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Scenario planning is rapidly on the rise as one of the most important strategic tools. This awakening have slowly been going on for a while but the global uncertainties caused by the financial crisis and global economic recession have been speeding up the process.

Since the 1960:s the value of scenario planning have been that of a tool for the long term strategic thinking process. A value that most managers have been able to ignore since operations have had a very strong focus in the vast majority of organizations. Because of this I usually argue for scenario planning along the lines that

  1. many of the important decisions organizations actually have to take have more far reaching ramifications and consequently is taking place in a more uncertain future than usually is understood - scenario planning can help in mapping and understanding this longer term perspective
  2. peoples perceptions of a situation are almost always flawed due to a range of biases that comes from how we as humans are hardwired - scenario planning is here used to assist organizations to see through and beyond their own unconscious blinds

Since October of 2008 a lot of people have suddenly become painfully aware that we live in a time of fundamental uncertainty. In such a situation planning is not just a process of organizing long lists of actions that leads towards a goal. When uncertainty blurs the horizon and an uncertain environment calls for real action, people abruptly come to understand that they have forgotten the process of assessing and interpreting what is happening in the environment in order to evaluate their own capabilities of adapting and identify realistic and relevant goals.

Hugh Courtney, who is quoted below, is known for a simple but powerful model of explaining different levels of uncertainty we perceive that we can see for the future:

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The change we have seen since October of 2008 is that many more of us now perceive our situation to be on uncertainty levels 3 and 4 rather than on levels 1 and 2 which was the common view before.

One of the few structured ways to understand the situation of an organization in the longer and more uncertain perspective is to use scenario planning. And today when uncertainty even permeates the shorter perspective scenario planning is basically the only strategic management tool that is left.

This awakening can be followed by the increasing in referrals to scenario planning in management magazines articles. Here are some examples from the last couple of months.

  • Hugh Courtney, author of 20/20 foresight is interviewed in McKinsey Quarterly and advices strategy officers to start with scenario planning because it is more important than ever that we think forward even if we don't get any exact answers, because any clues to what might unfold is valuable in these levels of uncertainty - A fresh look at strategy under uncertainty: An interview
  • In the same issue of McKinsey Quarterly there is another article basically following the same line of thought - Leading through uncertainty

Even in other places scenario planning is suggested as a tool for managing uncertainty:

If you want to read more about scenario planning visit my page: scenario planning resources

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One major strength with humanity is that every time the current system is being threatened it is learning something. Some of us argue that we should be using our relatively recent develop pre-frontal cortex in order to foresee things, but at the same time we know that real collective learning emanate from real experiences which stirs op real emotions.

So what learning are we talking about in this sad situation?

First military and security groups around the world, including India, saw a new and horrifyingly effective tactic when a rather small number of individuals with ordinary weapons and explosives could terrorize one of the world's major cities for hours after hours and kill hundreds of people. I shrug when I think about which consequences this lesson will have when it comes to new kinds of security measures being implemented in more places in our society.

For all the different small groups of terrorists, guerillas and organized criminals around the planet this was a lesson in the efficiency in the swarming tactics we have seen small examples of here and there. In my home town Göteborg organized criminals seems for some time been experimenting with placing fake bombs or committing crimes elsewhere in the city in order to divert the attention of the authorities. This successful attack in Mumbai will become a major lesson of the learning processes John Robb calls Open Source Terrorism in his blog Global Guerillas.

For the Internet crowd and the traditional media channels the learning this time was about the effectiveness of tweeting, or as Paul Saffo puts it: News no longer breaks - it Tweets. Every time the social media crowd is engaged in something, new structures are emerging when the social software tools are being used in a slightly different but more effective fashion. I first noticed the real large scale effect of this in the aftermath of the dreadful Christmas tsunami in 2004 when the citizen journalists in place with cameraphones connected to the blogosphere and actually made all the necessary analysis hours before any journalist arrived and days or week before some governments figured out how to do. At that time the tools were blogs and wikis and mobile cameras. In every crisis after that I have been noticing how the connected crowd quickly restarts the process, but every time on a bit higher and more sophisticated level. This time the tool of choice was Twitter and since Twitter is a much faster paced technology, the information flow was even faster than before which meant that the reports were almost instant. For the curious you can go to Twitter #Mumbai to follow the Twitter updates in real time.

