All multinational companies should at least try to think beyond their tried and tested rolling three year plans. Oil companies are accustomed to planning two to three decades ahead, but then this is simply par for the course for them since it can take up to ten years or more to move from an initial discovery to their first barrel of oil or gas from the well. In other sectors attempting to peer too far into the future often looks like an exercise in futility. The future always surprises. However, there is a way to future gaze that may well yield useful results and that is to look at how things might play out given a variety of different scenarios.
This is the approach that Deutsche Post (DHL) has taken in its excellent report: "Delivering tomorrow: Logistics 2050 - A scenario study." Perhaps the key paragraph in the whole document comes in the opening to the introduction by DHL CEO Frank Appel:
"How does one shed light into the black box we call the future? Today's complex economic and political landscape renders accurate forecasts virtually impossible. In our volatile and connected world, traditional, linear forms of analysis have repeatedly proven wrong. They, alone, simply aren't enough to help us anticipate and prepare for change."
The value of such an exercise, of course, is pretty closely bound up with the range and types of scenarios that the planners pick for analysis. DHL's report looks at five potential paths leading to 2050, each of which has its own unique challenges and potential outcomes. DHL's interest, as a market leader in logistics, is of course in how these scenarios will play out in its chosen field, but the report can and should be read with interest by everyone, from politicians to CEOs in every sector. The aim in this kind of exercise is to engage in a kind of mental stretching exercise. It is not about picking a scenario and placing a large bet on this rather than on any other outcome, but in familiarizing yourself with the kinds of actions that would be required if any of these scenarios came to pass.
The five scenarios chosen by DHL are, in no particular order:
- 1. Untamed economy - impending collapse
This looks at what might happen if countries go hell bent for growth and throw "sustainability" out the window or pay it only lip service while trying to grow their economies in a "devil take the hindermost" fashion. The results would be massive but unsustainable economic stimulus, an acceleration in the shift of economic power from West to East, a massive increase in interconnectedness and in the demand for logistics, but all set against the backdrop of repeated economic shocks from unpredictable weather events and potential heightened conflicts as unbridled competition spills over into localized military confrontations.
- 2. Mega-efficiency in mega-cities
Here, the rise of megacities becomes a major driver, with megacities offsetting their impacts on the environment through global cooperation and global governance models. Rural regions get left behind and nation states become less important than mega city boards. Consumers switch from ownership models to rent-and-use models. Supergrids and highly efficient traffic concepts facilitate movement of people and things.
- 3. Customized lifestyles
This is basically a world where individualization and personalized consumption predominate. Making product local to markets to maximize customer input and choices predominates so regional trade flows are more important than global flows. Individual buying negates global climate warming controls and we get a 3.5 degree temperature rise by 2200. For logistics this means much shorter routes to market and diminished global trade flows.
- 4. Paralyzing protectionism
Here excessive nationalism and protectionist barriers reverse globalization, paralyzing resource flows and causing technology to lag and economies to go into a decline. High energy prices and dramatic scarcities lead to international conflicts over resources. Again, we get a move towards catastrophic weather by the end of the century with a 3.5 degree warming.
- 5. Global resilience – local adaption
Here DHL’s visionaries see plentiful cheap automation and a high level of consumption, with frequent disruptions to supply chains caused by an increase in catastrophic weather events. Countries start to focus less on maximizing efficiency and more on maximizing resilience to shocks, mandating shorter supply chains, multiple sources of supply and regional rather than global trade.
The five scenarios take much longer to unfold in the DHL account than we have space for here. There is much to ponder and probably much to disagree with. The thing that battles and the future have in common is that they rarely go the way you plan, but anyone involved in business planning will benefit from working through the DHL exercise in depth and detail. This kind of forward thinking, at the very least, pushes you to start thinking of other possible “new normals”, none of which look particularly appealing, and all of which carry challenges that will need to be overcome. It reminds me at least in part of the Leonard Cohen song, “I have seen the future, brother, and it's murder...” but it’s a good mind-stretching exercise.
Further reading on logistics and strategy:
- Transport and Logistics [sector profile]
- Countering Supply Chain Risk, by Vinod Lall
- Business Continuity Management: How to Prepare for the Worst, by Andrew Hiles
Tags: catastrophic weather events , Deutsche Post , DHL , economic shocks , future prospects , global warming , multinationals , sustainability