22. NEW FRONTIERS
We have it in our power to begin the world all over again.
A situation similar to the present hath not appeared since the days of
Noah until now. The birthday of a new world is at hand.
—Tom Paine, 1775
Writing Barricades was a sobering experience for the entire team. We had been as realistic and conservative as we could in the development of this scenario, yet we had drawn a chilling picture of an increasingly divided world, with anarchy enveloping society within our children’s lifetime.
We then turned to the task of fully developing the alternative picture of the future, at that stage simply called Scenario A. We had reached agreement about the general dynamics of this scenario, with dramatic economic growth taking place in the poor countries and new markets developing worldwide. The team had written significant parts of the story, and we had tested our conclusions against the best econometric and energy models available. But as we began to develop the heart of the story itself, it became increasingly clear that deep divisions were developing among the members of the team in relation to this scenario.
The gap was caused by the difference in our mental models—the deeply held internal images that we had about the way the universe is constructed and operates. Some of us saw the world through the eyes of modern physics: an interconnected web of relationships, with all matter constantly in motion and fundamentally open. Therefore, the future was not fixed. The world to us was full of possibilities for change and creativity. For the others, the Newtonian model seemed to prevail. This was a highly educated group of immense breadth. Most of them acknowledged modern physics, but only at an intellectual level. When it came down to doing the day-to-day work, it was apparent that their deeply held internal images of the way the world works were based on cause and effect, determinism, and incremental change. This deterministic worldview translated at times into a kind of cynicism—a skepticism and disbelief in the sincerity or goodness of human motives.
For example, early in our deliberations about Scenario A, in a plenary session with the whole team present, I proposed constructing a scenario that would project a vision of the kind of world that we would want our children to live in, a world order that was entirely plausible based on the driving forces that we discerned were at play in the world today. Why not develop this scenario, grounded in all of the knowledge and wisdom we had gained over the past two years, and then use the scenarios to help create the future instead of reacting to it? In other words, the actions of those who internalized the stories would, in fact, create the environment instead of merely responding to it.
This posed two significant problems for the team. In the first place, the Shell Group had always used scenarios to help their managers respond quickly to the changing business environment. This had served the Shell Group well and had been a distinct source of competitive advantage since the early 1970s. But the concept of using scenarios to help shape the business environment was foreign to the mental models of many members of the team. Furthermore, the whole proposal seemed to them to lack business credibility. It was a naive approach and smacked of “do-goodism” and, even worse, of the theological.
As our work continued, the discussions about these issues dealt not only with the overarching theory of the scenarios but with the substance of the stories and the practical aspects of gaining acceptance of the scenarios within the ranks of the senior management of the Shell Group. All of this was highly constructive and useful to our deliberations. But at points the conversations turned into debating sessions—sometimes quite vicious. As someone commented after one session, “A lot of blood was left all over the floor.”
Those leading the opposition felt a sense of certainty backed up by their experiences in high positions both inside and outside the Shell Group. Their arguments were highly rational and supported by facts and figures. To them, this quantification was real. My arguments centered on “soft stuff”: that we live in a relational, participative universe, that what is unfolding in the world is unique, and that this is an “open” moment in history. Under these circumstances, small discontinuities can suddenly and significantly transform the whole system. We have enormous opportunities to create something new. By building shared mental models, we can contribute to the environment we want to see unfolding.
At the time, I was doing a poor job of articulating these views. Ultimately, however, aligning the team around these issues became our greatest achievement. To develop real consensus, I felt we needed to share our mental models of how Scenario A might unfold—not only for the Group’s use but also to help create a positive future for the world.
Two sets of events provided the nudge we needed.
The first grew out of our earlier decision in late 1991 to allow one of the key members of our team, Adam Kahane, to help South Africa make its transition from an apartheid society to a representative democracy. While we were in the early stages of developing our scenarios, a group of South African political leaders were struggling to find a common language to help them talk about the future. In part because of the work of Pierre Wack ten years earlier, they invited Adam to lead a scenario project to develop common mental models about the future of that country. When this invitation was received in our unit at Shell Centre in London, I talked it over at length with the key managers in Group Planning and in Public Affairs as well as with the chief executive of Shell South Africa. I felt this was an extraordinary opportunity for the Shell Group to provide crucial help in the delicate political process that was unfolding in South Africa, and I strongly recommended Adam’s participation. Adam was made available, and over the following eight months led that project, all the while maintaining his responsibilities as head of our sociopolitical economic unit.
