Slide 1

Michael Mainelli, The Z/Yen Group

[A version of this article originally appeared as "Events that Change Business Perception", Strategy,The Strategic Planning Society (July 2002) pages 9-11.

"Does September 11, 2001 mark a strategic turning point?". Strategic? Well, as a businessman, the author does not claim authority on geo-politics or widespread social change except as they might relate to business. Turning point? There have been noticeable effects, but do they constitute fundamental changes? For many, especially Americans such as the author, it remains difficult to analyse 11 September (9/11) in strategic terms this close to the event. Yet, to fail to analyse is to fail to appreciate the tragedy.

Sticking to business, certainly many industries have been directly affected by 9/11. Obviously, the airline and travel industries were, and claim they still struggle. Sabena collapsed. Swiss Air folded into Cross Air. Art insurance on its own took an estimated $100M hit. While consumers wonder how 9/11 alters their actual automotive risk or household risk, reinsurance markets have lost capital estimated at anywhere $30 billion to $100 billion leading to significantly higher insurance rates in direct insurances. 9/11 has been blamed by numerous corporations for their failure to meet targets. Not all the effects on business have been negative. Restructuring of insurance risks is a healthy process. Security firms have already benefited and security technologies are starting to receive investor attention. Video conferencing has supposedly risen by a third since 9/11. Corporate security officers in the USA have seen tremendous pay rises up to a rumoured $500,000 in one instance.

Some changes are tangible, e.g., new airport security structures, heightened security procedures at most corporates and increased paperwork for new financial services accounts. It can be exceedingly difficult just to deliver a letter, as the author found when trying to deliver a document by hand to a European investment banking client in the City of London. Investment patterns have already changed, down goes airline-dependent leisure, up go defence industries, down goes foreign direct investment to Islamic countries. As the impact is absorbed, 9/11's effects will spread to other industries. New standards will affect construction. Security consciousness will affect information technology. Government demands will affect finance and communications.

For the world weary and the cynics, any number of off-the-cuff remarks may suffice to convey a superficial impression of insight - "it turned a threat into a reality" - or a contrast "more people die from X in a month than died in the twin towers". However, as a business strategist, specific events such as 9/11 illuminate trends which may have been obscured or unnoticed. An important event changes three key inputs to business decisions: 

  • risk: the likelihood and severity of future events interacting with courses of action; 
  • reward: the likelihood and benefit of future events interacting with other courses of action; 
  • volatility: the degree to which the event increases or decreases the amount of certainty in the business world.

The 1973 oil crisis changed business people's views of the risks faced by energy-dependent processes, of the rewards available from energy conservation and increased the perceived uncertainty in the world. Several management theorists attribute the demise of deterministic strategic planning and the rise of more open-ended, post-modern planning or scenario-based approaches to the unforeseen nature of the 1973 oil crisis. Likewise, the Gulf War changed views of the potential rewards from military action and American attitudes to safeguarding natural resource interests. In short, events are important to business when they change business people's perceptions. Perceptions have markedly changed because of 9/11 as can be seen by how obvious the following statements seem less than a year later: 

  • risks in insurance, air travel and hotels are very high (but these were growth industries in 2000); 
  • rewards available to certain businesses are increasing rather than decreasing, e.g. security, defence (but these were declining industries following the end of the Cold War); 
  • volatility around the world is increasing rather than decreasing, particularly in geo-politics (what happened to the New Economy, continuous growth, the death of inflation and the Pax Americana).

This author cannot provide readers with a definitive list of winners and losers from changes in perception due to 9/11. However, a few points were illuminated by 9/11 which may be worth further contemplation. First, contrasting America's reaction to 9/11 with the reaction to the 1995 Oklahoma City bombing highlights a paradox. Americans seem to feel more threatened by external than home-grown threats. This seems strange to nationals of other countries where betrayal hurts more than direct attack, but many US commentators confirm that the "traitorous" nature of Oklahoma City is less frightening than the impression of vulnerability to foreign force. Is this an indicator of an America where any overseas taint is suspicious, one that might affect international business relationships permanently?

