The search for foresight, The Antidote, Issue 22 - La prospective

40 Pages·2004·1.73 MB·English

Issue 22
Scenarios: The Search for Foresight
Each edition of The Antidote takes as its
Contents
theme one of the Issues currently on the
management agenda. First, we carefully
trawl through ail the available material we
can find on the chosen subject from
TOPIC
around the world. We then select those
aspects that we think are of most Thinking about the future 4
practical benefit to senior managers.
The price of not anticipating changes in the business environment is usually high
The Antidote is produced by the Centre
DESCRIBING THE SUBJECT
for Strategie Business Studies (CISIBIS),
a completely independent organisation
Talking about scenarios 7
which provides no consultancy services.
We are therefore able to write and A brief explanation of meanings and value
comment completely objectively. All of A perceptive and persistent pioneer 9
this ensures that you receive an impartial
Some of the scenario concepts that were developed by Pierre Wack at Shell,
overview of important thinking and
and the lessons that can be drawn from them
practice on current management issues
to keep you well informed and up to date.
SCENARIO METHODOLOGIES
Visit our website at
Weaving plots for alternative futures 11
www.theantidote.co.uk
An eight-step guide to developing scenarios
Creating the future 14
Disclaimer
A French school, La Prospective, argues against taking a fatalistic approach
Using scenarios to develop the right resources and capabilities 17
Publications Ltd, is designed to publish .
information and comment to a wide public A German approach to scenario management based on Systems thinking and future trends
audience, in both print and electronic format
(for example on CD ROM or the. Worldwide Variations on a theme 20
web). This edition of The Antidote is for
Some other techniques for generating scenarios and looking at alternative futures
general awareness and guidance only. It
does not, and stipula not be assumed to, Forming judgements 25
provide specific and individual legal,
What do structured group techniques and electronic meeting Systems contribute
technical, accounting, professional or
management advice. Individual advice to scenario planning?
should be sought on specific facts. This
edition of The Antidote has drawn on USING SCENARIOS
information from third parties independent
of CISIBIS Publications Ltd and The
Putting scenarios at the heart of strategy 29
Antidote. This information is subject to
rapid change. CISIBIS Publications Ltd and How scenarios can be used to 'wind tunnel' business ideas and strategies
The Antidote Are not able to verify the
accuracy of ail the information contained in Pitfalls in scénario planning 32
this edition. CISIBIS Publications Ltd and
A checklist of traps to be avoided
The Antidote exclude all liability for actions
Putting scenarios to use 34
edition of The Antidote.
Some examples of corporate, public body and generic scenarios
Photocopying Single photocopies of single
WWW
allowed by national copyright laws.
Permission, and payment of a fee, is
Surfing around the subject 37
required for all other photocopying
avaîlable to educational institutions for non- SNIPPETS
profit classroom.use.
Meanwhile, elsewhere... 38
Permissions Except as above, no part of
this publication may be reproduced, stored
in a retrieval systern or transmitted in any
form or by any means, digital, electronic,
recording or otherwise, wfthout prior,
Cover illustration: The Thinker (Le Penseur) (bronze) by Auguste Rodin (1840-1917)
Private Collection/Bridgeman Art Library.
Issue 22 1999 The Antidote fromC\S\B\S www.theantidote.co.uk
Editorial
No doubt in the period immediately running up to, and just after,
Editor
the turn of the millennium, much of the world's media will
Tony Kippenberger
indulge in an orgy of rétrospective reviews and future
Associate Editor
predictions. It's bad enough at the end of a decade, so what it will be
Brün Gould
like at the end of a century, let alone a millennium, is difficult to
Our independent
imagine. No doubt by the end of it we'll all be sick and tired of being
contributing writers
told where we've been and where we're heading.
in this issue
John Boyd
Whatever the solemn prognostications or wild 'sci-fi' projections, Peter Hïldrew
business will go on (Y2K permitting, of course). It will, as always, be Chrissie Hogg
up to individual managers in individual organisations to develop their Jaclyn Kippenberger
own views of the changing nature of business and the technological, Tony Kippenberger
economie and socio-political environment in which it will be Copy Editor
conducted. Indeed this Issue of The Antidote looks at a wide variety Jacky Lorimer
of tools and methodologies designed for just that purpose. Editorial Assistant
Rachel Jones
However, if asked what area will have the biggest impact on the way Art Editor
business is conducted in the future, and also where the greatest Bernard Fallon
uncertainty about the nature of that impact lies, it would be difficult
Business Manager
to avoid mention of what has become known as e-commerce and Peter Hïldrew
e-business. Despite, rather than because of, all the hype and froth
Subscriptions
around the subject, most of us have a sense that many familiar
Elaine Alexander
business models are going to be challenged over the next ten years.
