The fall of Troy was unimaginable to the Trojans. They had done everything right. They held out a nine-year siege while keeping supply and communication lines open. They had withstood all attacks by a massive Greek army, and the Greeks had lost two supposedly invulnerable heroes, Achilles and Ajax. So, when the Greek army retreated and left a wooden horse as a parting gift, it was, of course, cause for great celebration. In hindsight, we can wonder about the immensity of that mistake. How could they possibly have been that naive? Surely, the people that held a massive Greek army at bay for nine years couldn’t have been that short-sighted.
The end of coal-fired power was unimaginable to E.ON back in 2008. It had done everything right. The Dutch government supported additional and diversified (from gas) power generation capacity. Coal-fired power was the cheapest option. Wind at sea was three times more expensive. The new coal-fired power plant would be designed for the use of biomass and be capable of capturing CO2; all contingencies were in place to respond to climate policy. The business case for the new power plant was solid according to all financial standards. So, the company set out to build the power plant, which would be commissioned in 2016. Now, only five years after the plant was commissioned, we see a debate about decommissioning it, and the plant is struggling to make a margin. In hindsight, we can wonder about the naiveté of that business decision.
E.ON, like the Trojans, faced a complete paradigm shift. The developments no longer followed the usual patterns and logic. A completely new reality made the company’s decisions look incredibly naive in hindsight. For the Trojans, the change consisted of an unforeseeable change of heart of the Greek. They no longer wanted to win heroically in an open fight; they just wanted to win, by any means. For E.ON, the societal and economic tide turned at a perhaps unforeseeable rate. Wind energy prices fell very fast, CO2 sequestration was severely delayed and perhaps even impossible due to societal sentiments, and biomass energy became questionable because it would still to the CO2 content of the atmosphere for the next 30 years, the time it takes to grow back the biomass.
A paradigm shift changes the axioms, the self-evident truths, at the base of the reasoning that leads to your decision. Carbon capture and biomass energy were such self-evident truths in 2008. These shifts are not completely unforeseeable. The Trojans had Cassandra, who was blessed with the gift of seeing the future and cursed because nobody would ever listen to her. She warned the Trojans. The story doesn’t reveal how she could see that the existing logic was no longer applicable where others didn’t. I imagine she paid more attention than others to the weak signals of change. In Troy, losing two absolute heroes must have made the Greek rethink their position on heroism, thus enabling the lowly trick of the horse.
Weak signals are real events, not ideas, that are the result of an alternative way of thinking. They are the early signs that reality may be about to change. You can take a weak signal and think it through to its ultimate consequence: What if everybody started doing this, if it scaled to relevant proportions? Lux Research did an exercise with weak signals for a client in 2019 to shape their 2050 vision and strategy. We collected interesting, out-of-the-ordinary yet relevant events and challenged everyone to think them through, bearing in mind a specific cultural perspective. The latter is important: You need to weigh not just the practicality of the weak signal but also the sentiment in society.
Investments in climate tech often look like a wild gamble, a scary leap of faith. What to think of SSAB (Swedish Steel), for example? The company is investing in a hydrogen-based direct reduction plant to convert iron ore to steel that, by its own account, will make steel 30% more expensive. Is that visionary or just folly? If it is visionary, SSAB may well have a decisive advantage over the competition in a future carbon-free world – but how do you know? Investing in climate tech, more often than not, means anticipating a change in economic conditions that will change your business case completely. Currently, you can make money by converting natural gas into hydrogen, yet companies are already investing in the opposite: turning hydrogen into natural gas.
To differentiate between reasonable expectations for future business and fantasies, you must build your own Cassandra, and you have to listen to her this time. Building your own Cassandra means listing the given truths you rely on today and considering if they may be altered soon, finding weak signals and considering their ultimate consequences, watching for convergence of technology developments that, when combined, will create completely new opportunities, and actively combining all that information to build substantiated hypotheses about the future economic and societal reality.
At our Lux Executive Summit, we aim to give you food for thought about all of this. Our conference can be your treasure hunt: finding those weak signals and alternative paradigms that you need to reshape and grow your business. We will be happy to discuss the treasure you found afterward and help you with the process in your business. Don’t be a Trojan; come and participate in our debate.