As regular readers will know, I usually advocate thinking strategically along three time horizons at the same time. Brexit is no exception.
The immediate priorityThe good news is that nothing has changed - yet. The UK has voted to leave the EU but has not done so yet. As of today, it remains a member of the EU with all of the obligations and rights that membership entails.
But while nothing has changed yet, that does not mean that there is nothing to do.
The immediate priority must be to stabilise and re-assure. Just as Mark Carney, governor of the Bank of England, wasted no time in coming forward to re-assure markets that the BoE was doing everything it could to stabilise the currency (which dropped overnight to levels not seen since 1985), so too should business leaders be out in front of their staff and customers explaining what Brexit means for their business, what they are doing about it, and offering all re-assurance that they reasonably can.
Rapid and substantial change provides fertile soil for rumours and cultivates anxiety. It is the leaders role to provide a clear vision which re-assures and re-focuses, and strategy is the text with which they can do this.
In the medium termIn the medium term, Brexit is going to create a lot of work. I've heard it said there are some 80,000 pages of legislation which need to be unraveled and redrafted. Trade agreements will need to be renegotiated. All of this will inevitably knock-on impacts for firms supply chains, pricing, human resources, location and regulatory passporting practices and policies. One can see armies of lawyers, tax experts and procurement and policy experts, within government as well as within the private sector, working on this for years to come.
All of this effort comes at the expense of what those same people might otherwise be doing to help businesses develop and execute new products, services and other strategies. That is, there is a tremendous opportunity cost in Brexit.
Business without clear impact assessments, plans and resourcing already in place will need to move quickly to ensure all the capacity in the market has not already been absorbed by the time they are ready to act.
In the longer termIn the longer term, almost everyone's strategy needs to be revisited in light of the events of last night. We now all have a material strategic insight which none of had less than 24 hours ago. (Although this is about the longer-term implications of Brexit, that is not to say it can wait until later - this needs to be done right away in order to prepare for the longer-term future!)
Although we know the outcome of the referendum, there is still much uncertainty surrounding it.
- Who will succeed David Cameron as the leader of the Conservative Party and what will be the political consequences of that change of leadership and of the referendum itself? Will a special general election be called?
- When will Article 50 be invoked (marking the UK's official withdrawal from the EU and starting the 2 year time-frame within which the withdrawal must be completed)?
- How will rest of the EU and the world at large react: will they push the UK 'to the back of the queue as some have threatened, or welcome the UK into new trade agreements with open arms? Will other EU nations now seek to exit as well? Will the EU fight a rear-guard action to attempt to convince the UK to change its mind? Will Scotland go back to the polls for a second attempt at leaving the Union in order to remain within the EU?
- Will the UK remain a member of the European Economic Area (EEA) like Norway, or have to trade with Europe under the terms of the World Trade Organisation (WTO) like the USA or China.
- Will George Osborne issue an 'emergency budget' and what will this contain?
- What will the direct economic consequences be? Whilst the campaign was rife with difficult to reconcile scare-mongering predictions, we may yet experience a 'technical recession' - and if we do just how deep might it be?
- Which EU regulations will the UK adopt, what amendments might they make to those, and with what regulations might they replace those they don't adopt?
Retaining strategic focus in the face of such great uncertainty is extremely challenging, but the alternative - sitting back and waiting to see what happens - could prove disastrous. And it looks like it could take some years for the various inter-related issues to be fully resolved.
The logical place to go in the face of such uncertainty is Scenario Planning, a structured approach to developing and envisaging different possible futures, developing strategies which are more robust, and planning how to sense and respond to events as they then subsequently play out.
The UK's EU referendum has been hailed as one of the most significant choices of our generation, and that is probably true. How we respond to it will define us, not just as a nation, but also as individual businesses. As a strategist, this is an exciting opportunity. Change inevitably creates winners and losers. Good strategy is what will decide which your business will be.