Information Services
While e-commerce is generally couched in terms of a retail battle
Debbie Ormston
between 'bytes' and 'bricks and mortar', the much less widely
Directors
popularised world of e-business has far more potential to disrupt
Mark Allin
current thinking about how all businesses can and should be run.
Anthony Biddle
Richard Burton
So, before we enter the brave world of the new millennium, and get Tony Kippenberger
used to writing strange dates like 3/1/00 (or 1/3/00 in the US), Richard Koch
The Antidote will be devoting its next two Issues to exploring equally
The Antidote is available by
unfamiliar territory. This is a different world of web-oriented subscription only (ten issues).
Subscription queries:
marketing, procurement through extranets, video-conferencing via
theantidote@csbs .co.uk
virtual private networks and even cyber strategy! As usual, we will
© Copyright 1999 by
seek out the best or most distinctive current thinking and, cutting C|S|B|S Publications Limited
through the buzzwords as best we can, provide you with a guide to St Thomas House
St Thomas Street
managing in a digital economy. These issues should also provide a
Winchester
useful antidote to some of the more fantastical forecasts Hampshire SO23 9HE
we are likely to hear over the coming months. United Kingdom.
Tel: + 44 (0) 1962 877377.
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Printedby Optimum Litho Ltd,
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ISSN 1363-8483
www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22
Thinking about the future
In their 1994 bestseller, Competing for the behaviour, values and decision-taking. But
Future, management gurus Gary Hamel managers forget that such assumptions are
and C.K. Prahalad describe asking senior not tablets of stone, that they simply form a
managers three simple questions. Firstly, what hypothesis, a view taken at a particular time.
percentage of their time is spent on external, They therefore forget to refresh and re-think
rather than internai issues? The usual answer them. (For more on Peter Drucker's "Theory
is about 40%. Secondly, how much of this time of the Business", see The Antidote Issue 4 pages
is spent actually looking some years ahead, as 9-11 or www.theantidote. co.uk/articles/
opposed to worrying about competitors' druckertob.html)
current tactics? The answer is around 30%.
Finally, how much of that thinking-ahead time Holding fast to certainties and previously
involves developing a consensus view of the successful formulae, while the world is
organisation's future? The answer is about changing around you, is a dangerous pastime
20%. Hence what Hamel and Prahalad call in good times as well as bad. Highly regarded
their "40/30/20 rule", the consequence of UK retailers such as Marks & Spencer and J.
which is that senior management actually Sainsbury have recently been finding that out,
devotes less than 3% (40% x 30% x 20% as indeed have US companies like Motorola -
= 2.4%) of its time to building a "corporate challenged by Finland's Nokia in mobile
perspective on the future". Thus many phones - and even Compaq, hit by Dell's direct
organisations are forced to rely on personally selling operation.
More than one prediction
held, often idiosyncratic, views about what the
about the future has been future might be. A classic case
proved wrong. As the Writing in the Spring 1999 Sloan Management
Personal views, of course, can prove to be Review, Professor Peter Williamson of INSEAD
following real (or attributed)
dangerously wrong. Ken Olsen, founder of cites the Woolworth Corporation, founded by
quotes iliustrate: Digital Equipment Corporation (DEC) and Frank Winfield Woolworth in 1879, as a classic
regarded as a model entrepreneur in his time, case of a company that became a victim of its
provides a good example. In 1977 he stated own success. By the time of the founder's
that, "There is no reason for any individual to death in 1919, Woolworth's "five and dime"
"Everything that can have a computer in their home", and many stores already numbered over a thousand and
would have agreed with him (though as a the company's headquarters were in what was
be invented has been
projection of the future it was clearly wrong). then the world's tallest building. Up to and
invented."