What does this mean for the future? If we compare these three groups when it comes to the speed and potential of learning to act in this new emerging environment the picture becomes pretty clear. It is not the governments or the security professionals that will adapt best or more quickly, even if they control a lot of resources. Most likely they will intensify their already ongoing work of trying to identify and stop potential dangerous people. They will undoubtably make the life difficult for many citizens around the globe, but if they don't redefine themselves and their mission to be much more bottom-up and preventive, they will not learn how to really cope with new emerging security situation.

The fastest learning is definitively taking place in the bottom-up part of the game where a race of mastering these new emerging technologies in a new emerging environment have been going on for some time. The question is not if the nation state will be able to handle terrorism but if the networked global citizen will develop a working distributed "defence system" in order to shield the society faster than what terrorists and other radical forces will develop their effective swarm tactics.

Update: John Robb have made a couple of interesting follow up posts about the Mumbai tactics:

Global Guerrillas: JOURNAL: More on Tactical Innovation

Global Guerrillas: URBAN TAKEDOWN: MUMBAI

There were also more articles about the use of social media as news reporting and communicating platform e g

Mumbai attack coverage demonstrates (good and bad) maturation point of social media | Feeds | ZDNet.com

Update 2: And guess what communication technology the terrorists were using?? Blackberrys of course!

Update 3: In NY Times February 14, 2009 John Arquilla commented on these kinds of attacks and called them Swarm tactics and characterized them as

The basic concept is that hitting several targets at once, even with just a few fighters at each site, can cause fits for elite counterterrorist forces that are often manpower-heavy, far away and organized to deal with only one crisis at a time.

and ends the article with a prediction:

Yes, the swarm will be heading our way, too. We need to get smaller, closer and quicker. The sooner the better.

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One major challenge with the failing global financial markets is that the amygdala is directly connected to the economic system. This means that individual feelings of billions of people around the globe is directly linked to the global economy. To some extent this have of course been true for a long time, but the increasing speed due to more online transactions i e removal of buffering mechanisms, makes the connection even tighter for every day.

And gradually economics becomes social psychology (or complexity theory).

Once upon a time I played volleyball, a sport which I sadly retired from after I had a bit of surgery in my shoulder. I really liked volleyball because of the magic that occured when playing. Volleyball is an explosive and intense sport where all team members have to connect to each other - have flow - to play really good. To achieve this volleyball players repeatedly talk to each other and touch each other in order to create bonds that connect the bodies and minds of each other. When you feel you are connected you don't think consciously about where the other players are positioned, you simply know where they are and where you should be. It is an almost magic sensation and the team seems to behave like one organism.

After some time of flow, the opponents might be catching up and play better and you lose a couple of points. Suddenly you feel like if you've lost all the flow and your team seems to have a problem performing as a team. You start losing even more points and it feels like nothing is working anymore.

The key question here is what you do to recreate your flow again?

The wisdom from tight team sports like volleyball is that you cannot recreate it with less than forcing the whole system to completely disconnect, wait for a while, and then restart the whole process of connecting again - not creating exactly the same connections - but starting to connect again in order to find the flow of the team. In volleyball it is called a timeout.

I would argue that since the economic system more and more behaves like a volleyball game - i e a tightly connected system of brains and bodies - and what it would need right now is a timeout.

Why would timeouts be better than bailouts? If we look at the economic system from a social psychology perspective, or even a complexity system perspective, changing a destructive spiral into a constructive one is extremely difficult. The reason is that all the small reinforcing drivers are working in concert in order to maintain the direction of the system. And it will continue until the energy runs out or something at a very basic level is turning some of the fundamental drivers in another direction e g a positive spiral. This is basically the reason why many billion of dollars of aid to the third world didn't change anything. It is first when a number of internal key forces, albeit very tiny-looking, are starting to positively reinforce each other the economic development turns into an upward spiral. To be able to reinforce these small, but important drivers within our economy, we have to be extremely clever to reinforce the right ones, without also fueling the destructive ones.

