Scenarios for an Uncertain Age
In today's age of uncertainty, managers are finding it hard to make important business decisions, often deferring them until there's greater "visibility" regarding the future. Yet, as online publication Knowledge@Wharton puts it, "If there's one thing worse than a deal that falls through, it is a deal that is put on hold – indefinitely."
One way of coping with such uncertainty is through scenario planning. This involves generating different stories about what the future may look like and then devising strategic responses for each of those stories. The idea isn't to predict the future but to prepare for various contingencies. As consulting firm Bain & Company puts it, "Having examined the full range of possible futures, a company can more rapidly modify its strategic direction as actual events unfold."
For example, when the Human Resource Institute's research analyst Barbara Johnson wrote scenarios for HRI's comprehensive Crime and Violence report back in February 2001, she posited in one scenario – written from the vantage point of the year 2015 – a time of terrorism in the early 21st century. "Even as conventional U.S. crime rates declined between 1995 and the early 2000s," she wrote, "there was a sharp rise in the number of terrorist episodes threatening the U.S." She describes terrorist attacks on power plants in the year 2003. At one point in her scenario, she writes, "Some believe that nothing will ever be the same because the terrorist strike put the nation and its businesses on a constant state of alert. Many likened the attack to Pearl Harbor but call it even more frightening because the identity of the attackers remains unknown."
Obviously, Johnson's disturbing scenario did not "predict" the recent terrorist acts, her storyline being different from today's events in various ways. It did, however, get HRI and perhaps some of its member companies thinking about the potential business implications of terrorist acts. It's one example of how scenarios can encourage us to consider subjects that we'd ordinarily dismiss as unlikely or at least irrelevant to our day-to-day business preoccupations.
In another example, a group of professors from the Wharton School at the University of Pennsylvania recently met to develop scenarios for the post-September 11th business environment. The professors determined that there will be two crucial drivers of economic growth during the three-year period from 2001 to 2004: 1) the degree to which external events are known/understood or unknown/surprising and 2) the degree to which organizations respond actively or passively to external events. Upon analyzing the possible effects of these drivers, the professors created four scenarios.
In the first scenario, most companies respond to surprising events in a generally passive and reactive way, "pulling into a protective shell" and so provoking a long, global recession. In the second scenario, most companies again respond passively to events that are, this time, relatively well understood. This results in a slow-growth environment. In the third scenario, companies tend to respond in an active and opportunistic way to events that are surprising, resulting in a "thriving on chaos" scenario. And in the fourth scenario, companies tend to respond in an active way to a fairly well understood business environment, leading to a "global growth" scenario. Companies may benefit by envisioning what strategies would work best in each of these scenarios and so better prepare for a future that, for now, remains uncertain.
Even the U.S. military is intent on using scenarios to deal with today's uncertainties. The San Francisco Chronicle reports, for example, "Several brainstorming sessions among the best strategic minds in the Army and a top-secret pool of entertainment talent were held this month to map out scenarios, and more sessions are planned." The idea is to tap into the talents of professional storytellers who are very good at scenario-type thinking. "We've used these folks for a number of things in the past, and they are incredibly helpful," said Michael Macedonia, chief scientist at the Army's Simulation Training and Instrumentation Command. "When you have Hollywood writers in the room, you sort of shake things up a bit, stimulate things." The Chronicle notes that scenario planning was famously used by the U.S. to design the D-Day attack of World War II.
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For more on scenario planning at Wharton, see
http://knowledge.wharton.upenn.edu/whatshot.cfm
For more on how the military is using scenarios, see
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2001/10/28/MN180760.DTL
HRI has been including scenarios in its comprehensive reports for over a year. In addition to the "Crime and Violence" study, other comprehensive reports with scenarios include "Age Discrimination," "The Americans with Disabilities Act," "Flexible Work Arrangements," "The Future of Leadership," "Global Staffing," "Health Promotion and Wellness," "Managing Change," "Managing Healthcare Benefits," "Mergers and Acquisitions," "Minority Employment Trends," "Outsourcing Human Resources," "Performance Management," "The Quality of Life," "Retirement Benefits," "Sex Discrimination and Harassment," "The Status of Education," "Substance Abuse," "Teams," and "Work Ethic and Attitudes." These can all be found in the Research Reports section of our site. Also, various HRI White Papers contain scenarios.