But this view became such a fixation that by immediately after the Second World War the
CHARLES H. DUELL the early 1980s, when the world was already company thrived both at home and abroad,
COMMÏSSIONER changing rapidly, he imposed a blanket ban becoming a household name through its
US PATENT OFFICE 1899
on the words "personal computer" and any winning formula of selling inexpensive,
discussion of them within his company. non-perishable general merchandise through
Olsen's refusal to accept a future for the IT "no-frills" self-service.
industry in which PCs would play a large part
cost DEC dear. From being a leading market However, by the 1970s the Woolworth's
contender with IBM at the start of the 1980s, formula was no longer performing, particularly
"Atomic energy might in 1998 the company suffered the ignominy in the US. By the early 1980s, it was clear that
be as good as our of being absorbed by Compaq - an upstart that the business was in trouble with sustained
rode to the top on the PC wave. attacks coming from two quarters - Wal-Mart's
present day explosives,
discounted general merchandise superstores
but it is unlïkely to Living off the past and speciality retailers like Toys 'R' Us. A
produce anything very But Ken Olsen and DEC are not alone. The process of closure and retrenchment in the
recession-ridden early 1990s saw many well- face of declining sales followed, beginning in
much more
known role models, such as IBM, Disney and 1982 with the sale of its UK stores - 73 years
dangerous."
General Motors, stumble badly. What Peter after the first one was opened in Liverpool -
WINSTON CHURCHILL 1939 Drucker calls their "Theory of the Business" to the company now known as Kingfisher plc.
had passed its sell-by date: "the assumptions
on which the organisation has been built and In the US and elsewhere Woolworth tried
is being run no longer fit reality." These to respond by opening both discount and
assumptions - about markets, customers, speciality stores but found that it lacked
competitors, necessary competences, critical capabilities. It no longer understood
technology and society - shape corporate its customers, who flocked to the competing
Issue 22 1999 The Antidote from C|S|B|S www.theantidote.co.uk
retail formats, nor did it have the Bad news doubt find out). For instance, many a
new retail skills, such as Wal-Mart's For managers, of course, this recently re-designated life sciences'
fabled logistics expertise, that had represents the worst of all worlds. If company, initially rewarded by the
become necessary to compete. The this theory holds, they are in charge stock markets for their clever exit
consequence was that Woolworth's of inflexible organisations in an ever from cyclical bulk chemicals, have
options for the future were running more volatile world. Furthermore, been banking on a wonderful future
out: "The company had become it is a world in which past decisions, for genetically modified organisms.
a prisoner of its past". Eventually, strategic choices and subsequent They have devoted considerable
in 1997, Woolworth's last general management actions will all have resources to re-focusing their
merchandise store in the US - the determined the inherent capabilities businesses and acquiring the newly
company's original bedrock - was and resources that a company has. required competences. But right now,
shut. As Williamson puts it, the These in turn will tend to restrict in Europe at least, this technology is
company "had refined and polished the ways in which new resources not the winner it was going to be.
its economic engine and deepened and capabilities can be most easily Large companies like Monsanto,
its narrow range of competences into developed. Conceptually, therefore, Aventis and AstroZeneca therefore
almost perfect extinction." companies are already stuck with a have to readjust their mindsets to a
portfolio of current strategic options new reality.
A changed view largely pre-determined by earlier
In Williamson's view, the company choices. Grappling with the future
simply failed to invest in the essential So how can managers think about the
knowledge and capabilities needed Thus, it is the task of senior future? Reflecting the different
to succeed. This in turn brings us to management to adjust and renew answers to this question, Technology
an important part of the current resources and capabilities as time, Futures Inc, a US consulting firm, has
strategy debate. As Henrick Duus competition and change erode their devised a neat way of categorising the
of Copenhagen Business School value - creating, in the process, five different ways people think
has recently pointed out, attitudes new future options. Simply living about the future.
toward companies and the business off current resources and capabilities
environment have changed a lot over will, in the long run, lead to The first group is the Extrapolators.
the last 30 years. During the 1970s, weakening competitive performance, They believe that the future is a
and into the 1980s, companies were increasingly restricted profitability logical extension of the past. Large
seen as highly flexible units, able and inevitable decline - as with scale, inexorable forces are at work
and expected to adapt readily to Woolworth. So the strategic problem driving the future in a reasonably
the shifting needs and wants of is to decide upon, and then develop, predictable way. The future can
customers, in a relatively predictable those resources and capabilities that therefore best be forecast by
environment. Now, however, the provide a platform for the products extrapolating past trends in a
focus of strategic thinking has shifted and services that will be needed in carefully reasoned and logical
to one that views companies as the competitive markets of the fashion. Next are the Pattern Analysts.