The South African scenario team included twenty-two members from across the spectrum of South Africa’s diverse constituencies. This multiracial group included left-wing political activists, right-wing separatists, officials of the African National Congress, trade unionists, mainstream economists, and senior corporate executives.
In a series of meetings in Mont Fleur, a conference venue near Cape Town, the team developed four scenarios, all focused on the nature of the political transition, the most important single uncertainty in the country. Whimsically, the scenarios were all named after birds.
In Ostrich, the de Klerk government “sticks its head in the sand.” Some path other than a free election is followed. White segregationist and black extremist groups gain in influence, stop communicating, and then polarize the country, leading to the “Lebanonization” of South Africa.
Lame Duck suggests what might happen in a prolonged transition with a constitutionally weakened transitional government. The government purports to respond to all, but satisfies none. Investors hold back, and growth and development languish amid uncertainty.
The third scenario, Icarus, turned out to be the most important and influential. Proposed by some of the black members of the team, it suggests that a black government would come to power on a wave of public support and try to satisfy all the promises made during the campaign. It would embark on a huge, unsustainable spending program and consequently crash the economy.
Flamingos is the most positive of the four. Like Lame Duck, it concerns a coalition government, but, as a pair, the two scenarios raise the question of what constitutes a “good” coalition. The name was chosen because when flamingos fly, they rise slowly, but they fly together. In this scenario, improvement is gradual and—most important—participatory. This is a plausible and consistent story of economic growth and political equality reinforcing one another.
At about the same time that we in London were locked in debate over how we were finally to tell the story of Scenario A, the Mont Fleur Scenarios were published and were being presented to the public and to the political, business, financial, and professional leadership in South Africa. They pointed to a vision for South Africa that began to influence the policy dialogue across the spectrum. For government and business observers, the existence of Icarus was reassuring because there was great fear in these circles about the possibility of the economy crashing in the wake of an unsustainable public spending program by a black government. For the left-wing black political parties, it was the first time that a team which included prominent members of the ANC and PAC seriously looked at the possibility of trying too much. It provided a nonthreatening way to bring the unpalatable message of Icarus—that a government policy of radically redistributing economic resources might not work.
Reports of the developments growing out of the Mont Fleur Scenarios had a significant effect on many members of our team. The events that were beginning to unfold in South Africa gave direct tangible evidence that scenarios could be used to positively shape the environment instead of merely helping people to respond more quickly to change.
The second set of events that heavily influenced the direction of Scenario A was our meeting with four highly respected and most remarkable men, all of whom spoke powerfully of their vision of a world consonant with the one we were describing in the scenario.
The first was R. Kaku, the chairman of Canon, Inc. I had met with Kaku on a number of occasions and had been impressed with his breadth of vision. He was a true statesman in every sense of the word—a citizen of the world. Three influential members of our team and I went to Japan to discuss our emerging scenarios with the senior managers of our Japanese operating companies, and while there, I introduced our team members to Kaku and two of his senior managers.
We had a wide-ranging conversation with Kaku, which kept coming around to two principal themes. One was the need for radical reformation in Japan and the world. He mentioned a number of steps needed to achieve a kind of reform and began by saying:
For the past fifteen years I have been calling for the establishment of an ethical state with a concrete plan for change. The first step is to give [Japan] a new purpose. Since our earlier objective of national prosperity has been achieved, we must now adopt a principle of “kyosei”—of living together in harmony and interdependence with the other peoples of the world—and commit ourselves wholeheartedly to this purpose.
Later the conversation shifted to his second theme—the role that corporations should play in an interdependent world. “Today,” he said, “there is only one entity whose effort to create stability in the world matches its self-interest. That entity is a corporation acting globally.” The essence of a successful company, Kaku asserted, is to strive to contribute on three dimensions: to its customers, to its employees, and to society. This is the essential element of the “spirit of Canon” and has been since its founding in 1933. This is the company’s purpose, and it “forms the very backbone of our entire corporate complex.”