One way of coping with such uncertainty is through scenario planning. This involves generating different stories about what the future may look like and then devising strategic responses for each of those stories. The idea isn't to predict the future but to prepare for various contingencies. As consulting firm Bain & Company puts it, "Having examined the full range of possible futures, a company can more rapidly modify its strategic direction as actual events unfold."
For example, when the Human Resource Institute's research analyst Barbara Johnson wrote scenarios for HRI's comprehensive Crime and Violence report back in February 2001, she posited in one scenario – written from the vantage point of the year 2015 – a time of terrorism in the early 21st century. "Even as conventional U.S. crime rates declined between 1995 and the early 2000s," she wrote, "there was a sharp rise in the number of terrorist episodes threatening the U.S." She describes terrorist attacks on power plants in the year 2003. At one point in her scenario, she writes, "Some believe that nothing will ever be the same because the terrorist strike put the nation and its businesses on a constant state of alert. Many likened the attack to Pearl Harbor but call it even more frightening because the identity of the attackers remains unknown."
Obviously, Johnson's disturbing scenario did not "predict" the recent terrorist acts, her storyline being different from today's events in various ways. It did, however, get HRI and perhaps some of its member companies thinking about the potential business implications of terrorist acts. It's one example of how scenarios can encourage us to consider subjects that we'd ordinarily dismiss as unlikely or at least irrelevant to our day-to-day business preoccupations.
In another example, a group of professors from the Wharton School at the University of Pennsylvania recently met to develop scenarios for the post-September 11th business environment. The professors determined that there will be two crucial drivers of economic growth during the three-year period from 2001 to 2004: 1) the degree to which external events are known/understood or unknown/surprising and 2) the degree to which organizations respond actively or passively to external events. Upon analyzing the possible effects of these drivers, the professors created four scenarios.
In the first scenario, most companies respond to surprising events in a generally passive and reactive way, "pulling into a protective shell" and so provoking a long, global recession. In the second scenario, most companies again respond passively to events that are, this time, relatively well understood. This results in a slow-growth environment. In the third scenario, companies tend to respond in an active and opportunistic way to events that are surprising, resulting in a "thriving on chaos" scenario. And in the fourth scenario, companies tend to respond in an active way to a fairly well understood business environment, leading to a "global growth" scenario. Companies may benefit by envisioning what strategies would work best in each of these scenarios and so better prepare for a future that, for now, remains uncertain.
Even the U.S. military is intent on using scenarios to deal with today's uncertainties. The San Francisco Chronicle reports, for example, "Several brainstorming sessions among the best strategic minds in the Army and a top-secret pool of entertainment talent were held this month to map out scenarios, and more sessions are planned." The idea is to tap into the talents of professional storytellers who are very good at scenario-type thinking. "We've used these folks for a number of things in the past, and they are incredibly helpful," said Michael Macedonia, chief scientist at the Army's Simulation Training and Instrumentation Command. "When you have Hollywood writers in the room, you sort of shake things up a bit, stimulate things." The Chronicle notes that scenario planning was famously used by the U.S. to design the D-Day attack of World War II.
====================================================
For more on scenario planning at Wharton, see
http://knowledge.wharton.upenn.edu/whatshot.cfm
For more on how the military is using scenarios, see
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2001/10/28/MN180760.DTL
HRI has been including scenarios in its comprehensive reports for over a year. In addition to the "Crime and Violence" study, other comprehensive reports with scenarios include "Age Discrimination," "The Americans with Disabilities Act," "Flexible Work Arrangements," "The Future of Leadership," "Global Staffing," "Health Promotion and Wellness," "Managing Change," "Managing Healthcare Benefits," "Mergers and Acquisitions," "Minority Employment Trends," "Outsourcing Human Resources," "Performance Management," "The Quality of Life," "Retirement Benefits," "Sex Discrimination and Harassment," "The Status of Education," "Substance Abuse," "Teams," and "Work Ethic and Attitudes." These can all be found in the Research Reports section of our site. Also, various HRI White Papers contain scenarios.