bundles of distinctive resources, future. These choices, about how and They believe that powerful feedback
knowledge and capabilities built up where to invest, are critical because mechanisms in society, combined
over time. they form long term commitments with basic human drives, cause
that are difficult to reverse. Making Jxends and events to occur in
From this new perspective - what such decisions and commitments, identifiable cycles and predictable
has become known as the 'resource- in the face of real uncertainties patterns. Thus, analogous situations
based view' of strategy - the about the future, tests strategic from the past can be analysed to
company is much less flexible, management ability to the full. identify probable future patterns.
simply because it takes a good deal
of time and effort to develop new The remaining problem The third group is the Goal Analysts.
capabilities and knowledge. For While managers are trying to resolve The best way to project the future,
this reason companies may indeed these problems by re-focusing their in their view, is to examine the
become 'prisoners' of their past, organisations, clearly defining their explicit and implicit goals of key
dependent on outdated and core competences and then decision-makers and trend-setters
increasingly less applicable skills increasingly relying on networks and to evaluate the degree to which
and abilities - as in the case of and strategic alliances to provide these, and the actions they take to
Woolworth. Simultaneously, as other critical capabilities and achieve them, will affect the long-
Duus points out, there is widespread resources, the problem does not end term. Counter Punchers comprise
acknowledgement that the business there. Changing the nature of the the fourth group. Seeing the future
environment has become organisation doesn't resolve the as the outeome of unpredictable
increasingly unpredictable. (See question of what the future holds. and random strings of events, they
The Antidote Issue 17 pages 6-11 or Companies do not trip up just believe that the only way to deal
www. theantidote. co. uk/articles/ because their past formulae no longer with it is to keep an eye on a wide
rbvstrategy. html for an explanation work. Future plans can just as easily range of possible trends and events,
of current thinking on resource-based go wrong if they assume a future that monitor the technical and social
strategy.) does not materialise (as some récent environment and stay as flexible
investors in Internet stocks will no as possible.
www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22
The final group is the Intuitors. Convinced important vehicle for 'Goal Analysts' and
that the future is shaped by a highly complex 'Counter Punchers', as well as 'Intuitors',
mix of trends, random events and actions by to use.
individuals and institutions, they believe there
is no rational technique for forecasting the Over time, ways have been found to make
future. In their view, the only way to handle them at least partially acceptable to
such complexity is to gather as much 'Extrapolators' and even 'Pattern Analysts', as
information as possible and then allow the this Issue of The Antidote illustrates. But, to be
brain's subconscious, and personal intuition, of use, they must break down preconceptions
to provide meaningful insights. and reveal blindspots, widen managerial
thinking and re-focus it onto new, possible
Using scenarios alternative futures. Unfortunately, this means
Naturally, many tools for each group are that scenarios have to tread a narrow line
available, most of them quantitative. But there between stretching belief and maintaining
"Who the hell wants to is a big difference between trying to predict the credibility - a problem cleverly captured by
hear actors talk?" future by extrapolating past trends and using Denis Loveridge of the University of
intuition to gain insights. Organisations will Manchester in Figure 1.
H M WARNER, WARNER BROTHERS,
always use forecasts (effectively predictions)
in 1927 when weekly cinema
attendance was about 5 million because they need them in order to project They need to arouse managers' interest and
a week. By the end of 1929, sales, create budgets and allocate resources. make them question their thinking while
'talking pictures' were drawing But to rely on forecasting techniques alone is simultaneously holding on to reality - not an
90 million a week.
to flirt with danger. easy recipe. Nor are they a panacea. But what
they do provide is one of the best, currently
The gravest risk is that forecasts tend to available ways to help managers avoid driving
project conventional wisdom and current an organisation into a dead end. And,
assumptions forward. They fit well with incidentally - used correctly - they also meet
existing mindsets. Yet, time and again, this Hamel and Prahalad's admonition to build a
is inadequate preparation for what the future "corporate perspective on the future" H
holds. Fresh thinking, leading to foresight,
or even better insight, is the ideal in the References: Gaiy Hamel and C.K. Prahalad,
current business environment. So, at the "Competing for the Future", Harvard Business School Press,
intuitive end of the spectrum lies another 1994, ISBN 0-87584-416-2. Peter Wiîliamson, "Strategy as
Options on the Future", Sloan Management Review, Spring
tool: scenarios. Designed to explore
1999. Henrik Duus, "Strategic Business Market Forecasting",
unrecognised possibilities and challenge
Strategic Change, Issue 8, May 1999. Technology Futures
current thinking, scenarios provide an Inc., www.tfi.com/ResCon/TF-Techniaues.html.
