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Business leaders need to be prepared for the turmoil of a changing world

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Given the uncertain times in which we live, it is imperative to build a roadmap that addresses the confusion of all shapes and shades and provides strategic adaptability.

The world is in flux due to conflicts in Eastern Europe, US-China technology competition, looming global stagflation, rising energy prices, biological threats, unpredictable climate events, and catastrophic food crises. It has been revealed.

In a connected and globalized economy, businesses can no longer exist in isolation. Business leaders may manage both “known unknowns” and “unknown unknowns” to create arbitrage transactions through strategic adaptability.

Today, the world is plagued by several confrontations, especially in the Eurasian continent and the Asia-Pacific region. There is also the ominous presence of China’s Belt and Road Initiative (BRI), which is considered a geoeconomic weapon by some strategists. The conflict between North Korea and South Korea is an additional concern with the possibility of a nuclear fire. Given that many important supply chains have a strong footprint in Asia, companies need to be aware of such asymmetric threats.

Why is the Asia Pacific region so important? There are three main reasons. Concentration of important raw materials, consolidation of manufacturing industries, which account for more than 65% of the world market share, and a range of routes that serve as a transit point for nearly 40% of world trade.

The turmoil in this region resonates with multiple industries and regions around the world. However, many cannot anticipate and prepare for the same thing. For example, consider the case of a conflict between Russia and Ukraine. Problems have occurred in the region since 2014. Nonetheless, everyone was comforted by the fact that such issues did not affect them, only proved wrong after almost eight years. Therefore, the phrase “predictable surprise” is very relevant. Most people seem confident in their knowledge, but few focus on results.

Today, the fate of business changes overnight. The average shelf life of today’s Fortune 500 companies is believed to be less than 10 years. For unicorns, less than 5. Most business leaders may overlook the reality that successful businesses do not rely entirely on management and engineering skills. There are other related events happening around the world, which could ultimately be the centerpiece of the company.

Wise business leaders are well-suited to process such intelligence in real time and act decisively. But the human mind is an imperfect tool. Research has shown that there can be various glitches in the way information is processed. Scholars call them cognitive biases, biases that can cause leaders to ignore or underestimate imminent disasters. It is important for businesses to remove such cognitive biases and prepare for challenges that may seem unusual. They need to be proactive in paying attention to “predictable surprises”. Unfortunately, few managers spend time understanding this today.

Leading an uncertain era

Apart from geopolitics, companies have other pitfalls. Localization or onshoreing, a force that goes against globalization, is a good example. Primarily caused by alien exclusion, it causes fragmentation of both the market and platform economy. Cyberspace is also witnessing a variety of threats. This is only exacerbated by advances in AI and quantum computing. In fact, it will overturn the traditional way businesses are organized from a social perspective and increase income inequality.

So the right question is how can business leaders prepare for these turmoil.

First, you need to build some resilience around your business. This depends heavily on the nature of the business, the technology, and the range of critical supply lines. It is becoming increasingly important for companies to make themselves relevant by building interdependencies while doing business in the larger global markets. For example, companies seeking to become suppliers to the global aerospace industry need a continuous focus on cost-effective design and technology. When a company is tied to the national security strategy of the country of purchase, it creates a lasting dependency. This is why countries like Taiwan and Japan are so important to the United States. Some companies have been able to successfully create some level of dependency.

Finally, intelligence, or information gathering, is very important. Today, almost 90% of the information is available from open source. However, if you have the skills to extract meaning from a huge amount of data. But the biggest problem in collecting such information is still our cognitive bias. The’coding’error is real because it can distort the interpretation of the data.

In his book Ash heritageTim Weiner — Former Reporter New York Times — Due to some major CIA intelligence failures, including coup failures, and missing targets due to such coding errors. In any case, you should always make some changes here and there and keep an eye on the repeating patterns.

Only a prepared heart is more likely to win. Think tanks have a nose on the ground and can pick up signals and tremors from all over the world, which can play a useful role. Once played, a golf ball cannot be teeed on the fairway. Experts know the lies of the course, so you should get help early.

(The writer is the chairman of the Synasia Foundation in Bangalore)