The Situation Facing the Leaders of Today and Tomorrow

Written by Jun Salipsip

The then-candidate and now Philippine President Rodrigo Duterte said, “Change is coming.” What he did not say is that there is more to come and the rate of it will be faster. I think that in his first six months in office he has already introduced many changes, compared to past administrations. And at the rate he is going, we can expect more changes to come rapidly than before. The man is in a hurry because he only has six years to make the changes that he promised. And as expected, the changes he has been introducing, including his personal style, has some leaders groping for ways to cope with them.

Based on the reaction of some business leaders, you could guess that they are baffled, perplexed, and/or angry. They probably have not yet figured out the train of events that will follow after the reintroduction of death penalty, the change in the presidential form of government to federalism, the ending of insurgency especially from the Muslim rebels, the implementation of the family planning program that had been opposed by the Catholic church, the shift from a capitalistic to socialistic economic model, the eradication of contractual work, the revision of the foreign investment law to allow more foreign investors to come in, the planned eight trillion peso infrastructure expenditure in the next five years, and the shift away from the US relationship to China and Russia. How will all these planned changes promised by President Duterte affect the existing social, political and economic order and how should leaders be preparing for it?

President Duterte also creates more confusion whenever he changes his mind. First, he did not want to run for president, and then at the last minute he decided to run — and won the election. Second, he wanted to cut ties with the US, but after the election of a new US president, he reconsidered his decision. Third, he invited an opposition leader to join his cabinet but later asked her not to attend cabinet meetings, resulting into the resignation of that person. Fourth, he promised to be more circumspect with his language, but then he reverted to his old ways in expressing what he truly feels.

The VUCA environment

These changes created an uproar from the media and were criticized by people who may not yet have accepted the Volatile, Uncertain, Complex, and Ambiguous (VUCA) environment of today. I think there will be more changes in the president’s plans and previous decisions depending on the prevailing economic, social, political, and environmental situation. And who knows, maybe that is what we need to survive today’s VUCA environment.

Recently, there were some unexpected changes that happened with the election of a new US president because of his pronouncements and decisions. The new US president’s protectionist and anti-sourcing stance has put expansion plans of the rapidly-growing Business Process Outsourcing (BPOs) in the Philippines on hold. What is its impact on the country’s employment opportunities and its effect on the building industry that has been rapidly building to accommodate the requirements of the BPO’s previous planned expansion? What should be the response of our national leaders in case the US companies pull out their BPO operations in the Philippines?

The recent withdrawal of the US from the Trans-Pacific Partnership (TPP) trade pact that had been vigorously pushed by the previous US administration could have a “sledgehammer” impact on Asia, including Japan, Australia and Singapore which are all signatories to the TPP. What is its impact on international trade and who will benefit from it? The potential responses of other countries, including ours, could have a domino effect whose results are difficult to predict.

The acceleration of change

Way back in 1970, Alvin Toffler already noted in his book “Future Shock” that change is accelerating. The author said that rapid change creates disorientation and progressive incompetence in dealing with the new environment. Those who were unable to adapt must have closed down or had been bought by those who were agile enough to change with the times. I think that if we check the top Fortune 500 in 1970, many of them would no longer be on the 2017 list.

To understand better the acceleration of change, let us have a macro view of the development or evolution of mankind from the beginning of civilization. Did the succeeding periods become shorter than the previous ones?

· The Hunter-Gatherer Age lasted thousands of years; the Agricultural Age lasted only a few hundred years; the Age of Discovery (colonization) and the Galleon Trade lasted only a hundred years; the First Industrial Revolution lasted less than a hundred years; the Second Industrial/Technological Revolution lasted less than 50 years and is now overtaken by the Digital Age which may soon be replaced by the next “who knows what” wave of development.

· Fast, unpredictable changes without clear patterns or trends are difficult to deal with. It has a way of disrupting the way people live and work. Being creatures of habit, people tend to resist change, but they are forced to change and adapt to new living conditions, or perish.

