Scenario Planning and ToP
by Scott Russell
Thinking about uncertainty: where do I begin?
Beginning to think about operational planning for next year? Are you trying to re-evaluate the goals in your current strategic plan (or a client’s plan)? Wondering where you could even begin in this environment to figure what the future might look like, never mind setting a goal or a target you’ll be evaluated on?
Consider scenario planning.
Scenario planning plays well with ToP methods and can be a powerful addition to the ToP participatory planning process during times of high uncertainty.
Facing an Uncertain Future
The year 2020 has been a stark reminder that the ultimate realization of the most carefully articulated vision, or painstakingly crafted strategies, or laboriously detailed action plans are subject to forces greater than the sheer will of even the mightiest organizations. Sometimes we all get caught in the trap of thinking about strategy as a product. A few years back, you created a plan that simply needed to be followed and adjusted quarterly. At this moment, you might be wondering, “Do I have to start all over? Do I just hold on and hope this passes and we can get back to business as usual?”
In this way, how we think about our strategy blinds us to changing circumstances.
And when the pace of change is accelerating and the environment becomes dramatically more uncertain, for example in the midst of a global pandemic, any blind spots can lead to catastrophe.
We sense the danger, but what do we do about it?
Focus can lead to failure too
Even in “normal times,” a compelling case is made by Michael Raynor for shifting how we think about strategy to address what he calls the strategy paradox. He proposes that many of the qualities we have come to know as the hallmarks of successful strategy (laser-like focus, exceptionally clear vision, deep commitment) are also present in some of the biggest organizational failures in history. Put another way, getting locked-in on the preferred future state you have planned to pursue can itself create a blind spot, even if you considered every possible variable when you started out.
Scenario planning expands the field of vision, illuminates changes as the future emerges and provides a starting point for developing a more robust set of strategic options for leaders to consider in changing circumstances.
Scenarios are a starting point for strategy, not an end point
The products of a scenario planning approach, called scenarios, are tools to support the strategic thinking process and enhance the conversation within your organization about strategy. Scenarios are narratives, stories, about what could be. They are plausible visions of the future, ones that challenge the status quo thinking about where we are heading, even where we are right now. Their primary purpose is to provide a “jolt” to leaders at all levels to think differently.
Imagine there are three or four possible futures that are radically different, and yet it’s possible you’ll wake up in any one of those futures tomorrow. That is the current reality most organizations face right now, “how do I prepare for a tomorrow that may be completely disconnected from the reality I face today?”
That high degree of uncertainty may be directly related to the impacts of the pandemic, the government response, or economic fallout. It could also be the reality of your industry, which may be in the midst of massive disruption. It could be both. Scenario planning isn’t about identifying the most likely scenario and planning for it. Instead scenarios can become the concrete starting point for ToP processes that support strategy development. Scenarios are the ultimate “what if” tools.
How scenario planning is done: 5 steps
First, you assemble a team. Scenario planning is a group process (diverse perspectives are required) and can be applied in two contexts, adaptive or transformational. Adaptive scenario planning, as defined by Adam Kahane, looks to support decision making at the organizational level to better respond in a range of situations. Players from across the organization are engaged. Transformational scenario planning by contrast brings together system players across a diverse range of stakeholder groups to tackle systemic issues.
Second, a deeper understanding of the current reality is developed. Research, interviews, workshops (think obstacles and contradictions) surfaces key issues.
Third, an inductive workshop approach (the consensus workshop method for example) or a deductive approach (identifying 2 key drivers of uncertainty and creating a matrix of possible scenarios) is then used to arrive at a handful of scenarios for consideration. The scenarios are tested for plausibility and relevance to the strategic question at hand.
Fourth, the scenarios are communicated (sometimes using different media to bring the stories to life) and the implications are considered throughout the organization or system. This may be where scenarios begin to intersect with ToP methods in a variety of different situations, e.g management meetings, team planning, product innovation, risk management, the list goes on.
Finally, scenarios should provoke decision making and action. Again, the intersection with ToP methods could be varied.
The fivefold process outlined above begins to demonstrate why scenario planning aligns so well with ToP methods. It’s hard not to see the second step through the fifth step as an ORID thinking process. (But that’s another article.)
