Clem Sunter

Spinning out of control

2010-06-03 08:30

On our website, Mind of a Fox, Chantell Ilbury and I make the following statement: “It is our contention that while a hedgehog approach to strategy may have been successful in the past because a company's environment was predictable and, up to a point, controllable, that condition no longer applies and a foxy approach is more suitable. Strategies where you have limited power and certainty differ materially from strategies where you can create the certainty because you have the power. This is true as much of politics as it is of business.”

Two individuals learning this lesson the hard way are Barack Obama, President of the United States, and Tony Hayward, CEO of BP. Before the oil spill in the Gulf of Mexico, they both must have thought that they had the power to create certainty in their lives. After all, they both head up vast organisations. It took just one man-made hole in the ocean’s floor spewing oil in all directions to dispel the myth. Obama’s ratings have fallen dramatically and Hayward’s company has taken a huge reputational hit, particularly as 11 platform workers were killed in the original explosion and 17 others were injured.

All efforts to stop the leak, with exotic names like “top kill”, have so far proved fruitless. Meanwhile, the coast of Louisiana is being tarred, the marine life is being decimated and local residents are losing their occupations.

Compounding the wrath of Americans is that the cause of their misery is a foreigner who was supposed to be competent. BP, like the banks before them, argue that they are dealing with an unprecedented disaster.

In our first book, The Mind of a Fox, Chantell and I put forward a matrix which we recommended that even people as powerful as Obama and Hayward should use before committing themselves to action. It went like this:


In the case of oil drilling in the Gulf, it would have been used as follows - before the spill occurred. The rules of the game are zero harm and minimal environmental impact, and procedures that ensure both. The key uncertainties are all the other oil rig accidents that have already occurred around the world together with unprecedented but plausible incidents. The best case scenario is one with no unusual event during the life of the rig. The worst case scenario is the kind of accident that occurred.

The options are firstly to prevent such an accident and the second is to work out exactly the remedial actions necessary, if it occurs. The decisions are whether or not to go ahead with the project in light of the risks involved and, if the green light is given, have the contingency plans in place for the worst case scenario.

Risk management requires that you think the unthinkable, because the unthinkable can happen; and it is your speed of response that determines the final outcome and the public’s reaction to the way you handled the event. Painting the scenario in advance and figuring out your options is better than letting the unthinkable happen, and making decisions in the heat of the moment.

In fact, our matrix should be embedded in the way leaders approach the future on a daily basis. Lack of precedent is no excuse.

The breaking news is that the spill is now being described as probably the biggest environmental disaster in US history and BP may face criminal charges. That is not a good sign when co-operation between BP and the US authorities is crucial in capping the well and limiting environmental damage.

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