Each change also brings with it more complexity because of the introduction of better tools replacing old ones, development of extensive new knowledge uprooting old mindsets in many areas, and the application of intricate processes that are more efficient and effective. Each period brings with it new challenges that must be learned within a shorter period of time.

· When the Ice Age ended, it brought forth a temperate climate to some regions that favored the growth of edible plants. It is not hard to imagine that the hunter-gatherers had to begin figuring out whether it was more convenient to do a search over a wide area to obtain food and chase wild animals for food, or tend to the plants in one area and domesticate some animals for their sustenance. Some of the hunters and gatherers opted to settle down, thus giving birth to the Agricultural Age. With improved agricultural harvest, the economy grew and encouraged trade and commerce. The growth of commerce gave impetus to voyages of trade and discovery, thus ushering the Age of Discovery and Colonization. With dominance in world trade and with Western Europe’s tremendous population growth, increased demand led to increased production of goods, leading directly to the Industrial Revolution.

· In the hunter-gatherer age, they foraged and hunted for food and carried them home to share with the others. They facilitated and coordinated their activities through language and probably only had stone tools to defend themselves or help them in their work and day-to-day activities. They were nomadic and had to travel light to follow the sources of food. The work was probably limited to a few hours every day and work may have simply been divided between those who forage and those who hunt. Life was probably more leisurely because nothing much was changing.

· But as they began to farm, the hunter-gatherer had to learn to weed or water the plants and gather seeds for replanting. They had to learn how to herd or domesticate animals, feed them and harness them for work. They had to invent private property and ownership to encourage land development. They needed to invent new tools for tilling the land, wheels to transport their harvest, and storage facilities that were protected from marauders. They had to create laws to regulate relationships and transactions. And to implement the laws, they had to establish a group that could enforce them. They had to invent writing to codify their rules and regulations. Together with writing, they had to invent numbers to count their harvest and keep an inventory of goods. Their activities were also probably driven by the seasons, thereby introducing a certain kind of cadence to their lives. The level of complexity had gone up a notch higher and work must be done within certain periods or else they will miss certain windows of opportunities. And because of the growing complexity, work must have been divided among many specialists.

· With the invention of sailing ships, the compass and the sextant, the Age of Discovery/Colonization and Trading began in earnest. This age opened up the world to new ideas. They also learned how to use gun powder and fitted their ships with canons to subdue and colonize other countries and force people into slavery. With increasing trade, they handled the new complexity by chartering corporations, invented double entry accounting to record transactions, and introduced foreign exchange and banking to facilitate foreign trade.

· Then the three stages of industrial revolution created more knowledge through science and introduced further complexity because of new inventions and technology that allowed more technology to be produced. It was during the first industrial revolution that professional management was introduced as a function separate from the other functions of business. New approaches to management that are still in use today were also introduced. There was a shift to “a system of factory-based manufacturing that included complex machinery, continual technological growth, new energy sources, and developments in transportation”.

· Later, in the second industrial revolution, the internal combustion engine was developed that led to the development of the automobile and the airplane. The development of electricity improved industrial processes and the invention of the telephone improved communication tremendously. With the airplane, travel to faraway places became faster, bringing people together more easily but increasing the clash between cultures more readily.

· Today, with the Internet, we generate and share information digitally across the globe. New e-businesses are cropping up all over the world and many businesses are able to relocate anywhere in the world that can offer the most advantageous location and conditions. Renewable energy is being developed to replace fossil fuel and electric cars may soon replace the internal combustion engine. Artificial intelligence may also replace the traditional work we know of today, forcing us to quickly learn new skills for new jobs, although that may even soon be replaced by future jobs within a shorter period of time.

· Multiple and intertwined technological, social, political, and environmental factors create a lot of complexity that is difficult to immediately comprehend.

The white water metaphor

Today, the impact of the digital age is represented by the “white water metaphor”. It is seen as symbolic of today’s digital environment that describes a situation where an organization is seen as shooting the rapids in a smaller boat manned by a crew working together to successfully steer the boat, without waiting to be told to do so. The organization is seen as navigating through the many dangerous and unpredictable twists and turns of the channel in raging current and foaming water with the crew trying hard to avoid sharp boulders littering their path.

