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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 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?