[MUSIC] This is Mike Rosenberg, in Strategy and Sustainability. We're going to do the last segment in session three, session three is strategic options. The last segment is about probably what I think is the most complicated, but at the same time interesting, of the strategic options, and I call it think ahead. So think ahead is about if you think about the different things, you might have a similar approach of compliance. So it's doing much more than the law requires. It requires a very high degree of sensibility on the part of the management team in the company. But it's not done because of some deep conviction necessarily on the part of shareholders or management about what's the right thing to do. It's done by a conviction about what will happen in the competitive marketplace and the regulatory environment as we go forward in time. So let me come back to this example of Virgin Atlantic of Richard Branson which I mentioned in the earlier segment where the truth is, the fact are that Virgin is changing all of his airplanes. They're changing from Airbus A340s, I think they're 343 hundreds to their new Boeing 787-9 the Dreamliner. You know probably the new sophisticated most advance airplane of it size in the market place is using liner materials better aerodynamics brand new engines, you know it's really complicated and really sophisticated airplane and they're changing all the planes. Now, one reason might be that Mr. Branson or Sir Richard thinks it's the right thing to do. Another reason might be that Virgin has decided or believes strongly that people will choose an airline at some point in the future. Partly because of its environmental performance. So they've decided that the metric is going to be the carbon footprint per passenger mile or passenger kilometer flown. So they've decided that one of the metrics they'll look at is the carbon footprint for every mile or every kilometer that a passenger flies. And they have a committment to reduce that and to be the world leader on that metric in the airline industry. Now, one reason to do it is because it's the right thing to do. Another reason might be because they believe that's what customers will be demanding in 2025. So if you look at the two planes, the Dreamliner uses 27% less fuel, 60% less noise. Their plan is to cover 40% of the fleet by 2017 with these airplanes, and even more by 2020. So if you look at this metric of CO2 per kilometer flown Virgin's target is to have 30% less by 2020, compared to 2007. The number, I believe right now, is about 9%, thanks to the changes they've already made to the fleet. Now, are they doing that because it's the right thing to do according to Mr. Branson, or are they doing that because that's what they think customers world demand. An interesting question, by the way, is, does it really matter, as long as they're doing it? But in any case, if they were doing it because it's what they think is going to happen in the future. Then it would be an example of what I call, think ahead. So the basic idea is, if you go back to our chart about environmental sensibility. In this case looking at where it is today and where do you think it might be tomorrow. In a specific company you might say I'm going to need to change my behavior. I wanted to change my infrastructure, my factories, my company culture, my products and services and I might have to change them a lot. So the question is when should you start that change? Should you wait until 2025 and then change a fleet of airplanes? It's very expensive. Or should you change the airplanes little by little as they reach the end of their natural life. And so if you believe things will be different tomorrow, you might want to start today. That's what is really the essence of think ahead. What happens in a lot of these issues, is it becomes a tipping point. As Malcolm Gladwell talked about in his book, when there is some interest in, people start to shop at those stores they perceive to be somehow more sustainable. And then when supermarket chains puts in refrigeration systems with glass doors on them, because they use a lot less energy, they save a lot of money, and you can tell the customers you have a lower carbon footprint and at certain point everybody is doing it and it becomes the new normal and if his chain does not have that In place, people might say, I'm not going there, look at all the energy they waste. And this can happen in people's minds very quickly. So the other idea about think ahead is how long would it take to change all the refrigerators, all the refrigerator displays in all the supermarkets for a chain of 600 supermarkets? Well, it takes awhile, it's expensive. So you might want to spread that out over time. But it requires taking a bet or making a guess as to what the future will bring. What's critical, and the most critical aspect of this is to be able to take those kinds of guesses, and we'll talk quite a lot more about this in session six, is to use techniques of scenario planning. Which is what if the world moves this way? What if the world moves that way? And how would we change things? So one of the techniques which is important, I'll talk more about this in session six, is to use scenario planning to think about the future, not forecasting. Scenario planning you imagine different futures for the world. And talk about what if this happens, what if that happens. That's one way to get a company's head around it in terms of who in the company is absolutely critical that senior management and even the board is involved in some of these meetings. Change management is something else which is very, very important which is to make a 10 to 20 year plan to change a fleet of airplanes, or to change a whole distribution network requires really good planning, it requires a medium program to change the infrastructure as well as the mindset of the people working in the company. And it also requires a certain level of flexibility. Because you must have some capability to test the assumption you made in the planning cycle. To see if it's actually comes true and then the ability to change things. To have some internal tolerance round ambiguity because you might have to adjust implementation schedules in going slower or faster depending upon whether the world actually develops the way you thought it would, or actually does something a little bit different. This is the key to the heart of think ahead. So to summarize session three, where we really looked at at a number of different strategic choices that a company can make. We looked at take the low road, which is to obey the law, and I insist that I don't think there's anything wrong with taking the low road. As long as you know that's what you're doing. And then to be careful when you take the low road, not to allow your people to inadvertently or advertently step over the line and go and to break the law. And wait and see is about looking out towards the future. Show and tell is about doing a lot of stuff and talking about it. We talked about pay for principle. Which is, if the shareholders of the company think it's the right thing to do, and it's their money, then why not just do it? And think ahead, of course, is this idea that tomorrow will be different, and therefore we need to start now. [MUSIC]