The twists and turns represent the frequent disruptive changes where the last twist and turn is not a very good predictor of the next one. The crew working together represents the required multiple and combined knowledge needed to address complex situations. It also represents the exercise of multiple leadership, making multiple decisions as against a single all-knowing leader making a single decision. Anything that does not contribute to the success of the navigation is considered unnecessary baggage that is thrown overboard. This metaphor represents how organizations have flattened out and outsourced anything that is not related to their core business.

I think the biggest contributor to the complexity in today’s world is the increasing availability of information to anyone who needs it, the speed with which information is made available, and the expansion of networks around the world. The activities and interactions of different individuals, groups, businesses, countries and races together with their mutual relations or the dependence of each of these elements with one another creates a more complex system that is difficult to comprehend in its totality. The world is now interconnected with many interacting elements, creating a complex system highly sensitive to even a slight change in another part of the world, resulting into what is called the “butterfly effect.”

The Butterfly Effect

The Butterfly Effect is the concept that small causes can have large or unpredictable effects in a complex system. The phrase “Does the flap of a butterfly’s wings in Brazil set off a tornado in Texas?” is attributed to Philip Merilees when he concocted a title for the presentation of Edward Lorenz who failed to provide a title for his talk that was to be presented at the 139th meeting of the American Association for the Advancement of Science in 1972.

The poetic “butterfly effect” does not really mean that the fluttering wings of a butterfly in Brazil will literally set off a tornado in Texas, but it represents the idea that there are many unknown factors or conditions interacting with each other that can influence the future results of an activity. It represents the idea of uncertainty in today’s environment.

And since today’s situation is in a continuous flux, the information we have may be vague, obscure, or could be interpreted in many ways. Identifying problems is difficult because they could have many causes and may need multi-solutions that we have not thought of because of the inconclusive information that we possess.

Under the above situations, plans would not be precise and the company’s objectives must be continually adjusted. Leaders must develop a sense of the reality of evolving situations and learn to adapt rapidly. Decisions would be based on the responses of others or on the anticipation of what those responses will be.

The world has become more complex and will become more complex in the future, making our knowledge of it more imperfect. Our ability to process the growing number of information is limited and most information that we possess is incomplete. Because leaders could not possibly analyze all information on all alternatives, they should have the ability to formulate a hypothesis and the courage to continue experimenting until they achieve the results they are looking for and learn to “accept solutions that are good enough”.

The leader of tomorrow would need to gather as much information he could get and reconcile competing views of different people with different perspectives. It is difficult today to foresee what the future holds, but a leader must be ready to keep matching the abilities of his organization to the changing business conditions.

Are our leaders of today up to the challenge of a VUCA world? We sincerely hope so — but it remains to be seen.

References:

1. Babe G. Romualdez, Spy Bits,”So Far So Good for Duterte”, Thursday, January 26, 2017

2. https://en.wikipedia.org/wiki/Hunter-gatherer

3. https://en.wikipedia.org/wiki/History_of_agriculture

4. https://en.wikipedia.org/wiki/History_of_colonialism

5. https://en.wikipedia.org/wiki/Industrial_Revolution

6. https://en.wikipedia.org/wiki/Second_Industrial_Revolution

7. http://study.com/academy/lesson/the-industrial-revolution-1750-1850-growth-impact.html

8. https://en.wikipedia.org/wiki/Electrification

9. https://www.google.com.ph/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=the%20white-water%20rapids%20metaphor%20sees%20change%20as

10. https://en.wikipedia.org/wiki/Butterfly_effect

11. Edward Norton Lorenz was an American mathematician, meteorologist, and a pioneer of chaos theory, along with Mary Cartwright. He introduced the strange attractor notion and coined the term butterfly effect.

12. John Kay, Obliquity, page 172

13. Robins and Coulter, Management, page 78