Sunday, May 26, 2024

Uncertainty and Scenario Planning


Uncertainty is permeating every aspect of modern life and work. The clashes of civilizations and cultures, geopolitical volatility, unpredictable markets, and rapidly shifting situations on every front have made a rational and planned approach to affairs increasingly difficult and possibly even impossible.

The Reinvention of Planning

During the 1990s, under the influence of a booming economy in the Western world, rapidly expanding globalization, and the new rhetoric of business models, even respected business gurus propounded the idea that, because everything was changing so quickly, “planning was dead.”

In many respects, this was true – narrow, ponderous, set-in-stone, five year central planning did die during the 1990s. But many organizations threw wisdom out with their abandonment of “large notebook planning,” forgetting they still needed intelligent, thought-through, guidance for their enterprises. Rapid change and ongoing uncertainty requires no less planning, but a different approach to such planning. Yet, when we are faced with such uncertainty, and all of the rules are changing, we often do not know how to think about it effectively.

Executive management cannot abdicate on the responsibility of leadership just because the planning of the past has become ineffective. Leaders still need to successfully negotiate the future.

How can we identify the new ways to think and plan? One way is by studying the responses of leadership in the enterprises that are most challenged to successfully adapt to uncertainty, and then scale and adapt their responses to our, possibly, lesser needs.

Large, global enterprises are exposed to the greatest levels of uncertainty and risk as they span cultures and vast geopolitical tensions. One of the tools increasingly used within such organizations to study and prepare for the future is “scenario planning.”

While originally founded during the middle of the 20th century under the specter of nuclear war and superpower brinksmanship, scenario planning was a sophisticated form of strategic planning reserved for complex situations. As the threat of nuclear war passed, scenario planning largely fell into disuse. Today, as the playing field for business spans the globe, and becomes hopelessly complex, blindsiding us again and again with its uncertainty, scenario planning may be coming back into its own.

What Is Scenario Planning?

Scenario planning is a practice for managing through uncertainty, and now, all times are uncertain times.

Founded by Pierre Wack at Royal Dutch Shell in London, and Herman Kahn at the Rand Corporation in southern California, “scenario planning” is a sophisticated strategic planning practice employed by many successful organizations and enterprises of all sizes.

Scenario planning originally referred to the systematic examination of the various ways or “scenarios” in which situations could develop. It was intended to encourage more insightful decision-making and planning for the long-range future. It was based upon two important realizations about long-term planning:
That many different futures are possible at any one moment in time, contingent upon how various elements work out in any given situation.

That planning generally is about what we want to happen, and is accomplished with inadequate regard to the complexities of the situation.

For Wack, Kahn, and their associates, scenario planning was an every day, all day, constant deliberation and study of the market, the industry, the environment, the surrounding politics, and whatever had any appreciable impact upon the business or the situation. It was a very ambitious, full-time undertaking with a total belief in how much rational study could uncover about the future. In its original form, it was an enterprise continued until the mid-late 1980s, when the nascent post-modern uncertainty began to replace all forms of long-term planning with the absence of planning characteristic of the 1990s.

Today, in a less think tank format, scenario planning can be employed as a technique for achieving the 360 degree due diligence that is necessary to provide the most complete perspective possible and from which to plan and decide. While it was originally a tool for modeling answers to the biggest of questions, today it can be used to see into the future, insofar as such a thing is possible, and to inculcate organizational flexibility and resilience.

Negotiating the Future

An image that is helpful in understanding scenario planning is to think of the organization as a pack of wolves, with executive leadership at the front of the pack. The wolves in front are continuously looking, watching, sniffing, scouting out developments, moving in tune with the environment, and telepathically signaling the rest of the pack, who, on their part, are ready to move and change and adapt in both broadly scripted and unscripted ways. The wolves that are at the front of the pack are those who are best at seeing into the future. Because they have modeled innumerable scenarios, and considered the likely and the unlikely, they possess the talent and acuity, the intuition and prescience to ensure the flexibility and resilience of the organization. The wolves that follow, have been rehearsed on the most likely scenarios, and understand in an instant how to respond, improvise, and change in new ways to remain competitive and viable and to recover from discontinuous change to adapt again.

Thus, scenario planning involves the development of “scenarios,” or images of the future, that included the best-case and worst-case, likely and unlikely options. The scenarios are then organized with next steps and plans to move the organization forward, ever remaining flexible and resilient.

Today, after both its historical ebb and flow, scenario planning is re-emerging as a technique for enhancing the effectiveness of strategic action and long-range thinking. Increasingly, it is being adopted within corporations, governments, NGOs, and non-profit organizations to explore the future and derive what prescience is available for those who fly far enough above the landscape to grasp the true significance of situations and opportunities. Scenario planning is a practice which should matter to those who desire to survive successfully in today’s increasingly discontinuous world.

Many may say, “Isn’t that what leaders already do?” The truth is that few leaders or executives actually achieve such acuity, or if they do, it is only for a short time, possibly during the “annual planning cycle.” While better at any time, than not at all, the real benefit of scenario planning is found in always being ready for uncertainty. The strength scenario planning imparts is that, in having thought about some of the shapes change and uncertainty may take, an organization gains flexibility in the face of uncertainty, and becomes resilience in its aftermath. Being able to negotiate uncertainty provides a competitive advantage, and a greater likelihood of surviving than rivals may possess.

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