Secondly, the perverse impotence against terrorism on this scale of an America wielding global military dominance was humiliating. This impotence may encourage even greater upheaval against America and other establishment entities. In 1992, in "The End of History and the Last Man", Francis Fukuyama questioned whether the combination of liberal democracy and capitalism was the most fitting form of government and economics, the culminating form of civilisation. 9/11 indicates that the military leg of the "real politik" tripod of military, government and economic interests could use quite a bit of redesign. Military redesign is needed not just for the structure or technology of forces, as seen in requests for more info-ware capability or chemical and biological defence, but as importantly for achieving more military goals through government and commerce. Military and business cooperation has increased markedly since 9/11. Leading thinkers believe, as does the author, that ultimately economics, not politics or military might, will provide the solution to terrorism, if anything will. Does this indicate that some businesses may increasingly become instruments for their governments' goals?

Thirdly, 9/11 illuminates globalisation. It may well be the most global tragedy ever from the international sympathy, to international responses, to military conflict half a world away through to fears over America's sensitivities post-9/11 in security and trade, e.g. the US government's proposed changes to worldwide container traffic. Paradoxically though, the roots of the tragedy may also lie in globalisation, from a long-simmering but previously remote conflict between Western and Islamic cultures, to escalation of Islamic disputes onto a global stage through to perceptions that all conflicts are global. Conflicts around the world are now shared global problems in ways that make Robert Ludlum's conspiracies look disconnected. Will businesses have to invest more time and resources in managing global information and risks without necessarily deriving benefits from being more multi-national?

Finally, 9/11 illuminates long-standing differences between America and the rest of the OECD. It is too easy to dwell at length on factors such as the relatively large size of America's domestic economy making it an outlier in the need for trade, or the contrarian origins of American culture, or America's greater acceptance of the winners and losers of capitalism. Commentators before de Toqueville's book of 1831 and after Cooke's books of the 1970's and 1980's have scrutinised America's unique factors. 9/11 showed America's ability to pull together, to react and to project force to achieve its goals. It also revealed the iron fist within the velvet glove of international cooperation. America acts unilaterally, in its own interests, rapidly. American absolutism versus European contingency. American dedication to principles versus, a sometimes mythical or hypocritical, European tolerance. Can we expect American absolutism to triumph such that American forms of business become the only forms of business, whether it's GAAP, tax, corporate criminality, HR standards, computing workflow, standard insurance contracts or obligations to divulge commercially sensitive information to authorities?

It is still too early to comprehend 9/11. 9/11 on its own does not mark a strategic turning point, yet 9/11 illuminates emerging perceptions of risk, reward and uncertainty, making them stand out more clearly. Starker contrasts do change strategic thinking and, thus, 9/11 will be used as a marker for current turning points in business strategies.

The most comparable event in my life to 9/11 was the assassination of President Kennedy in 1963. My mother cried copiously, telling me the world had changed. My father and other adults changed their demeanour for several weeks. People my age remember where they were and what they were doing that day. Yet, presidents and other world leaders have been assassinated before and since, with many close calls besides. Tragedies illuminate and punctuate their times, but perhaps the biggest impact of tragic events is not change, just a horrible reminder that life retains its power to shock as well as to please.

[While neither are responsible in any way for my comments, nevertheless I would like to thank both the Rt Hon John Gummer MP for his thoughts and Ms Emma Weiss who counselled at Logan Airport and Ground Zero for helping me to gain new perspectives and sympathies on the tragedy.]

Michael Mainelli, FCCA, originally did aerospace and computing research, before stooping to finance. Michael was a partner in a large international accountancy practice for seven years before a spell as Corporate Development Director of Europe's largest R&D organisation, the UK's Defence Evaluation and Research Agency, and becoming a director of Z/Yen ( 

Z/Yen Limited is a risk/reward management firm working to improve business performance through better decisions. Z/Yen undertakes strategy, finance, systems, marketing and organisational projects in a wide variety of fields (, such as recent projects developing a stochastic risk/reward prediction engine and benchmarking of transaction costs across 25 European investment banks. Michael's humorous risk/reward management novel, "Clean Business Cuisine: Now and Z/Yen", written with Ian Harris, was published in 2000; it was a Sunday Times Book of the Week and even Accountancy Age described it as "surprisingly funny considering it is written by a couple of accountants".