"The bomb will never
go off. I speàk as an
expert in explosives. "
ADMIRAL WlLLIAM LEAHY
about the Manhattan Project 1943
Figure 1: Relationship between scenario content and managerial response (Loveridge, adapted from G.L.S. Shackie,
"Expectations in Economies")
Issue 22 1999 The Antidote from C\S\B\S www.theantidote.co.uk
Talking about scenarios
A shappens so often in management, For the purposes of this Issue of The Antidote
there is a problem with terminology: we use the word scenario to mean a detailed,
the way the word 'scenario' is used to descriptive plot of a possible alternative future.
mean a wide variety of dissimilar activities in
different organisations. Origins "A severe depression
In the 1950s, the US Air Force began using lïke that of 1920-1921
At one end of the spectrum, using scenarios what were termed 'scenarios' to try to identify
is outside the range of
can mean trying out 'what if questions on what its Soviet bloc opponents might do and
probability. "
an econometric model. At the other end, it so prepare alternative strategies.
can mean the development of full length, THE HARVARD ECONOMIC SOCIETY
detailed 'stories' about possible alternative According to historian Art Kleiner, it was the 16 NOVEMBER1929
futures. The former tends to be an exercise novelist and screenwriter Leo Rosten who,
in sensitivity analysis, adjusting existing data finding a group of physicists hunting for a
within a model - as in 'what if interest rates name for alternative descriptions of how
went up by 2%?' The latter may involve satellites might behave, first suggested the
several man-years of work and is a task that term "scenario". "You should call them
can only be undertaken with a good deal of scenarios," he said. "In the movies, a scenario
commitment and at considerable cost. is a detailed outline of a future movie..."
While neither activity is invalidated by the
other, such a divergence in the use of the In the 1960s, first at the US RAND Corporation
same word can cause some and then at the Hudson Institute, Herman
misunderstandings. Kahn, who had worked with the US air force,
used scenarios in a non-military context.
Although he is often remembered for looking
The Shorter Oxford English Dictionary at the potential for nuclear war - he urged
providas a number of definitions that tend people to think the unthinkable so that they
to position the use of the word toward the would be better prepared should it ever
end of the spectrum: become imminent - he also developed the
use of scenarios in a business context.
scenario n. & v. L19. [It. F L scena SCENE]
A n. PL -os: la A sketch orotidine of the Kahn saw scenarios as fiction rather than
plot of a play; ballet, novel, etc., with rigorous forecasts. The point, as he saw it,
details of the scenes and situations. L19. b was not to make accurate predictions but to "Very interesting,
Cinemat. A film scriptwitball the details corne up with a mythic story that brought the Whittle, my boy,
of scenes, stage directions, Btc, necessary point home. Traces of this approach can still
but it will never work!"
for shooting the film. ,E20. 2 A; description be seen in some of Shell's thinking on the
of an imagined situation or a postulated subject today. PROFESSOR OF AERONAUTICAL
sequence of events, an outline intended ENGINEERING AT CAMBRIDGE
UNIVERSITY TO A YOUNG
course of action; spec a scientific- Types
SIR FRANK WHITTLE, WHO WENT ON
description or speculative model intended The management literature tends to divide TO PATENT THE BASIC DESIGNS
to account for observable facts. Also loosely, scenario methodologies into three categories. FOR THE TURBOJET ENGINE IN 1930
a situation, a sequence of events. M20. B Explanations of all three, and other
v.t. make a scenario (of abook, idea, etc); methodologies, are included in this Issue.
to sketch out M20.
1. Intuitive logic is a 'soft' method of scenario
development focusing on changing mindsets
In almost any discussion of scenarios, so that managers can anticipate different
the influence of Royal Dutch/Shell as an future worlds. It involves creating a series of
exemplar of scenario-planning, and the alternative coherent and credible stories
relative dominance of their model as a prime about the future against which decisions can
reference point, quickly becomes clear. be tested. It does not try to predict but offers
Shell's own definition goes: "Scenarios are a means of thinking about the future, while
descriptions of ALTERNATIVE futures also being a learning vehicle.
which are PLAUSIBLE and INTERNALLY
CONSISTENT. Scenarios are QUALITATIVE 2. Trend-impact analysis is a 'harder'
and QUANTITATIVE descriptions of future methodology that tries to predict the future
environments which highlight key by looking at the effects of trends over time.
