Creating Future Scenarios
3.4 Creating Future Scenarios The consequences of any decision made today play out in the future. Likewise, the product of every decision made during the strategic-planning process, including the strategy itself, happens in the future. It is important then that strategists and key organizational managers should feel comfortable in thinking about the future, because that is where they are going to live and work, implement plans and achieve results, and take the company to where it is going.
Some, managers are not comfortable thinking about or dealing with the future, adopting an atti- tude that it is beyond their purview and instead the burden of the executives. Many view it as “beyond their control.” They feel that nothing they can do can change the inexorable momentum that carries us into the future. That is a fatalistic attitude.
One cannot change other people or their behavior, but one can control how one responds to other people and what one does oneself. Most of all, it is a deep-down belief that what you do does make a difference and can affect how things turn out in the future. This is called a normative attitude. People with a normative attitude do not extrapolate everything. While certain industries that are stable for a number of years lend themselves to short-term extrapolation, others are more volatile or unstable and are likely to be discontinuous; the future will be unlike the past.
How does thinking about the future relate to strategic thinking? First, any kind of strategic thinking is going to be set in the future, so learning some ways of forecasting or anticipating the future can serve you very well. Secondly, trying to do strategic thinking with a fatalistic or naïve attitude about the future will adversely affect the results achieved. Instead, a normative attitude asks, of all possible futures, what can be done to bring about a desired future. Finally, being comfortable about the future means being comfortable with ambiguity, uncertainty, incompleteness, and subjectivity. This is easier said than done. For example, most accountants, used to dealing only with historical information, find dealing with the future very difficult. In fact, they have resisted auditing forecast information for pub- lic companies for years, unwilling to take responsibility because of the uncertainty (Abraham, 1978).
Futures Research Methods of looking at or analyzing the future are called futures-research methods. The most relevant and widely used tool that would enhance strategic thinking is scenario planning, a tool designed to create a small number of plausible futures constructed around critical issues for the company about which sufficient information is unavailable to determine how the issue will turn out. Despite the fact that scenario planning requires weeks to months of time, training, and exper- tise, companies often benefit greatly from the shared learning process as well as from the end result. Such planning can serve to position and hone employee skills as well as change set thinking habits.
3. “Monopoly” still has an unfortunate and illegal connotation, yet owning a monopoly space is per- fectly legal, highly profitable, and quite common. If you had to come up with another name for it, what would it be?
4. Can you use the four-action framework without a comprehensive knowledge of the industry in which your company is competing?
5. Must one use the strategy-canvas tool together with the four-action framework, or can they yield benefits when used alone? Discuss.
CHAPTER 3Section 3.4 Creating Future Scenarios
Doug Randall (2009), managing partner of Monitor 360 and a partner at the strategic-consulting firm Monitor, believes that the future should be explored in order to understand more fully options that might be considered today. He offers the five following recommendations:
• Create scenarios that are plausible, not necessarily probable.
• Determine what it would take to be successful in each scenario; give your creativity free rein.
• Assess current capabilities and be painfully realistic.
• Identify gaps between current capabilities and what it would take to be successful in each sce- nario. Be honest in your analysis.
• Make choices considering all your options.
Scenario Planning Scenarios are detailed descriptions that attempt to predict or project the way that something might hap- pen in the future. Engaging in scenario planning fos- ters preparedness; it allows managers to imagine a
range of potential futures and get ready for them before they occur, should they occur. Further, it allows enough time for a management team to consider what the company might do for each scenario should it materialize (Fahey, 2003).
Scenario planning begins with issues deemed critical to the future of the company and about which sufficient information is unavailable to determine how the issue will turn out. For example, a critical issue for the automobile industry in the United States might be energy prices, or more specifically gasoline prices. For the housing, construction, and lumber industry, as well as home- buyers, the critical issue is interest rates, a principal driver and inhibitor of demand. A critical issue for the movie-theater industry and its suppliers today is digital technology. In what form and when will digital-transmission and -projection systems be introduced; and what will persuade movie theaters to invest in and switch to that technology? Some economists, business leaders, scien- tists, and geopolitical strategists are convinced that water is the new oil; that is, water is rapidly becoming the “blue gold” and in short supply. Does this represent an opportunity or a threat? (Ebb without Flow, 2009). It is around such critical issues that a scenario is devised, or, better yet, two to three scenarios so that they may be compared and contrasted. Potential strategies are not only possible responses to a scenario about the future but also to what different players are likely to face and do within each scenario. These actions in turn may influence which strategy may be more appropriate (Wells, 1998).
To begin forming scenarios, one needs to collect information about key forces impinging on that critical issue and driving forces in the macro environment. This is very research-intensive and could cover markets, new technology, political factors, economic trends, demographic changes, and so on. Peter Schwartz says that in this phase one should look for major trends and trend breaks. Next,
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Futures-research methods are a way to analyze the future, enhancing strategic thinking through scenario planning and future mapping.