So why not try the timeout idea? If we don't, the system will crash anyway in order to create it's own natural timeout, and we will take the full hit. If we on the other hand create an artificial timeout and forces ourselves to rewiring the system in a new way, the we maybe have found a heuristic to stop these kinds of globally reinforces crises?

Since I use this example in my scenario planning education almost every day I thought it might be appropriate to remind you of this scenario published by Peter Schwartz and Jay Ogilvy in their article Plotting Your Scenarios in the book Learning from the Future (eds Fahey and Randall).

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It is said to have been developed in the 80:s in order to understand the uncertainties of the future of the american automotive market.

Searching Google I found out that this particular scenario cross is also referred in at least two other books:

Since what these scenarios described was two major uncertainties in the automotive market the conclusion was that efficiency and size/design of cars really are important i e lower fuel consumtion and more van/hybrid cars.

This process started, but came to an abrupt halt when the birth of the SUVs tricked the american automotive industry into that fuel and size weren't real issues. What was basically missed was that the relatively good economic era of the 1990s boosted a life style purchasing pattern that for some time supported large, safety focused cars signalling a active and individualistic life style. That basically made the automotive industry going back to sleep forgetting what they actually seemed to ahve realized during the short wake up periond in the 80:s

Just to some years later wake up to the bells of the real energy crisis boosted by a financial crisis and a global scale recession.

I don't know, but the word culling comes to mind...

What about the future of the automotive industry? It doesn't look good from an American (or Swedish) horizon, but where is all this going and how are we going to transport ourselves tomorrow??

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Yesterday I held a speech at a local conference of entrepreneurship. As usual I talked about scenario planning and it's virtues of creating a better understanding of the business environment, especially when it comes to understanding the underlying driving forces shaping the environment as well as assessing the critical uncertainties of how these will play out.

I also met a former colleague from Volvo and we started to discuss the state of the automotive industry. Suddenly I found myself retelling some of the ideas about the future of the car industry and mobility I spoke about at Volvo almost 10 years ago. Thoughts I had a problem getting people to grasp then... but maybe something has happened since? These are a new remix version of what went on in our minds then, and what is occuring inside in my head these days.

Three futures of personal mobility

Today's car industry is since long stuck in a mature and until recently slowly, but now rapidly braking market. The key reason for this have been, and still is, the unwillingness/inability to reinvent the concept of the car to something else than a increasingly complex, functionality loaded, emotional, status-boosting and expensive entity.

A number of driving forces in the business environment coincide to create the business situation where this reinvention is absolutely necessary:

  • overall diminishing economic growth due the approaching maturity of the industrial markets slowly decrease the customers available money
  • the urbanization continues which
    - decrease the need for a car in daily life
    - increase the cost of land and thus the cost for owning/parking a car
    - increase the awareness of the air pollution as a problem
    - increase the traffic congestions
    - increase the number of people who have a different economic situation with an uneven income that is dependent on projects, cultural consumption and other idea driven short activities
  • increasing global awareness of the climate situation
  • increasing/uncertain cost of energy
  • people are experience, meaning and identity driven in a different way than before which makes them more discontinuous and unpredictable in their behavior and choices

A certain indicator of this development is the continuous increase in the use of bicycles and small personal motorized vehicles (e g mopeds) in modern cities. The situation have since 10+ years become more and more critical so the problem isn't new. What is starting to occur is that the automotive industry is running out of both buffered resources and there is still no signs of proactive ideas.

What we now can be almost certain of, judging from the period from the different crisis from 1972 until the present, is that the ideas and innovations with a potential to change the situation will not come from inside the automotive industry itself. But where will they come from?