Scenario planning is a process that does require commitment, energy and resources to effectively complete. In a mature industry, with a few well-known players and relatively little uncertainty, maybe the work required to explore a range of futures possibilities might yield little value, except as a contingency planning exercise. However, in today’s environment virtually any organization would be well served to face the uncertainties in this moment and ask some hard questions about how well their plans stack up.
From strategic planning to strategic thinking: why ToP participatory planning aligns so well with scenario planning
Henry Mintzberg asserted that the act of planning (an analytic process) had overtaken the agenda in strategy formation and become disconnected, or conflated, with the thinking process (a learning process.) Mintzberg was a strong proponent of emergent strategy, a paradigm shift in strategic planning away from traditional “managerial” approaches of centralized strategy creation. Instead, he argued that analysis and planning should support solid consideration of strategic issues by management, at all levels, allowing the direction to emerge instead of seeking out the one right way to achieve a goal.
In short, he argued for an ongoing process of strategic thinking in an organization. Emergent strategy is really about shaping the underlying thinking process of decision makers in an organization. Scenarios are intended to aid clear thinking and sound decision making as one confronts the future. Scenario planning is an emergent approach to strategy.
Now, consider ToP transformational strategy, as Bill Staples describes it, which “emerges from deep within the actual workings of an organization.” It too is an emergent process unique in the way it fosters contradictional thinking, the secret sauce in the participatory planning process. Contradictional thinking is about seeing the interconnectedness and complexity of our environment. As Staples writes, “to stare into the cold hard reality of the present situation while figuring out how to bring about a new future.” Contradictional thinking is the tie that binds ToP methods and scenario planning so elegantly.
When you combine the two methodologies, you have a powerful toolset for emergent strategy creation across a range of plausible future realities.
Between the idea, and the reality
Fitting these two thinking processes together can be done in a number of ways. The most obvious is using scenarios as a starting point for strategy creation. Instead of grounding your thinking in one firm concrete reality that is now, scenarios anchor organizational thinking in a range of plausible future “nows”.
Likewise, as you review your action plans for next year, a well formed set of scenarios can be applied at the outset to broaden the range of actions you might consider, or the ways you might leverage strengths, address weaknesses, pursue opportunities and mitigate threats.
Scenarios can also provide a powerful way to share meaning and make sense of possibilities by making them concrete in the form of a narrative. It integrates risk management into the strategic conversation.
Better thinking leads to better options
Recognizing that there are larger forces at work gives you options should your best laid plans suddenly become irrelevant. With robust scenario planning in place when strategic questions arise, or new opportunities and threats present themselves, leaders can not only adjust course to stay on track toward their vision, they can assess whether these new signals represent a fundamental shift in the assumptions that their vision was built upon.
Combining scenario planning with ToP participatory planning transforms uncertainty into creative options and pathways forward.
Whatever is driving the uncertainty, you likely face high stakes choices about how you respond. You can devote all your energy and resources to one possible future and roll the dice. Or, considering a broad range of possibilities you might consider different actions, insurance, hedging, diversification or an outright reversal of course. In any event, with scenario planning and ToP planning, you will get unstuck from the paralysis of constant analysis that takes hold when confronted with a future of blinding ambiguity.
You can create new momentum toward your vision, even in times like these.
Sources and further reading:
- The Fall and Rise of Strategic Planning, Henry Mintzberg (HBR, 1994)
- The Art of the Long View, Peter Schwartz (Amazon) – The story of Royal/Dutch Shell’s pioneering work in the development of scenario planning.
- The Sixth Sense, Kees Van der Heijden, et al (Amazon) – How the scenario planning approach is applied to create and manage a culture of organizational learning
- Scenarios: the art of the strategic conversation, Kees Van der Heijden (Amazon) – Detailed outline of method and application of scenario planning.
- Transformative Scenario Planning: Working together to change the future, Adam Kahane – Stories of application of scenario planning in larger systemic issues, such as high-stakes, political situations
- Transformational Strategy, Bill Staples (Amazon) – In depth look at the ToP participatory planning process
- The Strategy Paradox, Michael Raynor (Amazon) – Reframing conventional approaches to strategy and management including the application of scenarios and option planning