Lately I’ve been thinking about the varied uses (and, perhaps, abuses) of scenario exercises and scenario planning, and how these uses have evolved. It’s interesting to go back to the thoughts and approaches of some early scenario thinkers and to trace some shifts overtime. Angela Wilkinson and Roland Kupers similarly review the history of scenario planning at Shell in their recent article ‘Living in the Futures’ that was published in Harvard Business Review. The article previews their upcoming book.
There is no one ‘scenario planning’; instead there are many different forms of scenario-based practices.
In particular, I see a need to revisit the original framing and intentions of scenario practices — which seem to be re-emerging in new forms of scenario-based practices such as Adam Kahane’s Transformative Scenario Planning method, and in emerging action learning-oriented approaches.
Encouraging ‘reflexivity’, and conducting ‘interactive speculation’
Herman Kahn’s development and use of “scenarios” focussed on articulating plausible stories of the future that would help “to tease out the assumptions of military planners and confront them with the possible outcomes of their decisions” (Olson & Rejeski, 2006). This notion of primarily targeting the thinking and assumptions of decision-makers seems to be the ‘foundation stone’ on which most early scenario practices were built – which later came to be referred to as “mental models”.
The unconventional Pierre Wack, a key figure in the early use of scenarios at Shell, put it this way: “scenarios deal with two worlds; the world of facts and the world of perceptions. They explore for facts but they aim at perceptions inside the heads of decision-makers. Their purpose is to gather and transform information of strategic significance into fresh perceptions. This transformation process is not trivial — more often than not it does not happen. When it works, it is a creative experience that generates a heartfelt ‘Aha’ … and leads to strategic insights beyond the mind’s reach” [emphasis added].
Wack referred to mental models as a decision maker’s “microcosm”, and these were the main target of his scenarios. (He termed the real-world the “macrocosm”). According to Wack: “A company’s perception of its business environment is as important as its investment infrastructure because its strategy comes from this perception. I cannot overemphasize this point: unless the corporate microcosm changes, managerial behavior will not change; the internal compass must be recalibrated.”
Similarly, Wilkinson and Kupers argued that early Shell scenarios encouraged readers to “imagine themselves as actors” and invited them “to pay attention to deeply held assumptions about how that world works”. They further add that “what happens at a scenario’s horizon date is not as important as the storyline’s clarity of logic and how it helps open the mind to new dynamics” [emphasis added].
Importantly, early practitioners “steered clear of probabilistic forecasts and normative statements and instead insisted that scenarios should first and foremost be plausible” (Wilkinson & Rupers, 2013). This aspect of scenario planning remains highly contested and often controversial.
Wilkinson and Kupers suggest that “as unthreatening stories, scenarios enable Shell executives to open their minds to previously inconceivable or imperceptible developments”, although I wonder about this claim. Wack himself discussed how his efforts frequently failed, and described his scenarios as often being like “water on a stone”. Scenarios are also very often disruptive (de Geus, 1997).
These ideas have also been expressed more recently. At the former Australian Foresight Institute (AFI) – where I did my Master’s in strategic foresight – we discussed the idea of foresight as being primarily about ‘in-sight’. The human iris was a key image for the Institute, which referred to the importance of the eyes that are doing the scanning and seeing. Dr Joseph Voros framed this as ‘reflexive consciousness’, highlighting the role of perceptual filters in interpretation. In an upcoming paper in On the Horizon I similarly discuss the importance of mental frames – a paper that was influenced by my time at AFI (during 2003-05) and recent exposure to critical realism as a philosophical stance.
Similarly, Richard Watson asserts the following in The Future: 50 Ideas You Really Need to Know: “Maybe that’s the whole point about thinking of the future. It’s not a matter of people being right or wrong, but is, rather, a way of inspecting our beliefs. It’s a way of disrupting the present and unearthing our assumptions about what can and cannot happen” [my emphasis added].
In ‘Has Futurism Failed?’ Rejeski and Olson also note that “Kahn stressed the need to bring together multiple disciplines to examine the future, a process he dubbed “interactive speculation”.” This is something we seem to be seeing more of with the renewed focus on participatory and discursive exercises, which can encourage a deeper dialogue between multiple epistemologies.