Two major long term driving forces shaping the future entrepreneurial landscape seems to be:

Simpler functions are are on the rise, not increasingly complex services - In the area of Internet and Web 2.0 we seems to have found a really important insight, which is slowly finding its way to other areas. When decreasing the complexity in an offer, as well as the process paying for it, the potential for rapid success through a high market penetration seems much better. The important advantage is that you can still be rational and efficient on the inside without having to internalize the understanding of complex and continuously changing customer behavior. Reducing complexity in an offer means that there is a better chance of finding a more natural interface between customer logic and production logic. A really important achievement in an increasingly complex and transparent world. This means basically that instead of trying to increase the service content in order to increase the value of a service, many of the successful companies are actually doing the opposite and reducing the width of the service, but instead excel in providing a simplistic but high quality function with global reach.

The rise of low end and distributed innovation - Increasing abilities of innovation among the other 4 billion people is changing the focus of innovation from exclusive and advanced top end innovation, which describe the majority of development in the West, to inclusive low end innovation for the masses, which is what seems to emerge elsewhere. Companies are slowly starting to realize that in the low end of innovation lies both the future for the rest of the world, but also a pretty huge untapped market. One really interesting effect of this is that a lot of our advanced western innovations, which are adapted to our situation, will be re-innovated in other parts of the world and under completely different circumstances and cost pressure. And when people realize that great many of these new innovations solves basically the same problem as we have here, but to a fraction of the cost, we are going to import these in great quantities in about the same fashion we today import a lot of produced goods from the rest of the world.

We can talk about the last one in more general ways as the rise of mass-collaboration, mass-amateurization and mass-innovation as well, but for my purpose here this description level suits me.

Another development that could be mentioned here is the Open Source/Open Content/Open X development, but as I see it is just a way of organizing innovation which of course will have a huge impact on how the different innovations will be developed, but will make less of an impact on how the future of personal mobility will develop.

If we consider these driving forces as important, but yet uncertain in how the might impact the automotive industry, how will they play out. What might happen??

Scenario 1 - The car (industry) is slowing down - to crash

The legal system is reinforcing the inertia in the western traditional industrial mindset when it comes to change how we transport ourselves. In the rest of the world a vast palette of new low cost transport technologies are seeing the dawn of light. Many of them builds on the bicycle and different kinds of individual vehicles propelled by solar powered electricity. We in the west shows again that we are simply unable to adopt innovations coming from outside of our own ranks.

Due to no alternative working transportation solutions, people in the western cities are being forced to increasingly use their bicycles and public transportation systems. One reason is that many of them will not even own a car. This development will reveal a number of problems with our current city planning when it comes to both managing bicycles as well as public transportation.

The automotive industry will continue it's slide downward and will basically crash. Maybe some of the leftovers will be reconfigured to smaller companies selling their increasingly expensive cars in the rural and niche markets that will remain.

Scenario 2 - The low end reinvention of the car - "The car is dead! Long live the car!!"

In this scenario the car is reinvented through the innovation powers that rise among the other 4 billion. Instead of an expensive car that is intelligent and safe, the new car is small and comes in many (but smaller) varieties. Some of them will more resemble a concealed moped with place for one person, while others will have room for both a family and a few bags. The main point is that these vehicles are both light, simple and cheap to buy and drive. They will most likely also be very rugged to survive in a crowded city as well as adapted to small parking areas by being foldable in different ways.

The automotive industry at last realize that if the want to survive in the market of mobility, the will have to enter the new emerging market by buying moped manufacturers and invest in different innovation models and market in the developing world. It means that they will radically widen their view of what a vehicle is and by using what is left of their financial muscle they will have maybe have enough resources to invest in the development of these new cars. It will be bad, but they will at least have a plan and an industry to compete in!

Scenario 3 - Personal mobility is reinvented - mobility as function

In this world the concept of mobility is changed from being based on vehicles, on to other ways of moving people and goods. By taking the perspective of how functions (rather than products or services) can solve the problem of urban and trans-urban mobility in more efficient ways, the breakthrough comes from a completely other direction. Instead a vast numbers of new public transportation innovations see the light of day. Old science fiction ideas like moving sidewalks and different kinds of light and continuous train-like systems are being experimented with in different places.

