How CEOs predict the future

Story highlights

  • Modern CEOs need "ripple intelligence" to understand how global events impact the business and vice versa
  • This need has transformed their conception of the job, a new in-depth study finds
  • Acceptance of doubt has become critical to success in this new landscape

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(CNN)As the Ebola virus swept through West Africa in 2014, savvy business leaders responded by reducing their transport and leisure liabilities in other parts of the world, anticipating that these too would be affected.

In the lead-up to war in Ukraine, a few prescient companies increased their presence in the country, securing an influential position as competitors fled.
The ability to foresee major events and their effects might seem a tall order, but for global businesses to thrive in a hyper-connected world, "ripple intelligence" is becoming an essential quality for modern CEOs.
    In The CEO Report, based on 152 in-depth interviews with CEOs across the world and different industries, conducted by Saïd Business School at the University of Oxford and leading headhunters Heidrick & Struggles, this quality is defined as "the ability to see the interactions of business contexts like ripples moving across a pond."
    Ripple intelligence, according to the report, "enables CEOs to envision how trends and contexts may intersect and change direction, so they can anticipate disruptions, make time to plan, and protect against being blindsided by unexpected events. Ripple intelligence also makes CEOs aware of their own impact and how it may influence contexts that might otherwise seem remote and unconnected."
    This entails fundamental disruption of the job of leading a business, said the CEOs, anonymized for full disclosure. The interconnected nature of the global marketplace left them vulnerable to "butterfly effects" from events as diverse as revolution in the Middle East, growing cybercrime in Europe, or the rise of new megacities in India.
    Old dogs, new tricks
    Rather than simply taking caring of their own operation, business leaders must prioritize efforts to anticipate these events.
    "The role has become more complex, demanding new skills and responsibilities," says Dr. Michael Smets, one of the report authors at Saïd business school. "Many CEOs feel the need to let go of operational activities."
    One CEO quoted in the report had redefined his role, delegating day-to-day responsibilities in order to "concentrate fully on the 35,000-ft level, looking for ripples outside the company...'hovering' above the business, his customers, consumers, competitors, and other market players, continuously searching the environment for emerging connections."
    Increased liabilities have also forced CEOs to think more short-term, with several reporting that traditional three-five year plans are being replaced with more flexible, responsive 100-day cycles.
    Humility in a new landscape
    The implementation of ripple intelligence is far from a precise science at this stage, based on a mix of traditional planning and technology advances.
    A popular practice is "the use of big data and how it relates to scenario planning, which is an established business technique," says Smets. "It involves an extension of that technique to connect different scenarios, to consider how they interact and look further into the future."
    Smets expects the process to be refined and made more accurate with practice and competition, and as the data sets expand. Many of the major events, such as wars and market crashes, can be predicted to an extent with access to the relevant data, he believes.
    The increased transparency of the digital age has also made CEOs more accountable and accessible to a massive new set of stakeholders. Online criticism from any source can hit any company's reputation and subsequent performance.
    Greater transparency and vulnerability has eroded the traditional conception of CEO power, shifting the model "from command control to collaborative control," according to Smets.
    But reduced control has had a liberating effect. Among the report's key findings is the widespread acceptance of doubt among CEOs, allowing them to factor and work with it, rather than feel pressure to deliver guaranteed outcomes.
    "Doubt is part of the 'humanization' of the CEO, a positive, generative state that should be embraced and utilized, not feared," the report notes, adding that doubt facilitates greater collaboration and openness.
    As one interviewee puts it, the modern CEO must "get comfortable with discomfort."
    As uncertainties multiply, so do the opportunities.