Kaku said it had been his belief for many years that companies evolve through four stages. The first stage is purely capitalistic, which leads to labor-management conflicts. Overcoming these problems, the company reaches the stage where labor-management relations are based on shared destiny. All people in the company are treated as equals, thus narrowing the gap in income between executives and other workers. “Management with a common destiny invites all the parties to share their joys and sorrows as well as their prosperity.” Few companies ever evolve to this stage. But, he said, overemphasis on this type of solidarity can create a gap between the corporation and society. So, in the next stage, the company is considerate of its local community and makes contributions to it. He felt that several companies in Japan and elsewhere had evolved to this stage. But the company may eliminate the barrier between itself and the local community only to provoke friction at the international level. This eventually leads to the fourth stage where a company is committed to serving humankind as a whole through its philosophy and activities.
At its fiftieth anniversary, Canon made the decision to become the fourth kind of company. “Its responsibility is to address the larger conflicts in the world … the growing imbalance between the rich and the poor … to set up manufacturing operations in developing countries, to transfer technology, and to help them to become self-sufficient.” The other global imbalance, which Kaku said was just as critical, is the depletion of the world’s natural resources and the destruction of the environment. “Linked with this is the fateful question as to whether the deteriorating world will be able to feed its growing population and even be able to sustain life on earth. This is the vital imbalance between mankind existing today and what will exist in the future.” The fourth type of company must be positively committed to the challenge of this overriding issue.
“I am convinced,” he said, “that if the companies all over the world would join us in this quest, the world would be a vastly better place.” By these measures, the role of business is becoming increasingly important. In the past, government provided the leadership. But, Kaku said, it was becoming clearer that in the increasingly borderless world created by a global economy, politicians and bureaucrats would not be the ones to turn to for guidance. It is the nature of politicians and government bureaucrats to serve one country. But global corporations can only do business in a peaceful and stable world. “It is vital for business to sustain peace on earth. If they do not assume a leadership role, who will save the world?”
The second critical conversation occurred in Argentina with Roberto T. Alemann, former chairman and CEO of Ciba Geigy, Argentina; a former economic minister for Argentina under three presidents; and one of the most respected statesmen of that country. He spoke so eloquently and persuasively of the kind of world that could be created in Scenario A that I invited him to come to London to meet with Shell’s Committee of Managing Directors and a few other very senior managers. A number of the members of our scenario team were also present on that occasion. That morning in Shell Centre he said of the Scenario A we were developing: “The lure of freedom and democracy cannot be extinguished—it is part of an irreversible parade of history. The people in the poor countries are leading the way in this revolution toward political and economic freedom. This push, this revolution, will fundamentally change the world.”
The third was Harlan Cleveland, a former trustee of the American Leadership Forum and the former U.S. ambassador to NATO who, drawing on a lifetime of distinguished service in the international arena, spoke to us about this “open moment” of world history and outlined a detailed strategy of what might be done to “make the world safe for diversity,” where no nation or alliance will ever again be “in charge.”
Finally, we had a long visit at Shell Centre with Kenichi Ohmae, the Managing Director of McKinsey & Company in Japan, and a highly respected, leading thinker on business issues. Ohmae spoke of the coming “borderless world,” where economic interdependence could provide future global prosperity and peace.
The reports back to us about the Mont Fleur Scenarios and the exposure to global statesmen caused the team’s collective mental models to gradually shift. For almost a month we discussed, wrote, and rewrote the story of Scenario A. It was a tedious and exhausting process, but as we continued to talk together and consider all of the possibilities, we eventually came to a shared understanding of how the story should be told.
By June 1992 we were in the process of writing the final version of Scenario A, which we decided to call New Frontiers. This title seemed fitting for a scenario of what can occur if the world embraces the unprecedented challenge of securing political and economic freedom for all people in the world.
THE NEW FRONTIERS STORY
In New Frontiers, the liberalization revolution continues and spreads on a very large scale. New Frontiers is a world where the center of gravity of the world economy shifts from the rich to the poor; and new priorities arise in the rich countries, reducing their consumption, which helps balance the extremely high demand and supply for almost everything throughout the developing nations. It’s a story of new demands, new opportunity, turbulence, and vast change, resulting in governments and businesses being challenged beyond what they thought possible.
The most striking feature of the New Frontiers world is the dramatic economic growth in poor countries. From 1992 to 2020, the center of gravity of the world economy and of global business activity shifts from the rich world to the poor. At the outset of the scenario period, less than half the world’s economy, in purchasing power terms, is in the poor world, while by 2020, it accounts for 70 percent. The incorporation of the big-populace poor countries—notably China and India—into the world economy is the most far-reaching change. Latin American reform continues to produce results; the decisive breakthrough comes when Brazil brings monetary and fiscal imbalances under control. The late 1990s are a period of very rapid growth in Latin America. Virtuous circles of development take place.
