in the year 2020, we know what they are now and what the specifications are now because you can’t invent new technology and bring it to market in four and a half years.

The things that will go on sale in 2020 have already been in the product development pipeline for some time and they are part of a longer term evolution of products. So in the world of technology you can predict five or ten years in the future as to what things will be like. Many of them are on relatively predictable Moore’s law price curves.

What is energy going to cost in ten or twenty years time? Well, we have fifty or sixty years history of the evolution of solar PV prices, and they will continue to decline on more or less the same basis for a period of time. Before long they will come to drive the cost of power, and so predicting the cost of power in the future becomes rather easier than it has been in the past where it was all dependent on oil and commodities cycles.

There is lots of data you can use to understand the future but businesses are not necessarily brilliant at doing that.

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