In this article, Graham Williams considers the role and usefulness of scenario planning in business. He looks at the entry of black swans, and how we can mature the scenario process in order to formulate more nimble, robust strategies in an uncertain and tumultuous world.
by Graham Williams
Graham Williams works with organisations to introduce mindfulness and imagination, using story and practical exercises as mechanisms to impart new outlooks, skill and confidence. He is a thought-leader for the Institute of Management Consultants. Members of his http://www.haloandnoose.com/ initiative have access to loads of information on mindfulness, imagination and story. Graham would welcome questions and engaging with you on any aspect of deeper mindfulness.
Scenario planning: Common business practice designed to prepare for the future Future scenario construction is an example of creative systems thinking wherein various mental models are shared, and a number of probable future frameworks are created. Consideration of these probable futures allows companies to anticipate changes, be more prepared and be less vulnerable to unfolding events. Both rational and imaginative forces are at play in their construction. The idea is that enough scenarios are written, “to condition managers to see past many of their blind spots”.
“In a time of uncertainty, it (the process) unfreezes intellect, allowing intelligent people a framework within which it’s not only ‘OK’, but even mandatory, to admit that they do not know what the future will bring, but nevertheless to plan”. “Evidence grows that the farther into the future a brain can see itself functioning, the more competent that brain is at handling complexity, juggling multiple responsibilities and integrating tasks”.
Scenario planning activity builds in robustness, a propensity to cope with what the future may bring, and to grasp unexpected opportunities quickly and deftly. Kees Van der Heijden reports that Shell have discovered five benefits of using scenarios:
Robust decision making;
Uncovering and stretching mental models to facilitate discovery;
Enhancing corporate perception;
Providing leadership within an organisation.
Enter black swans Popularised by Nassim Nicholas Talib (author of Fooled by Randomness and The Black Swan), a black swan is a metaphor for a totally unexpected, new, very rare event that has catastrophic impact. The metaphor is not limited to the high finance world of investors, but has widespread application. At the macro level, think Japanese earthquake/tsunami, Hitler’s rise to power, 9/11, a sudden stock market crash or a contaminated/faulty product that puts a business at grave risk of survival. In our private lives, black swans could be an unexpected relationship break up, a severe health-risk diagnosis, a career-threatening change due to a merger or re-engineering exercise or sudden death of a loved one.
Black swans appear to be outside of and beyond normal planning scope. They bring to mind Blaise Pascale’s statement: “It is not certain that everything is certain”.
In a speech to students of George Washington University, IMF Chief Dominique Strauss-Khan warned that the global economy is facing a flock of black swans. This has big implications for how businesses conduct their scenario planning exercises, if not their very continuation. Certainly, the process needs to be enhanced. »