The successful economic reform contains the seeds of its own political stability. Reformists are reelected as their reforms bear fruit. In many cases it is the very poor, marginalized by previous policies, who are the strongest supporters of reform. The relationship between economic and political liberalization is different in different countries, but no matter what the model, individual freedom increases with successful free-market reform. Governments over time have learned to pay attention to the very poor. To avoid social explosions, they learn to spread the benefits of growth more equitably and to provide the necessary safety nets.
Progress in key countries such as Poland, Mexico, and South Africa inspires others through the “demonstration effect.” Even in Africa, the hard grind of adjustment begins to pay off in the early twenty-first century, helped by a major breakthrough in hybridization introduced in the early 1990s, which multiplies the yield of cassava and sorghum, and makes them resistant to drought.
The former Soviet Union proves difficult to transform, but by the mid-1990s thousands of new enterprises have begun to sprout everywhere, and pockets of Russia are booming economic centers, their growth fed by foreign investment. By the turn of the century, the former USSR has passed the point of maximum crisis and can look forward to steady expansion.
In the rich countries, rising prosperity coincides with deteriorating public services, congestion, dirtier cities, rising crime, and pollution. This “paradox of wealth” causes a basic rethinking of the growth paradigm. Quality of life becomes a primary issue. Growth for its own sake is no longer sufficient. A public willing to spend money on the environment, infrastructure, and social goods such as education, health, and crime control, results in increased taxes, direct social spending by companies, and slowing growth and consumption.
The economic shift from the rich to the poor is accompanied by a power shift as it becomes clear that the poor countries can no longer be excluded from decision making. The diffusion of ideas, information, and capital crosses borders and cannot be stopped. The diffusion of technology, economic progress, and perceived mutuality of interests keeps poor countries from being marginalized. Many command a larger place on the world stage.
Developing a new international order is slow and complex and absorbs more and more time and energy of business people and business as well as governments, but a new order eventually takes shape. By early in the twenty-first century, India and Brazil hold seats on the United Nations Security Council.
A big step forward is the belated agreement on the Uruguay round of the GATT, which opens up liberalization in agriculture and services, and banishes the threat of trade warfare. Poor countries press on to remove the remaining barriers to trade, while the rich seek to reconcile environmental policy with trade. The momentum leads to launching the Bombay round in the late 1990s and to future rounds.
The new international order emerges because governments and individuals can see beyond narrow short-term self-interests to broader long-term interests and, in some cases, display a real generosity of spirit, as in the aid and debt relief extended to Russia and Africa to give them time to adjust.
Regionalism—a first step toward globalism—begins to flourish in the early years of New Frontiers. In East and Southeast Asia, regional integration led by business takes hold. Industrial development zones straddle national borders, such as Hong Kong, China, Taiwan, and the triangle of Singapore, Bataan, and Johore. Asia experiences the kind of boost from integration that Europe enjoyed in the fifties and sixties.
In Europe a widening range of trade agreements and security arrangements binds Eastern Europe more closely to the West. By 2015, Gorbachev’s notion of a “European home” from the Atlantic to the Urals seems to be reaching realization.
Turkey is part of that “European home,” but is also part of the Middle East and part of the network of economic and political relationships building up in central Asia and the Black Sea. North Africa is linked increasingly to Europe through trade and gas pipelines, but also to the rest of Africa. Mexico is firmly integrated into the North American economy, and both are part of a wider, more liberal, Western Hemisphere trading area.
By the end of the scenario period, 2020, the world is a very different place. In many developing countries, success continues to breed success—better education has resulted in lower birth rates, economic growth has led to environmental reform movements, and greater economic liberalization has supported a drive toward democracy. Increased communication makes it easier to discover and discuss areas of common interest. In New Frontiers, rich and poor alike recognize their economic, social, and environmental interdependence.
The scenarios were published internally by the Shell Group in September 1992, following approval by the Committee of Managing Directors. Volume One contained the two scenario stories and their implications for the international order, economics and politics, energy and the environment, and business and people. Volume Two showed how those global themes might develop in different geographic regions and business sectors. It also quantified the global economic and energy implications of the two scenarios.
For the following twelve months, the scenario team traveled to more than fifty of the operating companies, meeting with their management teams for two- and three-day workshops. In these workshops, these scenarios were presented in unique and interesting ways to enable the participants to “live” in the scenario stories. This was followed by a series of facilitated strategy sessions designed to enable the managers to gain greater insights into how these alternative futures might unfold in their particular operating environment.