UNCERTAINTIES." It helps forecasters identify pertinent factors
www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22
and assess their impact on an • helping to identify and quantify So there are a limited number of
established trend based on the the unknowns during a period alternatives:
probability of their occurrence. of upheaval
While it has the advantage of • explaining why there may be 1. Use generic, pre-prepared
combining traditional forecasting many possible answers to a single scenarios, created by strategic
techniques with qualitative factors, strategic question institutions or industry bodies.
it is designed primarily for the • looking for future threats and While such scénarios benefît from
evaluation of one key decision opportunities being externally produced, they
or forecast variable which is • generating future strategic options are also available to others, so
quantitative and on which historical • creating a better and wider no unique insights are likely.
information exists. As such, it rarely understanding of the real business In-house scenario presenters may
allows for assessment of the impact drivers also lack familiarity with the
of events on each other. • gaining competitive advantage by internai logic and consistency
recognising an emerging future involved in their creation. A
3. Cross-impact analysis is also early further problem is that industry-
associated with 'harder' forecasting • helping senior managers to specific scenarios may contain
techniques. It in volves experts recognise that 'strategies they like' current conventional wisdom.
identifying a large number of trends, may not always be perfect and So the way things have always
potential events and conditions, may need changing been done in the industry is likely
which may affect the likelihood • assessing long-term investment to predominate - thinking stays
of other events occurring. Each is decisions inside the box.
assigned a probability and, using a • assisting in portfolio management
computer, different combinations • helping to make implicit 2. Use external consultants. This
and cross-impacts are plotted. It management mindsets explicit is a common route, but means
allows analysts to work through • building a common language that the selectors have to know
a large number of variables and across the organisation for people what they are after. This issue of
scenarios, and to be explicit about to talk about issues The Antidote is designed to help
the interrelationships of particular • developing a tool for because it identifies many
events and conditions. organisational learning different methodologies from
• crafting new strategies for which to choose and the criteria
It's worth noting, however, that the different futures for making the choice. But the big
proponents of each methodology consultancies will cost a leg and
have little time for each other. For Going about it... an arm, while medium and small-
example, Steven Schnaars, author of Newcomers to scenarios confront sized consultants will have more
Megamistakes, describes cross-impact a Catch 22 situation. Many pilot limited experience.
analysis as "a family of exotic schemes or experiments, designed
mathematical models that seek to to 'prove their worth' are necessarily 3. Internai development or DIY is
quantify and manipulate the limited. This means that the true probably the ideal route. It has
judgemental estimates of experts. potential of scenarios may notbe its problems, however, not least
The procedure exemplifies the realised or that a contrary belief a potential lack of experience.
madness of models over substance." develops - that no great Once a scenario exercise has failed,
commitment of resources is really it may take years to rekindle
Intended outcomes needed. The alternative is to prove interest in the process! So, unless
The scale or scope of a scenario by example - quoting companies you have people on your team with
exercise - which vary at the or organisations that have really experience of scenarios, consider
extremes from the ten man-years benefited from their use. This is bringing in a scenario expert as
of work that Shell's 'global' scenarios difficult, not only for reasons of facilitator - at least for the flrst few
can take to a 50 minute 'electronic commercial sensitivity, but because attempts. As usual, external voices
meeting' - will depend on the many keen proponents find it also carry more weight...
intended use (and budget). Apart difficult to quantify the benefits,
from superseding trend-based especially at the softer, 'learning' Having said all that, it is worth
forecasts, scenarios can add value end of the spectrum. Predictors will, persevering. The alternative, after
in many ways. The following are of course, only tell you when they all, is to stick with extrapolated trend
some proposed by experienced got it right. Unfortunately, many lines and hockey-stick forecasts! •
managers at C | S | B | S workshops people have heard of Shell's
where scenarios have been prediction of the 1970s oil price
discussed: rise, yet Shell's processes are References: Steven P. Schnaars,
intended to be non-predictive ''Megamistakes: Forecasting and the Myth of
Rapid Technological Change", The Free Press,
• increasing management sensitivity (see www.theantidote.co.uk/
1989, ISBN 0-02-927952-6; "A Summary of
to potential future shocks and articles/shellscenarios.html Discussions on Scenarios", The Centre for
discontinuities for more on this). Strategic Business Studies, 1995, £35.
