The PLUTO scenario for business is Polarized, Liquid, Unilateral, Tense and Omni-relational.
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For most global companies, the business context has changed dramatically since the administration of U.S. President Donald Trump took office in January, threatening to impose tariffs, unraveling long-standing trade relationships, disrupting supply chains and questioning corporate practices in areas such as diversity and sustainability.
It can be tough to make sense of it all. From the mid-1980s, business pundits used the framework known as VUCA (Volatile, Uncertain, Complex, Ambiguous) to begin to understand the world. With the global situation becoming more unsettled, for some that was replaced by BANI (Brittle, Anxious, Nonlinear, Incomprehensible) starting in 2018.
Those frameworks are still useful, but these are very different times. We’ve identified five key concepts — Polarized, Liquid, Unilateral, Tense and Omni-relational — for business leaders to navigate this new global scenario. Here’s what to take into account when managing in a PLUTO world:
Polarized
Growing polarization has been a feature of American life for several decades, but the U.S. pivot away from traditional allies in recent months has divided the world in a way not seen since the Cold War. At a corporate level, issues like the importance of promoting diversity or fighting climate change are being hotly debated or ditched altogether. That polarization leads us to a second “P”: purpose. The experience of COVID-19 taught us that companies with a clear corporate purpose fare better than those without. Think about the long-term purpose of your company, and align your strategy with long-term values rather than short-term, tug-of-war pressures. Staying true to purpose responds to the very reason your company exists. You may have to tweak your communications: for example, some companies have adopted a “green hushing” approach — continuing their sustainability efforts but advertising them less in politically sensitive markets.
Liquid
With policies and alliances shifting by the day, companies must move beyond reacting to the daily news cycle and draw up scenario-based strategies for stable management. Companies should imagine where they’ll stand 12 months, 3-5 years and 10 years from now. Consider best- and worst-case scenarios, seeking alternatives and allowing for contingencies. In chaotic and complex environments that are constantly evolving, managers need to have agile processes in place to regularly assess what’s working, what the organization is learning and what needs to improve.
Unilateral
Decades of trade based (mostly) on multilateralism are over. Multinational cooperation agreements are up in the air. U.S. policy is centered on what the Trump administration believes will benefit the U.S. economy. Even long-time allies won’t be spared the shake-up. Business leaders will need more in-depth knowledge of geopolitics than they might have had in recent decades. The U.S. turn inward also represents the chance for Europe to correct long-standing problems: overcome internal divisions, climb out of its mid-tech rut to compete with the U.S. and China on innovation, rethink regulation and implement productivity-enhancing artificial intelligence. There’s opportunity there, as well as challenges.
Tense
Geopolitical and geoeconomic tensions are likely to characterize the next four years, whether from wars in Ukraine and Gaza or trade skirmishes between the U.S. and China, Canada, Mexico, Europe, etc. Tariffs will fundamentally change costs for companies. To respond, companies and their leaders should prioritize resilience. It’s time to diversify supply chains to reduce exposure to single points of failure. To minimize the extent to which supply chains are exposed to geopolitical shocks, get the board on board, measure risk at the sector level as well as the country level, and improve management awareness. When possible, invest in alternative markets and production hubs to maintain flexibility. Adopt nearshoring and friendshoring strategies to mitigate risks. Strengthen financial reserves to absorb the impact of sudden policy shifts.
Omni-relational
It’s a mistake to focus solely on American or European markets and overlook opportunities and innovation that are coming from China, India, Brazil, Africa and other parts of the world that are fast emerging on the global stage. Innovation can occur anywhere. Evaluating China’s dominance only in terms of its race against the U.S. ignores its growing investments in Latin America, Africa and elsewhere. The global race for dominance in artificial intelligence is also a multifaceted, geopolitical story. How good are you at sourcing ideas from unexpected quarters? Find likeminded partners to forge new alliances and discover new opportunities wherever they lie.
And don’t worry if it sometimes feels like you’re on another planet. That’s what it means to manage in PLUTO times.