Suddenly people understand that one of the major competitors to today's car manufacturers are companies like Otis, who have the advantage that they understand how to transport people both horizontally and vertically. By getting rid of the mental connection between mobility and owning/driving a vehicle and regard mobility as a function new possibilities of transportation is opened up.

Traditional car manufacturers realize that they have to engage in the development of transportation systems rather than vehicles. Cars will not disappear but will have a smaller market share and will be thought of as an urban complement to the integrated city system.

200810152232.jpgIn July this year HBS published a working paper by the name: Communication (and Coordination?) in a Modern, Complex Organization where the authors analyzed e-mails from 30.000 employees in a large company over a 3-month period. It is really interesting that this has been done, even if I wonder why it wasn't done before (or am I wrong?).Their conclusions are really interesting, especially in present times of the social networks, where horizontal communication is growing rapidly.

Communication patterns were extremely hierarchical: Executives, middle managers, and rank-and-file employees communicated extensively within their own levels, but there were far fewer cross-pay-grade interactions in the firm.

Junior executives, women, and members of the salesforce were the key actors in bridging the silos.

[From the executive summary: The Silo Lives! Analyzing Coordination and Communication in Multiunit Companies — HBS Working Knowledge]

To those people who believe in the strong transformative power of technology this may sound surprising or even depressing. Because it basically means that in spite if all this wonderful technology that creates transparency and breaks down borders people are still communicating within silos.

To me this just underlines one of the important lessons from the research area of diffusion of innovations: it is our social connections that are the vehicles for the spread of innovations, and first in the next step technology changes social patterns. Social patterns doesn't change over night, because they are based on human behavior which follows much longer cycles.

Another way to put it is that the people as both employees and as company culture members embodies values and mental structures that in practice regulates e g who is invited to which project or who to contact to get a problem solved. In 1990 Paul A. David published an article called The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox where he tried to explain why the productivity gain of computers didn't showed up in the balance sheet. His point is that productivity doesn't rise until the whole system is redesigned in a new way, a process that may take decades because of the built in inertia in a working systems consisting of both people, machines and information structures in complex interrelation with each other.

What I think lacks in this research is how these social communication patterns changes with age, education and the individuals earlier experience of e g social software. I don't doubt that physical, geographical or organizational barriers creates this effect, but I am curious what is happening what is happing to people which are heavy users of communication and have a wide reach before they enter a large organization. Are they changing their behavior? And how much??

It would also be very interesting to compare companies of different age and maturity to understand how and how fast these silo patterns are emerging.

My comment as a futurist about this is (as usual): think s-curves! A lot of communication patterns on this planet haven't changed a bit yet, but they are about to. We are just inflating our expectations about this horizontal and social communications.

Many of you readers know that I am skeptical to to future of traditional hierarchies. I believe the huge change that is happening now (again) is that new communications technology is simply creating another playing field for the basic human capacity to organize and solve problems at hand. A field where the model of traditional hierarchic and static institutions is not the given answer for solving problems, as we have been assumed for some years (read "hundreds of years") now.

Maybe this thought is at last coming through in a more traditional context? Or am I just exaggerating what my mother recently pointed out to me in the latest issue of Time Magazine? On the question on the chaotic situation in the Japanese government Michael Elliott asks:

Yet on Japan serenely sails. It makes you wonder if most of us have still not figured out the question of 1962 [How do they do it?], or if the answer to it is so radical that we miss it. Could it be that an old society is leading us into a postmodern age, one where the world of politics, something that we have assumed for 200 years was the wellspring of national success or failure, is somehow just not that important?

[From The Moment -- Michael Elliott -- TIME]

I am aware of that there are (at least in theory) other angles of attack for questioning the relevance and impact of the national political governing system, but Elliott is pointing at an important issue here. We are assuming that the national political system still is a wellspring of national success or failure. I would say that it is much worse than that: we can't even use the word society today without bringing along a complete system of assumptions containing the dominance of the nation state model and it's constituting institutions. In all writing that I read, regardless if it is in an academic context or not, I can track these underlying and implicit assumptions. Assumptions that effectively clouds the discussion of how we should go about organizing the society of tomorrow. A society where the nation state may or may not be the fundamental organizing model.

