Doing Business in the Garden of Forking Paths:
Synthetic History as a Leadership Tool
by Adrian J. Slywotzky

Successful business leadership requires a variety of skills: technical know-how, financial acumen, practical psychology, a gift for communication, and many others. But one of the most essential skills, and one of the least-discussed, is foresight--the ability to see around corners into a tomorrow most other people haven't begun to imagine. An effective business leader is someone who sees his or her company’s best potential future, understands what is needed to realize that potential, and takes the steps necessary to transform vision into reality.

Of course, this is easier said than done. Among other things, developing the gift of business foresight requires a deep sense of your company’s present realities—those readily apparent on the surface as well as those that are less obvious. And this, in turn, requires a thoughtful understanding of your company’s history, including the choices, conscious or unconscious, that have brought it to its current crossroads. (And yes, every moment in any company’s story is a crossroads, since we always face choices about the direction we will travel tomorrow.)

One of the biggest challenges in understanding any company’s story is that, when we look at the past, we see one history. Because we know what happened and have assimilated those events into our view of the world, that real-life history appears inevitable: "How could it have happened any other way?"

It’s so easy and so tempting to produce after-the-fact rationalizations for events that startled us when they happened. Listen to political pundits the day after a close election. Every one has a clear, logical, iron-clad explanation of why Candidate A edged out Candidate B—including all the pundits who were absolutely certain, a day earlier that Candidate B was sure to win. In the same fashion, when the Dow Jones falls, the analysts have no trouble explaining the factors that made the drop inevitable—"weakened earnings expectations," "uncertainty overseas," "a sluggish housing market." Given the exact same data and a rising Dow, the same experts will offer an equally plausible set of explanations for that result—"rising productivity," "consumer confidence," "lower interest rates."

We look backward, see one historical path, and quickly learn to view it as obvious and inevitable. In the same way, when we look ahead, we see one future history. We call it our "base forecast," or "the most likely case," or "the default scenario." While some part of our mind knows that there is always uncertainty about the future, another part quickly gets comfortable assuming that the one future we consider most likely is, somehow, real and even inevitable. That one assumption leads to lazy, careless non-thinking about the future. The base forecast, like a powerful magnet, pulls our thinking back toward the comfort zone, short-circuiting our ability to imagine the unexpected.

To remedy this blind spot in our thinking, we need to change how we view both the past and the future.

When we look at the past, we need to see a number of dominant alternative histories that could easily have occurred: The Greeks lost the Battle of Salamis to the Persians, insuring Asian dominance of Western Europe. Joshua Chamberlain’s regiment from Maine was routed at the battle of Gettysburg, Lee’s army took control of the state of Pennsylvania, and the South won its independence. The levees in New Orleans were expanded and strengthened before Katrina hit.

Or, in business: The medieval European laws against compound interest were never revoked. The Model T was invented and marketed by an enterprising Russian. IBM decided not to get into the computer business. Xerox successfully commercialized the mouse and the graphical user interface. Apple opened up the Apple operating system to everybody.

What would have happened? How would our world be different today? Which fortunes would never have been created? Which fortunes would have been multiplied beyond imagining?

For a comparison, consider chess, the ultimate game of strategy. In mid-game, a great chess master like Gary Kasparov surveys the board and sees a dozen possible synthetic future histories playing out. Identifying the one future history he wants to make real, Kasparov works backwards through the story to identify the single best move he can make right now—the one with the best options and the best odds, and the first step on the particular pathway Kasparov wants to create.

Of course, Kasparov must make a move—it’s required by the rules of chess. In real life, we don’t have to. We can postpone our decision, letting time pass and letting a little more history turn from synthetic to real before we decide. But waiting is a narcotic: pleasurable, habit-forming, and ultimately fatal.

Thinking about the world in terms of multi-branched possibilities (what Argentine author Jorge Luis Borges called "the garden of forking paths") is a different way of viewing life, one that is incredibly humbling, because it acknowledges the vital role of chance in the history that produced us. It can also be amazingly profitable, because seeing many possible futures is a first step toward choosing among them and then working to make real the future you prefer.

