This is an Atalaya. It is an Arabic word. It means watchtower. But it kind of means more than watchtower. It was built here by the Moors, just north of Madrid, when just over those mountains they were confronting the Christian kingdoms. Now they didn’t just fight with the Christians. They traded with them as well. So the Christians for them were both an opportunity and a threat. They needed to identify those opportunities and threats and communicate them rapidly to other parts of Moorish held Spain. This Atalaya formed a central part of that communication network. A network of information and influence that was key to building resilience for the Moors in against the Christian threat.
Like the Moors, we live in a world of opportunity and risk. British Chancellor George Osborne has warned of the external dangers for the British economy. The World Economic Forum gloomily warns of the global risks in 2016.
You can see what they mean. From China to North Africa, from Russia through the Ukraine to the Middle East, economic and political instability threaten. In the longer term, it may the global challenges like climate change or pandemic disease that prove more dangerous.
The rules governing international political and commercial relations are breaking down. Governments are no longer willing, or able, to enforce them. International Organizations are stagnating. While capital remains global, trade is regionalized, but policy making remains national. Companies must learn to navigate between the rocks and eddies of a fragmenting international system.
The bottom line of a company operating abroad is affected by a broad range of economic, political, geopolitical and social factors. Companies must front up to interconnected threats new and old, ranging from expropriation and nationalization through to cyberattack. Non-governmental organizations, both benign and malign, can hit the financial results. In the modern world, an NGO like Greenpeace can be as dangerous as a hacker in China.
The trouble is that the world is not only dangerous. It is also volatile and unpredictable. It is important to understand the political and economic factors that shape the international business environment, but this cannot translate into certain prediction. For all the efforts of organizations like the World Economic Forum, there will be key events in 2016 that no-one had predicted. This has always been true, but in the more dynamic and interconnected world of the 21st century, geopolitical surprises will be more common and have greater impact. Nassim Taleb has written of Black Swans. Donald Rumsfeld preferred “unknown Unknowns”.
In a world where prediction is a mug’s game, decision-making must be flexible and agile. The key for companies is to develop the Enterprise Resilience that allows them to adapt rapidly and effectively to the changes and surprises of a volatile international business environment. We must be capable of developing strategies to seize the opportunities as well as to mitigate the risks.
Soldiers and diplomats understand this well. They are used to taking decisions in conditions of uncertainty or with imperfect knowledge. As the Prussian Field Marshall Von Moltke said in the 19th century, no plan survives first contact with the enemy. And in the highly volatile business environment of the 21st century, we must learn to do the same. The rigid strategic plans that business schools have been selling for the last thirty years just don’t cut it any more.
Businesses must develop resilience to survive in a volatile and dynamic world. We can no longer rely on governments to do it for us. But we can learn from the techniques and mindset of the government diplomat. The core of resilience lies in developing networks of influence and information. We must cultivate the key government and non-government stakeholders who shape how political, economic and social factors impact on our business. These networks allow us to put together flexible coalitions to seize the opportunities and mitigate the threats the world throws at us. In the 21st century every business executive must be a diplomat.
The Moors tried to use their network of Atalayas both up there to the north and going further to the south, to generate the resilience they needed to confront the challenge posed by the Christians. In the end the network was too rigid and the Christians took the rest of Spain towards the end of the 15th century. But we still need to create networks of influence and information necessary to generate the kind of resilience our companies are going to need in the 21st century. Our networks will not be physical. Rather they will be networks of stakeholders in the broadest sense. And we are going to need to identify these stakeholders and understand their motivations to make those networks work. And that is going to require us to develop the empathy to see their point of view. Empathy is going to join resilience as one of the buzzwords of business in the 21st century. And we must make sure that we take full advantage of the social media and the new technologies that will enable us to develop these highly flexible and adaptable networks.