Is publication of Michael Elliott's short essay a weak signal that this line of thought is on it's way to breach into the mainstream discussion? Is it just a call in the dark? Or am I filling in too many blanks myself?

Kevin Kelly say something like this in the speech:

"The Internet's development is really amazing, but strangely enough, we are not amazed?"

Do we really understand what is going on?

The last time I wrote about Kevin Kelly in this forum was when he had been writing an interesting article in Wired about the future of Internet in 2005, 10 years after the year 1995 when Netscape went public – a pivotal year in computing and as I am arguing in human organization. When he spoke at TED last year he actually talked about the same subject but now called "Predicting the next 5,000 days of the web". Now it is a far better story, but it is essentially the same idea.

I encourage you to see this, but as fascinated you may be think of this:

Technology change is, if it is diffused to a certain level, an unstoppable transformational force. The relation between the different stages is of course very complex and usually nonlinearly directed in both ways. It is usually very difficult to predict what specific effects these transformation will have, but once the process have started, some effects are inevitable. This is especially true with technologies which change the way which individuals communicate, because it changes some of the fundamental capacities we have as humans, the ability to communicate, view ourselves and organize ourselves. The way we communicate basically constitutes what it is to be human. It follows a simple and elementary line of thought:

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The problem why we don't see these changes immediately is that it takes some time to diffuse a technology or a set of technologies into our behavior so that it transforms e g our institutions and other structures. But that doesn't mean it is not happening.

A way to try to understand the different stages in which technologically induced change happens is to see the sequence of cause and effect over time:

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When looking at Google and eBay I use to say that what we used to call Internet in the 1990:s (that is Web 1.0) is now changing the world at an economical level. The next step for that technology is soon the political/regulatory level. And then we have Web 2.0 and social computing as a new level of technology, not even talking about the Internet of Things when we connect billions of artifacts over the globe and let them talk between themselves.

Kelly naturally and wisely stops short of the post-technical changes in his speech, because it is enough to be flabbergasted about the Internet development in it's own terms – in technical terms by which we are used to talk about machines like computers. Enjoy!

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Coming back from vacation a sieving through the mail box I found an article where scenario planning was mentioned in an interview with Nassim Nicholas Taleb, author of the very interesting book "The Black Swan: The Impact of the Highly Improbable"(Amazon UK). / "The Black Swan: The Impact of the Highly Improbable" (Amazon US). Even if I don't totally agree with what claims in his book I totally agree that he is pointing at some terribly important issues which concerns everybody who deals with foresight and long range decision making. When it comes to scenario planning he is doing some implicit points in his book but in an interview in Condé Nast Portfolio he speaks up.

The thing you have to be aware of most obviously is scenario planning, because typically if you talk about scenarios, you'll overestimate the probability of these scenarios. If you examine them at the expense of those you don't examine, sometimes it has left a lot of people worse off, so scenario planning can be bad. I'll just take my track record. Those who did scenario planning have not fared better than those who did not do scenario planning. A lot of people have done some kind of "make-sense" type measures, and that has made them more vulnerable because they give the illusion of having done your job. This is the problem with risk management.

In my position of scenario planning consultant I can only agree. This is exactly why I try to end my courses and seminars by trying to underline the point that scenario planning is not a method in the traditional sense, but more of an art - a way of thinking that will broaden your thought patterns and open up your perceptions in order to be able to see things you otherwise wouldn't recognize.

This is exactly why attributing probabilities to the different scenarios is irrelevant - or even dangerous. I think that scenario planning should occur at an earlier stage of reflection when you are still aiming at understanding what is happening around you. First after the scenario process have sunken in you can revisit it and identify some important insights of the process.

If you treat scenario planning as a direct method for decision making the risk is obvious that either the result will be irrelevant and nobody listens or worse, that you succeed in creating a false sense of security. If you on the other hand put some effort to understand the result of a scenario process from a more reflective standpoint it can be an invaluable tool to widen the discussion and the collaborative reflection process within the organization.