Our team was also privileged to be invited to meet with key government and nongovernment bodies in countries where the Shell Group operates. In these sessions we presented the scenarios and then held wide-ranging conversations with those present. In many instances, we would commence early in the morning, and the conversations would conclude long after lunch. These decision makers had to pause and reflect about alternative pathways our world may take at this important point in history. We also met with leading policymakers in the World Bank, the United Nations, the International Monetary Fund, the Organization for Economic Cooperation and Development (OECD), the European Community, and the United Kingdom Foreign Office. In the United States, the Atlantic Council acted as a convener for a five-hour session in Washington, D.C., with fifty prominent government and business leaders.
That session took place in late June 1993 and was the last Shell scenario presentation I participated in. It was a fitting conclusion to almost four years with the Shell Group. We had accomplished an important part of the team’s vision: “To inform the public dialogue.” Our purpose in making these outside presentations was to help paint a picture for the people in leadership roles of what might be possible for the world at the beginning of this new era. From what I had seen during my work on the global scenarios, there are people in important places in all parts of the world who have in their hearts the wish to make New Frontiers a reality—to end the fragmentation in the world, and to create a better, more peaceful, more sustainable world for all.
It’s much too early to judge the long-term impact of these scenarios on the Shell Group. But it is unquestionable that they are helping the Shell managers to gain significant new strategic insights for themselves and for the company—the feedback that the scenario team and the planning group at Shell have received over the past few years has told us so. We have also learned that the scenarios have, over time, had a deep personal impact on many people. Two members of the scenario team itself have altered their respective career paths specifically to undertake the work of helping to create a New Frontiers world.
For me, personally, I can only describe my service on the scenario team as a profound aesthetic experience that was deeply satisfying to me. The whole experience served to underscore all that I was learning about the domain of generative leadership—how we can operate day by day to participate in creating new circumstances, new realities. Particularly over the last two years of our work together, I became acutely aware of how often the coincidences were occurring. Wherever I seemed to turn, the answers would be provided—a door would open, a “coincidence” would occur; someone would introduce us to another who “just happened” to know a person who, as it turned out, would provide a key direction to us. Sometimes the coincidences were very subtle reminders, and at other times the learnings came to us in intense waves. At times it was, to me, simply stunning.
Take, for example, our visit to Canon to meet with Kaku. Kaku himself was extraordinary. We were all struck by him—just being in his presence and being in dialogue with him was a singular experience. Immediately after that session, two of the senior officers of the company who had attended the meeting took us for a tour of the headquarters facility, and in the process we saw a film that told the Canon story. During the course of the twenty-minute film, suddenly there appeared on the screen a familiar face—Bernard Cahier—the man whom I had met by happenstance at the Grand Prix at Monza back in 1977. He had directed me to the particular spot at the Curva Parabolica where I watched most of the race. It was there I experienced an early insight into energy fields and the collective state of flow—the same sort of field I had experienced in our meeting with Kaku just a few minutes earlier. I marveled at the synchronicity of it all.
Later, at lunch, the conversation turned to the subject of leadership, and I mentioned specifically to one of our hosts, Mr. Tadenuma, how striking I found Kaku’s presence and his orientation of character, and how fully human he seemed to be. He was, I said, one of those people to whom I was drawn like a magnet.
Tadenuma said he completely understood. Then he told us an amazing story. In 1945 Kaku was only eighteen years old and working on a large ship in a shipyard in Nagasaki when the atom bomb was dropped. When he experienced the heat and force of the explosion, Kaku instinctively knew what it was, having studied physics and having understood the principles of nuclear fission. Although he was the junior member of the crew, he immediately led his fellow crew members deep within the hold of the ship and warned them it was crucial that they stay there and not become exposed to the contamination outside. He convinced them to stay in the hold of the ship for three days before they came out. Tadenuma said he believed Kaku emerged from this ordeal no longer the same person.
Since then, I’ve thought often about my encounters with Kaku and what Tadenuma said. Nagasaki had been Kaku’s supreme ordeal, and he had emerged with, in Buber’s words, “something more in his being.” He not only epitomizes the servant leader, but he consistently focuses on the greater question of what we can create—how we can collectively shape our destiny. This, I have concluded, is what leadership is ultimately about.