The development of scenarios for “collective sense-making purposes” (Wilkinson, 2009) clearly expresses and continues this “Kahnian” tradition of collaborative ‘interactive speculation’.
Scenarios as a decision-making and planning aid — and the related integration with organisational processes and need to address uncertainty
Former senior Shell staff have written many of the most influential books on scenario planning. For example, Kees van der Heijden’s Scenarios: The Art of Strategic Conversations frames it centrally as part of risk management (and reframed planning as learning under conditions of high uncertainty), and Arie de Gues’s The Living Company placed scenario exercises within a new understanding of decision-making. Specifically, decision-making processes can be understood as learning processes.
These books also reasserted some of the principles emphasised by Kahn and Wack such as the focus on plausibility (rather than probability), and propose alternative ways of thinking about the future. de Gues critically discusses the “yearning for some certainty about the future” (p.51) and the related emphasis on prediction, proposing the development and use of new ‘tools for foresight’. Continuing the original scenario tradition, de Gues argues that the core purpose of scenarios is to “change the mindset of those who use them” (p.57), such as by helping “managers to see past their biases” (p.63).
Moreover, scholars compiling the history of scenarios at Shell argue: “Shell-style scenario planning has never really been about predicting the future. Its value lies in how scenarios are embedded in — and provide vital links between — organizational processes such as strategy making, innovation, risk management, public affairs, and leadership development” (Wilkinson & Rupers, 2013).
Scenarios and futures research literature now commonly describes the core purpose as assisting decision-makers. The editorial statement of World Future Review, the strategic foresight journal started by the World Future Society in 2009 (and now published by SAGE), provides a representative example: “Futures research encompasses both an evolving philosophy and a range of techniques. Its primary objective is to assist decision-makers to understand better the potential consequences of present and future decisions by developing images of alternative futures”. Related themes:
- Uncertainty: scenario planning as a different approach to business planning that recognises and addresses the unpredictable nature of the future; making uncertainty part of the plan. For example, Chermack (2011) argues that “the most valuable advantage of creating and using scenarios is the recognition that uncertainty is a basic feature of organizational environments”
- Questioning assumptions of stability: helping organisational leaders see that the future is not likely to consist of historic trends, projected forward, and questioning related problematic assumptions of a stable operating environment (Chermack, 2011)
- Preparedness: the idea that by thinking through the consequences of different future possibilities, a corporation (or a person or society) can be better prepared to meet the unexpected
- Turning on “high beams”: trying to partially illuminate the future through disciplined evaluation
Scenarios Vs. Forecasting, and disputed purposes and benefits
The contested difference between scenarios and forecasting was an interesting theme in the recent special symposium in Journal of Futures Studies (February 2009) titled “Questioning scenarios”. The lead article by Graham Molitor describes scenarios as a forecasting method, whereas most other contributors to the symposium rejected this and sought different framings. Angela Wilkinson asserted that “by implicating scenarios with ‘any technique that may advance forecasting capabilities’, Molitor contributes to the already considerable methodological confusion that characterises the futures field, in general, and scenario practices in particular. In fact, scenarios – i.e. many futures – and forecasting – one future – have different ontological and epistemological underpinnings”. Wilkinson also referred to the “Shell tradition of scenario practices” where “the emphasis is on creating and maintaining a set of plausible futures” rather than “determining the most probable future, which is more common to forecasting”.
Practitioners in the United States seem to most often view scenarios as a forecasting method. For example, Andy Hines and Peter Bishop from the University of Houston futures studies program include it amongst a range of forecasting techniques (e.g. see their book Thinking About the Future).
Robert Burke from Melbourne Business School further argued that “scenarios are not about forecasting or even alternatives but about having deeper more effective conversations about world’s we wish to create.” He argues “futures thinking is about being able to connect to preferred future possibilities while serving that possibility in the now”, linking it to the ‘Presencing’ approach of Otto Scharmer. Burke’s use and framing of scenarios is a stark contrast to the approaches that emerged at Shell.