Issue 22 1999 The Antidote from C\S\B\S www.theantidote.co.uk
A perceptive and persistent pioneer
For 12 years, from 1970 to 1982, Pierre Wack wrestled to create scénarios that were both
relevant and meaningful enough to change Shell management's mindsets
Pierre Wack, an economistby training, is credited, may be right". Critically, they describe "différent worlds,
alongside Ted Newland, with the development of not différent outcomes in the same world" (our emphasis).
scénario planning at Royal Dutch/Shell. Described The aim is not to 'get it right1 but to "illuminate" the major
by his successor, Peter Schwartz (see page 11) as a forces at work within the System, to illustrate their
"mysterious, elusive Frenchman, almost oriental in interrelationship and to highlight the key uncertainties.
appearance", Pierre Wack learnt through a process of This he calls "the gentle art of reperceiving".
trial and error what it takes to make the use of scénarios
effective. The story of how Shell developed and then Some problems
used scénarios to good effect, told in his own words, can For those who hâve tried scénario planning and been
be found in two séminal articles in the Harvard Business disappointed, Wack offers some thoughts. Many so-called
Review published in 1985 (see références below). The scénarios "merely quantify alternative outcomes of
trials and tribulations of the learning process that Shell obvious uncertainties"; for instance projecting a possible
went through has also been extensively covered in range of oil priées ten years hence. Thèse, he suggests,
The Antidote Issue 10 on Organisational Learning do not help décision makers, because they présent "raw
(pages 35-40). That article, entitled "Over 25 Years of uncertainties" but provide no basis on which managers
Learning to Learn", is also available at: can exercise their judgement. As a resuit, no stratégie
www.theantidote.co.uk/articles/shellscenarios.htrnl. action or thinking takes place.
Hère, we look specifically at some of the scénario Scénarios need to be structured in such a way that
concepts that Pierre Wack developed and the lessons he executives corne to understand the nature of the
drew from his expérience. Since many organisations hâve uncertainties and thus corne to grips with them. But
tried using scénarios, with very différent degrees of even good scénarios are insufficient. They can only help
success, it is instructive to reflect on Wack's own findings. managers when they change the décision makers'
assumptions about how the world works and then
Forecasts compel them to rearrange their mental models. To do
Wack accepts that straightforward forecasts can be this they must create a bridge between the new realities
reasonably accurate on many occasions. But he believes of the outside world and the "microcosm" of the
that, paradoxically, this is their greatest danger, because manager's mind.
sooner or later they fail to predict some major shift. And
this occurs at precisely the moment that organisations The need to observe
most need to know, or at least sensé, what the future Wack also highlights the need to separate what is
may hold and, more particularly, what éléments of it uncertain from what is predetermined. By
may quickly make their stratégies obsolète. 'predetermined', Pierre Wack means events that either
ha-ve occurred, or are almost certain to occur, but whose
It is the ability to predict stormy change that would make conséquences are not y et clear. He likens it to monsoon
forecasting useful, and that is precisely the area where it storms hitting the Ganges river basin - the fact that the
is weakest. Too many différent forces are now at work conséquences will be felt in Rishikesh in the Himalayan
for it to be possible to get the right forecast, "no single foothills within two days, in Allahabad three or four days
'right' projection canbe deduced from pastbehaviour". later and at Benares two days later still, is predetermined.
The alternative By simply recognising the future implications of
Instead of looping for better forecasts - by perfecting something that has already occurred, effort can be
techniques or finding better forecasters - Wack argues directed at what those conséquences mightbe. In Wack's
that managers must "accept uncertainty, try to view, identifying what is predetermined is fondamental.
understand it, and make it part of their reasoning". But it is also an area of great danger. He quotes Paul
Uncertainty is not just a short-term déviation from a Valéry, the French philosopher: "A fact poorly observed
predictable world, it is now an intégral part of business is more treacherous than faulty reasoning." Errors in
life. And, he argues, one of the best ways of managing scénarios, Wack suggests, are more often the resuit of
this uncertainty is the proper use of scénarios. poor observation than weak reasoning.
Scénarios - "pathways into the future" - acknowledge Looking at the edges
uncertainty and set out to structure and understand it. Wack sought out what he called "remarkable people".
