Scenario Planning: Creating Strategy for Uncertain Times

by Joe Willmore

Joe Willmore is President of the Willmore Consulting Group, based in Annandale, Virginia. He can be reached at Willmore@juno.com.

So how do we ensure our perception is sharp enough, focused enough to make the right choices for the future?

These are very uncertain and turbulent times for organizations.

We continue to see a wave of industry consolidations and mergers. The explosion in technology and computing power has implications for how we define organizations, community, and participation besides raising opportunities for the Web as an advertising, information, and communication conduit. The increasing globalization of commerce and organizations has changed our marketplace and who potential customers and competitors are. Many public sector fields, such as power and utilities, face deregulation. The amount of data is exploding exponentially. In short, the amount and rate of change is increasing. Our world is changing rapidly and it has never been more important to foster organizational learning than it is today.

For special libraries, these times offer unique and challenging opportunities. Information is vital. Organizations increasingly seek to capture and manage knowledge effectively. Yet efforts to capture and manage knowledge have often resulted in nothing more than data warehouses with chaotic structures, and outdated data driven more by technology than by business goals. Special libraries find themselves confronted with harder tasksmanaging more information, evaluating relevance, dealing with "shelf-life" as data becomes obsolete quickerwhile also potentially being able to offer more value to their clients who require more and better information. Through it all is the issue of perception. How do we know which information is most relevant? How do we know which options matter most? How do we avoid costly mistakes? Given limitations in time, money, attention, and other resources, where do we focus? Special libraries must make choices about where to focus and what to serve in ways that then help their client organizations focus correctly. These choices are shaped by our perception. So how do we ensure our perception is sharp enough, focused enough to make the right choices for the future?

In early 1973, Pierre Wack, head of Corporate Planning for Royal Dutch/Shell, was frustrated. He was frustrated because he felt that Shell (and indeed the entire world) was operating on the basis of two questionable assumptions: that the supply of oil would remain plentiful and that the price of oil would remain low. Wack developed an approach now referred to as scenario planning. Wack presented a series of short stories (or scenarios) about possible futures to senior management at Shell. In one scenario, an accident in Saudi Arabia led to the severing of an oil pipeline, which in turn, decreased production and thus supply, creating a market reaction that increased oil prices, allowing OPEC nations to pump less oil but make more money. Senior management, when confronted with the scenario, re-examined its assumptions about oil price and supply. Investigating further, they concluded that OPEC was preparing to increase oil prices. When the oil price shocks of 1973 hit, Shell was the only major Western company (or nation for that matter) that was prepared. Within two years, Shell moved from the eighth biggest oil company to the second.

Some ten years later, Wack's protégé and successor, Peter Schwartz, was in charge of Shell's planning. Faced with a multi-billion dollar decision about building a natural gas platform in the North Sea, Schwartz and his team again turned to scenario planning for guidance. Schwartz and his team noted that a key variable in this decision was the price of natural gasa price that was artificially high because most natural gas came from the Soviet Union. Investigating this further, the scenario planners at Shell created a story entitled "the Greening of Russia"a tale of how communism fell, democracy, and a free market economy rose up, and the price of natural gas declined because Russia was no longer a threat to the West. This scenario, crafted while the Soviets were still in Afghanistan, while the United States was building a 600 ship navy, and before Ronald Reagan delivered his "evil empire" speech, identified Mikhail Gorbachev (who was not even a member of the Soviet Politburo at the time) as a reformist who would lead Russia in these sweeping changes. When the rest of the West was shocked in 1988 by the "sudden" fall of communism, the executives at Shell were wondering why the process had taken so long.

Both of these examples are explained in much more detail in Peter Schwartz's book, The Art of the Long View, which is possibly the best introduction to the topic of scenario planning around. Scenario planning has been used by a range of organizations to help improve their perception and organizational learning. Shell alum Adam Kahane facilitated the transition from apartheid to majority rule in South Africa in 1983 through the use of scenario planning. Scenario planning has been used by investment firms to forecast the economic crash in Asia in 1998, understand development conditions in Eastern Europe in 1997, rethink military threats to the United States in the mid 1990's, and develop strategies for firms in telecommunications, government, healthcare, IT, research, media, higher education, and non-profits.

Before we look at how to develop scenarios, it is useful to understand what scenario planning is not. Scenario planning is not an attempt to predict the future. While it is tempting to view it as such and to try to write scenarios that forecast what the future will be, such efforts are doomed to fail. Our perceptions determine what we think is "reality." Any prediction of the future is shaped almost totally by our perceptions. Organizations are typically unprepared for future events because of the limitations of their perception, not a lack of effort at trying to forecast what the future might be. Thus, scenarios do not predict the futurethey highlight our perceptual limitations thus allowing us to spot issues, trends, and developments that we would be otherwise unaware.

