Scenario planning and decision support
Recently, I was on the 14th floor of the Shell building in London. It is right next to the Thames, overlooking the Houses of Parliament and the London Eye, with the familiar shapes of the Gherkin and BT tower in the middle distance, with the rest of London fading into the haze. Pretty apt, then, for a meeting on scenario planning, with all its implications for horizon scanning.
And of course looking out into the distance and into the future, and seeing what risks and possibilities lie there, is key for scenario planning. As William Gibson said: “The future is already here – it’s just not very evenly distributed.” So the genesis of our future performance is already there, if only we know how and where to look, and if we can transfer that learning and insight into the decisions we take.
Scenario planning is a key input to decision taking. Execs are taking decisions about the direction to take their organisation, judging the probabilities of the possible futures, and deciding what adaption to make to the organisation and in what time frame. Most of the time, leadership teams only consider one option in their decision-making. So the decision is a binary yes-no to this one thing. And research shows that these yes-no decisions fail at implementation more than those where options are presented and discussed. So using scenarios, which themselves ‘pre-frame’ the development of investment options, leads to better decisions.
So far, so good. But who should develop and explore the scenarios? Many situations will need intensive research and the development of models, requiring time and specialist expertise. It’s likely that the decision takers themselves won’t be the people engaged in scenario development, and this leads to an ongoing dilemma. There is a separation between the people developing scenarios and investment options, and the people who are going to decide about them. The richness of understanding is built up in the heads of the decision support team, but not in the heads of the decision takers, so achieving a good process of transfer is critical.
The decision quality is positively affected by the quality of discussion by the execs about the scenarios and investment options. In that discussion, their thinking shifts from individual and tacit to collective and explicit. Their mental models and assumptions get exposed and constructively challenged, and often the highest value comes when there is a mismatch between the current way of thinking, and the indicators coming from the real world. This realigns and re-orientates the mental models of the execs to be better anchored in reality.
This all sounds very rational and structured. But decisions are taken about the future, and there is no data on the future. Ultimately, decisions are taken on emotion. If we can find ways to engage executives in the possible futures, to ‘time-travel’ forward and test out how it will feel to be there, this adds an important extra element to the data, intelligence and probabilities which come from the scenarios. If a picture is worth a thousand words, then a prototype is worth 10,000, and that’s because it gives people a sense of the real experience. Not just the facts and numbers, but how it could feel. So for scenario planning to deliver its full value to decision support, then the way in which those scenarios are explored with the decision takers needs to be as rich and experiential as possible. Building shared understanding of how different futures could play out can be inviting, interesting and engaging – and it should be.
I’ll be going back to Shell Tower in the next couple of days. Because I left my glasses there by mistake, and as a strategist it is uncomfortable for me to not be able to see the middle and far distance at all clearly …