15 July 2014

The trouble with our times…

“The trouble with our times is that the future is not what it used to be”, said Paul Valery, a French poet, essayist and philosopher- decades ago.

In my role as Business Intelligence Advisor it is essential to be interested in the future. Predicting the future has traditionally been quite easy in base oils business. Demand was firm and prices had their own cycle of ups and downs. Now the situation has changed, and both the prices and the demand are stable but unfortunately at quite low level. Still, we are interested in reading the news between the lines, trying to see what are and will be the next big moves and events in our business.

But why even try to predict the future? What good can you achieve by trying to guess the forthcoming? Here are at least some obvious answers in addition to many others: to increase profit potential, to increase adaptability and to align constituents. In short, to get on better!

The black swan theory is a philosophical theory by Nassim Nicholas Taleb which describes randomness and uncertainty. A highly improbable event with three principal characteristics is called a black swan. The main characteristics are that the event is not predictable, it has a massive impact and, eventually, we can form an explanation which makes it appear less random and more predictable than it actually was.

Have there been events like this in base oils business? Can you say that the fast pace of Group II replacing Gr I, or new high quality base oil capacity streaming on the market, were black swans? Maybe not – even though these things had major effects on the business environment they were however foreseeable quite a long time ago already.

Will there be black swans in our field of business? Well, one of the characteristics of a black swan is that the event takes the observer by surprise. And most probably there will be events which are not predictable and have big impact to the business. It is hard to think what it actually could be, since what is a black swan for me might not be that for you. How about e-mobility, could it cause some unpredictable effect on our business? Or zero emission technologies, what could be the unexpected consequence of those? At the moment every scenario says that the internal-combustion engine will dominate the market for the following decades, but what if…. And is it even possible to predict these potential black swans if one of their characteristics is that they are unpredictable?

Our business is not disconnected from its surroundings. Megatrends are effecting the whole environment, not just the business environment. What happens in social, cultural and environmental issues around us have a huge impact on our business. New ideas, inventions and regulations shape the environment and we will have to detect them as early as possible. That’s what we will have to do, in other words, try to eliminate black swans. That’s what makes my days at work so interesting!

I wish you all sunny summer days!

Outi Valtonen
Business Intelligence Advisor, Base Oils