Big fish rules the sea

The rise of entrepreneurial Asia? (Part 1)

Two weeks ago, I shared with you a series of forecasting questions I gained at a Futures Foresight workshop run by Prof. Dr. Sohail Inayatullah. I introduced to you a series of forecast scenarios on the future of innovation in Asia, one of which was called “Entrepreneurial Asian Innovation 2035”.

But why is Asia, like other parts of the world, likely to see a shift from a managerial to an entrepreneurial society? Let’s explore this question with the help of a futures forecasting technique called Causal Layered Analysis (CLA). Thereby, we first conduct a CLA to capture the layers of Asian business as it is today; in two weeks, we will contrast the status quo with a second CLA that forecasts the future of Asian business in 2035.

What is Causal Layered Analysis? Why is it useful?

Causal Layered Analysis is a forecasting technique created by Dr. Inayatullah to shape the future more effectively. CLA explores ways to create a coherent new future by playing on four levels that he likens to the layers of an iceberg:

  1. The tip of the iceberg is called the litany, and summarizes well-known, observable facts and quantitative trends.
  2. Located right below the waterline, the second layer captures the systemic factors that include economic, social cultural, political, and historical factors.
  3. The third layer hosts the worldviews, which are deeper-laying beliefs and viewpoints of stakeholders involved in the forecasting issue.
  4. Finally, the base of the iceberg is the metaphor (also called narrative or myth), a symbolic catchphrase that likens the essence of the issue to another situation.

As such, while we start the CLA with observable facts and quantitative factors, we become more qualitative, emotional and intuitive the deeper we go. Dr. Inayatullah suggests that in order to create real future change, we need to analyze and synchronize all four levels of the CLA.

Causal Layered Analysis Iceberg

Asian Business 2015: A CLA on the managerial society

How may a CLA describe the state of Asian business as of today?

  • The litany: In 2015, Asian economies are driven by multinational or Asian corporations (“Asian Business Inc.”). These “big fish” dominate most industries, and in the managerial society, the managers who run these firms are everybody’s darling and role model.
  • The systemic factors: Production- and asset-based industries (the “old economy”) are at the heart of many Asian economies. Oligopolies dominate these asset-driven industries because (a) new ventures need substantial capital to get started, (b) the existing players enjoy higher ecomonies of scale, and (c) the “big fish” can use their supreme market position to lobby the political system to influence rules and regulations in their favor. Large Asian corporations organize themselves in hierarchical structures that often value seniority and the “right” background and connections over merit. Nevertheless, the “big fish” still attract top local talents because they pay higher salaries and because working for a well-known name  “gives face” to an employee.
  • The worldviews: Here, we consider how different stakeholders involved may look at the issue:

How may managers in multinational and Asian corporations look at the situation? “We rule business in our industry. But things were easier in the past. It’s getting increasingly difficult to make the numbers. And between the two of us, I don’t agree with a number of things that we do.”

Asian entrepreneurs and new venture founders tend to maintain these worldviews: “We are more agile and creative then the large corporations, but we’re not able to compete with them as Asian business is not a level playing filed. We feel bullied by the big fish, who push us away with their sheer size and at times operate according to the motto: ‘The end justifies the means’.”

Asian government agencies tend to think along these lines: “We support the big fish with our policies. They create jobs and pay taxes. They also donate to social projects and to political parties. And we “gain face” when we associate ourselves with with the big guys.”

What are worldviews of a typical Asian consumer? “I am quite loyal to the trusted brands I know well. I gain face if I show that I can afford to buy glamorous brands. SMEs and start-ups are less sophisticated. If I buy from an unknown start-up, I may lose face — so at least, I should pay less… But better safe than sorry, let’s stick with brands that everyone knows.”

Last but not least, let’s also probe for the worldviews of the Asian Financial System. What do banks think? “We favor the vital few big fish, not the trivial many SME. We don’t like to lend to start-ups; it’s more risky and non-lucrative.” In contrast, business angels and venture capitalists tend to have these worldviews: “Start-ups have few funding alternatives in Asia. It’s a buyers market. We can set the valuation at a lower value, thus giving us more shares for the capital that we give to a start-up”.

  • The metaphor: “The big fish rule the sea, but they start feeling a tidal wave coming.”

Outlook: Two weeks from now, we will contrast this CLA of big fish-driven “Asian Business Inc.” with a second one describing how in the next 20 years, we may see a shift from a managerial to an entrepreneurial society driven by millions of small ventures that we may call “Asian Business Me”.

© Dr. Detlef Reis 2015. This article is published in parallel in the Bangkok Post under the same title on 1 October 2015.