In the lead symposium article Molitor argues scenario planning is not worth the effort. He writes: “I can’t recall any personal experience with scenario exercises that was worth the time and effort spent.” Adding: “At best, most scenarios merely reinforce and regard what participants already basically knew.” However, this could be an issue with whether a tool is being used for the right purpose, or with how it is used. In his symposium response, Molitor argues practitioners should go with what they find ‘works’.
An underlying constructivist epistemology?
In their recent piece in Harvard Business Review Wilkinson and Kupers state the following: “Corporations, like human beings, act on the basis of an agreed-upon reality — which is, in essence, a story. Stories of the past and the present can be based on facts, but a story of the future is just a story. The problem is that the stories we most commonly tell about the future simply extrapolate from the present. Perhaps the greatest power of scenarios, as distinct from forecasts, is that they consciously break this habit.”
This sounds like a very constructivist stance – that is, reality is “constructed” by the perceiver or the organisation, informing action. However this paper, along with almost all scenario literature, fails to discuss epistemology and ontology. Echoing my recent blog post about the gaps in the theoretical underpinnings of futures practices Chermack (2011) argued reported approaches to scenario planning are incomplete. Important missing pieces – in his view – are the theoretical foundations of scenario planning, how to use scenarios, and structures for assessing the impact of scenario projects. I could not agree more; it is heartening to see scholars starting to seriously address these issues.
Clearly, there are many different practices called ‘scenario planning’ and ‘scenarios’. Chermack (2011) notes that “scenario planning means different things to different people, and the reported approaches are incomplete”. Some of the diverse approaches revealed by this brief scan are:
- Scenario planning as a tool for shifting perceptions and ‘unearthing’ assumptions. Pierre Wack viewed scenario planning as centrally being focussed on addressing the “crises of perception” that often emerge during times of rapid change and discontinuity. A related concept of scenario planning is ‘a tool for ordering one’s perceptions about alternative future environments in which one’s decisions might be played out’ (Peter Schwartz, Global Business Network)
- Scenario planning as a decision-making tool
- Scenario planning as an alternative to traditional planning that better recognises uncertainty
- Scenario-building as a collective sense-making technique (Angela Wilkinson)
- Scenarios as about enabling deeper conversations about preferred futures (Robert Burke)
- Scenarios as a forecasting method (see above relevant debates)
The first form is most consistent with the AFI’s emphasis on reflexivity and ‘reflexive consciousness’. It is inherently difficult for people to communicate their mental models, or to know what another person’s is. Practices like scenario planning can help to surface what is difficult to communicate or observe.
Personally, I’m interested in the key challenge highlighted by Pierre Wack: the process by which information of strategic significance leads to shifted perceptions. As Wack asserted “this transformation process is not trivial — more often than not it does not happen” (my emphasis added). I’m also not interested in scenarios conducted as a forecasting method – I agree with those arguing that scenarios and forecasting are two very different things. Instead, what’s interesting is how scenario methods – amongst others – can be used to tease out assumptions and open-up peoples’ thinking (as per the “Kahnian” and “Wack” traditions) in ways that help to explore difficult, ambiguous problems.
Further reflections – informed by my current doctoral studies – address the deeper philosophical issues of epistemology and ontology referred to above. Folk adopting different philosophical positions will frame and use scenario methods in very different ways — e.g., shaping whether the aim is ‘knowledge’ about the future (and value is primarily judged according to the ‘truth-value’ of future scenarios) or, alternatively, if practitioners embrace a more constructivist stance (and different value criteria). Whist Pierre Wack sought special insights into the future, i.e. future facts, his writing is often seen as embracing a constructivist learning perspective (e.g. see this paper by Chermack and van der Merwe).
In this respect, Chermack’s recent book Scenario Planning in Organizations: How to Create, Use, and Assess Scenarios looks to be a very important contribution. Chermack offers a view of what he believes is the theoretical foundation of scenario planning, and ways of assessing the impacts of scenario projects.
A final reflection that comes to mind is that the push towards professionalising applied foresight and futures work is likely to be held back by the debates referred to above. If people in the field cannot agree on the meaning, appropriate use, and value of key methodologies like scenario-exercises and scenario planning it seems there is little hope for the wider standardisation professionalisation requires.