This, he suggests, is very différent from simply criss- Thèse were "acute observers with keen, unending
crossing multiple variables and then looking at scores of curiosity"; people who paid attention to the way the
possible outcomes. Good "décision" scénarios, as fie calls world worked and, in the process had their finger on the
them, "are not a group of quasi-forecasts, one of which puise of change. For example, on one occasion in the
www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22
1970s, Wack got into a stimulating conversation In times of change
with an Iranian physician. They became close In a rapidly changing business environment,
friends and each year Wack would visit him the inability to see a newly emerging reality
to see how his perceptions of the world were because of obsolète assumptions is a common
changing. cause of stratégie failure, "particularly", Wack
says, "in large, well-run companies."
Peter Schwartz, Wack's successor at Shell, Management mindsets, shaped by past
explains why this was so important: "Pierre expérience and sustained by standard forecasts
"T/râ 'téléphone' had corne to believe that if you wanted to see and projections, frequently prove inadéquate.
has too many the future you could not go to conventional
sources of information. Everyone else would Because of the sheer quantity and complexity
shortcomings to be
know them as well and thus you would hâve of information available, managers' mental
seriousty considered no unique advantage." Scénario builders need models never match reality - they are always
as a means of peripheral, not tunnel vision. constructs. Thèse constructs tend to be nearer
to reality when times are stable. When change
communication. The
Number and nature accélérâtes, however, they "become a
device is iriherently
The number and nature of the scénarios also dangerously mixedbag: rich détail and
ofno value to us." matters. For instance, three scénarios along a understanding can coexist with dubious
single dimension will tempt managers to pick assumptions, sélective inattention to
INTERNAI MÉMORANDUM
WESTERN UNION 1876 the middle scénario as the most likely. Two alternative ways of interpreting évidence, and
scénarios - one optimistic and one pessimistic illusory projections." This is when scénarios
- will tempt managers to 'split the différence'. are of most value.
Wack's personal suggestion is that there
should never be more than four and that the And success...
idéal is three, two différent worlds and one Scénarios are intended to gather and
based on existing thinking (the "surprise-free transform strategically important information
scénario"). The latter is included specifically into fresh perceptions. However: "This
to show how fragile current assumptions are! transformation process is not trivial -
more often than not it does not happen.
In terms of their nature, Wack argues that When it works, it is a créative expérience
scénarios must address management's deepest that générâtes a heartfelt 'Aha!' from your
concerns - what keeps them awake managers and leads to stratégie insights
at night. That way, they hâve immédiate beyond the mind's previous reach." In
relevance. According to Peter Schwartz, Pierre times of change and uncertainty, scénarios
Wack also believed that scénario création was in this context can provide real opportunities
not a reductionist process, it was an art full of for companies to achieve compétitive
subtleties - like good story-telling. Anecdotal advantage M
évidence certainly suggests that Wack himself
HThe phonograph... was an excellent story-teller.
is not ofany Références: Pierre Wack, "Scénarios: Uncharted Waters
Two tests Ahead", Harvard Business Review, September-October
commercial value."
1985 (reprint no. 85516); "Scénarios: Shooting the Rapids",
Wack suggests two tests for evaluating
Harvard Business Review, November-December 1985
THOMAS EDISON scénarios. First, what do they leave out? (reprint no. 85617); Peter Schwartz, "The Art ofthe Long
ITS INVENTOR 1 880.S
Managers must not be able to look back and View", John Wiley&Sons Ltd, 1998 (first published 1991),
see that important events were missed. ISBN 0-471-97785-3, £14.99 PB; Arie de Geus, "The Living
Company", Nicholas Brealey, 1997, ISBN 1-85788-180-X.
Second, do they lead to action? If they do not
push managers to act differently then they are
little more than "interesting spéculation".
COMMENT
Unlike many other Shell alumni, apart from What is clear is that he understands the
teaching scénario planning at Harvard problems inhérent in getting managers
Business School for two years in the mid- to reframe their mental models. Many
1980s and his two subséquent articles in who hâve tried using scénarios express
l HBR Pierre Wack has remained réticent disappointment at their inability to achieve
;
; about précise méthodologies. Perhaps this this goal. Revisiting Wack's views, outlined
; adds to the air of mystery that surrounds above, may^ help to explain the difficulties
| him and causes some among Ms purist involved and provide the encouragement
followers to call him 'the Master'. to persévère.
Issue 22 1999 The Antidote from C|S|B|S www.theaiitidote.co.uk