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Scenario planning vs trend spotting

200801251129Yesterday I got a newsletter from Spira Rekrytering (newsletter), founded by a friend of mine. Interestingly enough it contained short piece of advice from Magnus Lindqvist, a consultant in business intelligence and trend spotting.

Förr i tiden, nör organisationer hade långa och tröga beslutsprocesser (vilket, tyvörr, fortfarande vissa har) så var scenarioanalysen verktyget man arbetade med för att förutspå framtiden. Man fixerade det som i sin natur stöndigt föröndras för att kunna könna sig sökrare i sitt beslutsfattande. Idag har de flesta företag insett att de måste byta ut långa, tröga processer och beslut för ett mer dynamiskt, snabbrörligt sött att arbeta. Vi fattar beslut snabbare så att vi snabbare kan få resultat (och snabbare inse varför vi misslyckades så vi kan justera). Då passar scenarioanalysen mycket dåligt och istöllet måste vi arbeta med trendspaning, d.v.s. att löpande och kontinuerligt följa skeenden i vår omvörld och samla på oss artiklar, citat och insikter.

For you English speaking crowd I have a translation attempt below:

In the old days, when organizations had long and sluggish decision process (which, unfortunately, some still have) scenario analysis was the tool of choice to predict the future. You fixated what was in continuous change to feel more safe in your decision making. Today most companies have realized that they have to replace their long and sluggish decision processes in favor of more dynamic and agile way of working. We take decisions quicker so that we can get a quicker result (and a quicker insight in why we failed so we can adjust the course). Then scenario planning fits very badly and we must instead word with trend spotting, i e continuously follow the development in our business environment and collect articles, quotes and insights.

Reading this it is easy to believe that

  • just because companies have decided to have shorter decision cycles, they succeed in that
  • all important decisions have short term implications
  • trend spotting is a replacement for scenario analysis (and other more long term tools)

I don't disagree at all with that many companies would benefit from shorter decision cycles and continuous trend spotting activities. The business landscape is today changing in such an unpredictable way that it is important that all parts of the organization are active in the business analysis process and to participate in the feedback and decision process.

First, all decisions does not just have short term implications! Think for instance on the decision to start a new business. Or deciding to invest in a new house or factory. These decisions still have to be managed the long and pretty sluggish way since they require participation of many people, capital and long term commitments.

OK, there are an increasing group of e g network knowledge companies that can avoid these kinds of decisions by just being fluid. Fair enough, but in countries like Sweden the companies that still is bringing home the bacon is not that kinds of companies at all. And probably not for some years to come.

But just because it is important with the short term perspective doesn't mean that the long term perspective is unimportant. I would argue rather the opposite, taking the long view in turbulent times is more important than ever! But maybe for somewhat different reasons than to make long term plans.

What is missed is the other roles scenario analysis have in the organizational intelligence process. Here are merely two of the, but I think these are pretty important.

  • trend spotting just provides scattered information chunks which doesn't have any sensible meaning to your organization if it isn't fitted into a larger context - scenario analysis provides that analytical tool, that larger context, by which you could interpret, analyze and prioritize your trend observations so they provide any real world meaning
  • when doing a scenario analysis, the participants are working together imagining a number of of synthesized possible futures, a process which part from the analytical values also have emotional values which today is recognized as vital to get both groups and individuals to actually change their perceptions, prioritations in order to increase their preparedness and value as trend spotters

In turbulent times it is the organizational ability to interpret and react in an intelligent and decisive way to changes that is the competitive edge, not just spot what is happening and react. I see that as the current most important role of scenario analysis.

So, Magnus I would suggest that you added some more of longer term pattern recognition in form of scenario planning as a analytical base for your trend spotting. Just a tip!

PS. I just remembered that I wrote something connected to this a short while ago and showed a sketch that maybe is valid here as well.

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2 thoughts on “Scenario planning vs trend spotting

  1. Paul Holmstrom

    This raises the entire spectre of what Strategy really is. Early this week I took part in a workshop with consultant colleagues about management teams. We had a fairly long discussion about how difficult it has become to get access to a management team for longer strategic retreats. They are so busy, strategy has to be revised and adapted constantly because of trend changes.

    An hour later one of our colleagues spoke of a major strategic initiative over a long period of time, which has caused the client company to realize that their conception of customers and potential employees had to be completely revised as i had not changed for 15 years. They had been so busy trendspotting and adapting that they had missed the slow change.

    In his latest book Mintzberg revisits his conception that real strategy changes very rarely, maybe 10-20 years inbetween changes. What goes on in the shorter term is strategic adaption to short term trends.

    I agree with you Martin that there is great risk that we confuse short term trend adaption with long term strategic intention.

  2. Peter Kennedy

    This is a useful and valuable discussion.

    The "strategy is dead" literature that has become popular over the last decade has greatly overstated the capacity of the "agile organization" to be operationally prepared for inevitable changes in markets, technologies, supply chains, economics, government policies, etc.

    With obvious exceptions (e.g., software development), the majority of organizations are faced with de facto strategic decisions that have long-term implications -- meaning, beyond the normal business and planning cycle. For example: what kinds of people do you need to hire? What kinds of distributions relationships will be required? For what products, services? More fundamentally, where is your growth, which geographical markets, consumer segments?

    It is hard to escape the strategic nature of these questions. They require insights into future market and operating conditions. Scenario analysis and planning can greatly help meet this challenge by exploring hidden risks, uncertainties as well as upside opportunities. Critically, in contrast to the point made in the original piece by Magnus Lindqvist above, the scenario value is NOT about predicting a single future, but systematically exploring a range of alternative future business environments (scenarios) and devising a set of strategies/actions that promise positive results across most (if not all) of these future business environments.

    (By the way, this is exactly what US automakers did NOT do during the 1990s, when demand for SUVs, mini-vans and pick-up trucks was booming. Oil prices were low, profits were high and no serious investments were being made in fuel efficient vehicles powered by alternative technologies. The sad consequences of this for Detroit are now well-known.)

    A few critical clarifications are important here:

    1. Scenario-derived strategies (which promise to work across a range of future operating environments) should never be static. Paul Holmstrom, above, is suggesting something very similar. Contingency plans are critical in a world of accelerating change and widespread uncertainty. This is where trend analysis or trend spotting is useful -- as a way of continuously monitoring external events and adapting strategy and business plans accordingly. Ideally, the scenario-based strategy process itself will identify a range of contingent actions, which themselves should be "dress rehearsed."

    2. The strategy cycle has become greatly compressed because of globalization, the effects of inter-connected networks, disruptive technologies and now the potentially large but still uncertain effects of climate change. A scenario-type strategy exercise is important to undertake every 4-5 years, but monitoring of emerging business trends and conditions should be continuous.

    3. Scenario-based strategies should be "hard-wired" to business plans and actions. If this is not explicit in the process, the resulting hard work will be left in a project report binder to gather dust. The future happens much faster than we anticipate. We must begin to anticipate and make decisions NOW if we are to be prepared for the challenges we will be facing 3,5, 10 years from now and beyond.

    Thank you. Peter Kennedy, The Futures Strategy Group

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