What might have been different if one of the world’s largest and most troubled industries had applied this kind of thinking over the past decade? A "synthetic history" of the automobile business—a look, not at what actually happened, but what might have happened—provides one answer:

It’s October, 1996. The September new car launches have just been completed. The fortunes of the world’s great automakers vary widely, with the leading Japanese companies generally doing well, while American firms are struggling in many parts of their product lines except trucks and SUVs. Nonetheless, it’s clear that there are certain serious problems the entire industry shares. These problems are not new. But at this moment, something new appears to be happening. The leaders of the biggest automakers now seem to recognize that they face a shared set of problems, and for the first time they seem to be moving towards exploring some shared solutions.

On October 24, the Associated Press carries the following terse, cryptic bulletin: "General Motors has confirmed that its CEO John Smith will meet today with the chief executives of Toyota, Ford, and Honda to consider matters of joint concern. ‘Because the meeting is private, there will be no public comment on the specific topics discussed,’ a spokesman said."

The automakers recognize the seriousness of their shared dilemma, and they sense the need to work together to tackle it. But there’s an atmosphere of tension in the room. Each of the CEOs believes—not without justification--that he brings to the table something unique and more valuable than any of the others. It’s a complex cocktail of emotions swirling around: the old American hubris, the new-found Japanese pride in their undoubted quality advantage, and hurt feelings over past snubs.

As the morning wears on, a list of possible areas for collaboration takes shape.

  • Creating common production facilities.

  • Joint development of new propulsion systems—more fuel-efficient engines that will reduce emissions and save customers money.

  • Shared research into improving systems like transmissions—important, expensive systems that customers never see and that create no competitive advantage for any one manufacturer.

  • Development of universal standards for safety, security, and communications—areas that consumers say they care about and where shared improvements could lift all boats.

  • Most ambitious: A shared program to develop a low-cost, small car for the emerging markets in Asia and Africa—a safe, reliable vehicle that can retail for less than $7,000.

Each of these projects has been discussed and costed out at automakers around the world, and the numbers are sobering: $1 billion to develop a fuel-efficient hybrid engine, another $3 to $4 billion to convert the whole fleet to hybrid; $500 million for a new transmission system; $400 to $600 million for in-vehicle security and communication system; $500 million for safety. The total cost would be prohibitive for any one company—but for the industry as a whole, manageable.

The conversation ends with a sense of new possibilities. But the agenda is ambitious and the change in attitude required is daunting. The CEOs return to their home offices for further strategizing and discussion, and with an agreement to talk further a year later.

In early 1998, they bite the bullet. At a joint press conference, the CEOs of the world’s leading automakers announce an agreement to share several basic technologies. The statement issued by all the companies states, in part, "We realize that without highly disciplined project management accountable to the alliance, no advantage will be created, either for our companies or for consumers." Based on this realization, they create a networked development system including several R&D labs with clear project leadership, specific investment commitments, and aggressive schedules.

Imagine how different the recent history of the auto industry might have been if its leaders had been willing to take this visionary step a decade ago. More important, our synthetic history raises the vital question: Is it too late? Could Rick Wagoner at General Motors and his counterparts at the other carmakers reshape the next ten years along the lines of our imagined scenario?

We think the answer is yes—provided they have the readiness to see and embrace a different vision of the future than the one their training and experience have led them to assume. The art of thinking about past and future in this new and less-constrained fashion is one that isn’t taught in business schools, but it’s a vital skill for any manager in today’s increasingly complicated, multi-dimensional universe.


Adrian J. Slywotzky — cited by Industry Week as promising “to be what Peter Drucker was to much of the 20th century, the management guru against whom all others are measured”—is a director of Oliver Wyman. He is the author of the bestselling The Profit Zone (selected by BusinessWeek as one of the ten best books of 1998), Value Migration, and How to Grow When Markets Don’t. He has also been published in the Harvard Business Review and the Wall Street Journal and has been a featured speaker at the Davos World Economic Forum, the Microsoft CEO Summit, the Forbes CEO Forum, and the Fortune CEO Conference. See www.crownbusiness.com or www.mercermc.com for additional information.

Many more articles in Creative Leadership in The CEO Refresher Archives

     
   
   


Copyright Adrian J. Slywotzky. All rights reserved.

Current Issue | Archives | CEO Links | News | Conferences | Reading