Additionally, scenario planning is not an attempt to develop possible scenarios for every potential development that might occur. Not only is this typically a waste of time, it leads to superficial analysis and we still fall victim to our perceptions. After all, if we fail to perceive something as possible, we would not develop a scenario for it. So attempting to develop scenarios for all possible developments is not only impossible, but leads to false confidence.

The scenario planning process starts with a focal point: an issue on which it is important to develop insight. The focal point is future oriented, by looking out sometime in the future. It is often phrased as a question. Typically, the focal point does not predict a result ("how can we get more funding" or "how would we get more support for this initiative"). Instead, the focal point looks at particular issues ("how will technology shape libraries" or "what will information center needs look like in the future").

Once we have a focal point, we next identify an organizational mental model that exists. A mental model is a series of deeply held beliefs, assumptions, and blindspots around a particular issue. As organizational learning theorists Peter Senge and Chris Argyris have noted, deeply held mental models prevent learning and lead to perceptual blindness. Organizations and even countries become oblivious to the obvious because of deeply held mental models. By determining what mental models exist that are relevant to the focal point, the scenario planners will be able to determine easily what beliefs and assumptions the scenarios need to challenge. It is by challenging these sacred beliefs and assumptions that organizational learning takes place. Thus, the success of the scenarios is dependent mostly on the ability to identify and then challenge the prevailing mental models that exist within the organization. There are a variety of ways to identify organizational mental models. One good hint is to look at themes that emerge in missed opportunities. Is there a particular issue or sector on which the organization seems to always "miss the boat?" Often times, outsiders, competitors, or former associates can be great resources on this issue because they now have a broader perspective than do people within the organization.

Next, the scenario planners conduct an environmental scan to determine what forces and trends are likely to be relevant to this issue. Some of this information will have been gleaned already during the mental model analysis. There are a number of tools for this part of the process: SWOT analyses (strengths, weaknesses, opportunities, and threats) or SEPT studies (social, economic, political, and technological trends or forces). Once a comprehensive list has been developed, the participants in this process can either identify key themes among all the forces or vote to pick the two most important trends. The two themes or trends are then placed on a matrix (see Figure 1). The matrix is a way of testing our perspective. Variations on each theme are placed on the matrix in the form of a continuum. For instance, if one major trend affecting libraries is "increasing use of the Internet," this could be placed on a continuum as "increased digital divide" on one end and "wider public access and use of the Internet" on the other end. Once the two themes or trends have been placed on a matrix, they create the four quadrants that are used to suggest scenarios.

The next stage of the process is to flesh out each of these quadrants. Given what we already know about the organization's mental models, this element of the process is relatively easy. Generally speaking, there is an inherent tension within each scenario. As scenario

Creating the Scenario Matrix Let's assume that the focal point for our scenario planning process is the following question: how will knowledge management efforts play out in the next ten years? Let us also assume that after much research, we discover that the two biggest factors influencing knowledge management efforts are the kinds of knowledge being captured and leveraged (and thus the kind of value it provides to the organization) and the culture within the organization (which shapes how open people are with information, how willing they are to share key learnings from mistakes, and the degree of collaboration). Our matrix might look something like this

planner Kees Van Der Heijden (formerly of Shell) points out, we need to ground the scenario sufficiently in the participant's beliefs and mental models so they don't reject it out of handwe don't want too much "stretch" or the scenario will have no credibility. But we must add elements to the scenario that challenge the prevailing thought and belief systems. Additionally, each scenario should read a little like an emotional roller coaster. No scenario should be totally positive or negative in tone. Instead, each scenario should have elements that participants view as good news and other elements of the story that are seen as bad news. Finally, each scenario should accurately depict how the system actually functions. For instance, a scenario that describes the economic crash of a country (see Figure 2) should be an accurate description of the sequence of events that would have to happen for a particular outcome to occur. This part of the process can often be a very powerful one as participants gain a richer understanding of how key systems function and why they sometimes "break down" or deliver unintended consequences.

At this point (once the scenarios have been developed and refined), there is some form of discussion and analysis. Typically, discussion themes around the scenarios can be broken down into three areas: that which is surprising to us about each scenario (which really gets into what the scenario teaches us about our perspective and mental models), what data or knowledge gaps did we discover (the areas in which we need more research), and what follow-up actions or strategic revisions do we need to make (how our plans stack up and the changes we need to make). Organizations that are serious about scenario planning will often have several stages of discussions, during which initial reactions and insights are included in subsequent conversations that examine applications and actions.

There are a number of ways that information professionals can use scenario planning. The most obvious fashion is to facilitate learning and strategic discussion within the organization. Used in this way, information professionals can help their leaders understand how they provide insight to the organization and that they don't just catalog and warehouse data. Additionally, information professionals can use scenario planning for their own internal planning efforts to check assumptions about library structure, processes and priorities, to develop insightful strategy, and to better understand their clients. Finally, scenario planning is a powerful and effective way to promote organizational learning.

And organizations that learn quickly and place a high value on learning are also likely to be very supportive and collaborative environments for libraries and information centers, and the professionals who run them.