Future is something that no one can predict with accuracy, even remotely. Businesses have a method of developing over time and expanding as well as contracting depending on the market situation, demand and technology changes. One the ways that have a scientific basis on predicting and preparing for the future is scenario spinning – method by which different future scenarios are painted along with the probability of their occurrence and then preparing for the future!
While indulging in scenario spinning it is vital to make them as divergent as possible, and this is where the divergent thinking component is brought in. The importance of divergent thinking is to create as many possible scenarios as possible.
Divergent thinking is, usually, free-flowing and very akin to mind-mapping – a practice held important in creating innovative solutions for a situation. This is, usually, random and unorganized. Following this exercise the ideas are then put back together in some structure in creating scenarios. There are many techniques that are used to indulge in divergent thinking like, but are not limited to, brainstorming, Journal recording, free-writing, subject mapping among others.
2. Process of Scenarios
The process of scenarios is akin to writing a fiction, starting from the existing reality now. The purpose of this process is to develop a number of possible future scenarios and take stock of how business would perform in each of them. This is typically useful for future planning. The beginning of the entire thing is to state need to make a decision, then go ahead and list all the possible factors that could influence in making this decision, followed by making a list of all the driving forces that could influence these possible factors. Further, the factors and the driving forces are ranked based on their importance and uncertainty, following which plots are drawn for alternate possible scenarios. Each of the scenarios is then evaluated, and finally indicators are created for each of the scenarios for future follow-up.
3. Ingvar’s concept of ‘memories of the future’
Ingvar stated a theory in which he says that memory plays a central role in permitting individuals to create “alternative hypothetical behavior patterns in order to be ready for what may happen” which he says is the primary simulation for behavior. Much later in 1995, he says that concepts regarding the future are just like memories of past events that can be remembered in vivid detail, and it is these memories of the future that offer insights into the adaptive behavior of human cognitive ability. The ability to simulate and create alternative versions of the future can actually impact behavior, and create certain advantages for the individual on the basis of future thinking and the ability to effectively recollect simulated events.
Many recent studies in as late as 2012 have given evidence into how people can remember details associated with simulated and possible future events. These studies have shown that enhanced memory are encoded with future in mind and that factors could influence the retention of such simulated future events even over extended periods of time.
4. Swartz's "steps to developing scenarios"
Peter Schwartz of the Global Business Network is known to be a pioneer in scenario development. He has even authored the famous book ‘The Art of Long View.’ He has suggested an eight-step procedure for scenario development, which is:
- Identifying the focal issue or decision to be made, probably beginning with decisions like what bothers me and keeps me awake at night.
- Identification of the key forces in the local environment.
- Listing of the driving forces, including social, economic, political, environmental, and technological factors.
- Ranking the factors and forces by importance and uncertainty, and identifying two or three such factors that are most important and are most uncertain.
- Choosing scenario logics
- Fleshing out scenarios
- Exploring implications
- Selecting lead indicators and setting up of sign posts so that as time progresses, the sign posts written earlier are identified and eventually there is adequate preparation for the upcoming scenario.
5. Scenario Planning at Shell
Shell scenarios are a detailed analysis of ‘what-if’ questions into the future. Around each of the scenarios, Shell built stories and considered them from the perspectives of energy supply, energy demand, the political shift, social changes, and economic viewpoints. They also factored in what caused and drove change. As an organization, Shell has been using scenarios since the 1970s, enabling their executive leadership in making excellent business decisions. Because of the success of implementing the scenarios, Shell scenarios have a global following across governments, businesses, and academia. They portray what the world could look like decades in advance.
6. Difference between Scenario Planning and traditional Western Strategic Planning
A traditional western strategic planning takes an inside-out approach while scenario planning is an outside-in approach. The traditional strategic planning takes a point of view of the world or majorly ignores it and creates a plan and a road-map for the business, its expansion and finances from the perspective of purely the business, and does not actually consider any radical changes that could happen in the environment, nor does it create any kind of preparation for the future in terms of lead indicators and sign-posts.
7. Importance of Scenario Planning for successful change and development
Scenario planning actually involves creating possible future options and setting-up lead indicators that could trigger memories of the future, which is nothing but an indication that a scenario detailed earlier is about to occur. This allows much better and well-prepared response to the future. When one recognizes that one of the scenarios is about to happen, an organization is better prepared to handle change and implement effective development programs that will help it meet the challenges of the future better.
8. "Information hunting and gathering" in scenario planning
As Scenario Planning is something uncertain and a plan for the future that nobody has ever seen and it is only envisaging of the future that information gathering that is relevant to the possible future course and relevant only to that specific scenario needs to happen. This means sifting through large volumes of data and information and mining or even better hunting for that specific piece of information, which is like to impact the scenario.
9. ‘Plots’ in Scenario Planning
Plots are nothing but possible events in the future and mapping of relationships between various entities that impact that particular scenario. Plots are important for scenario planning because they indicate many of the possible future instances.
10. Global Business Network
Global Business Network (GBN) is part of the Monitor Deloitte Group, which is into aiding NGOs, Governments, as well as Corporations in effective usage of scenario planning. GBN essentially is into information hunting as well as gathering company.
Part 2: Case Analysis
Deloitte is one of the largest consulting firms of the world, and in United States alone, they have over 57, 000 professionals. They believe that they need to serve clients and help them overcome their toughest problems. Deloitte’s services can be broadly classified into four business areas namely Audit, Financial Advisory, Tax and Consulting. They claim that combination of talents from these four groups of services in addressing client requirements is their real strength. Deloitte has been ranked as the best place to work many a time, and this attracts excellent talent into the organization.
Deloitte is a broad umbrella brand name that employs many dedicated professionals worldwide, providing audit, consulting, financial advisory, risk management, and tax services to its clients. All these are member firms of Deloitte Touché Tohmatsu Limited (DTTL)., a registered UK based private limited company. Each member of the firm offers services in specific geographic areas and is subject to laws of the land it operates in.
Each of the DTTL firms is formed in accordance and compliance with the national laws, regulations, and customary practices in the respective territories that they operate in. Not all DTTL firms offer all services, as DTTL and DTTL member firms are independent entities, and are in no way obligated to each other.
DTTL offers scenario planning services specifically in the areas of financial planning and risk management, and it endeavors the CFOs into examination of the future impacts and outcomes trough scenario planning. It distinctly uses econometrics analysis, the science of applying statistics in analyzing economic data to help CFOs in establishing effective and actionable processes.
Deloitte also offers scenario planning services in workforce planning in meeting the future goals of the organization. Scenario Planning in workforce tries to identify key segments for meeting the growth targets, number of people, associated costs, and even planning right-sizing operations as and when required. Work Force Planning goes with Business Planning, and both are tightly meshed together.
Eamonn Kelly, one of the directors at Deloitte Consulting LLP pioneers scenario planning methodology, and he is known to advise senior leadership across industries. He helps the leadership to acquire the knowledge and skills, as well as judgment needed to meet success in the unpredictable future.
One method of evaluation of low-impact, high-probability events is through scenario planning, and they are called risk intelligent enterprises that link probability, vulnerability with risk interaction and instead of depending on typical statistical models, scenario planning is extensively used here. Top notch consulting organization Deloitte also endorses and extensively uses scenario planning as a technique to look into the future, thereby making scenario planning an excellent tool to peer into the future and be prepared for uncertain and unpredictable nature of the future itself.
Deloitte uses scenario planning in a wide range of areas right from “capital planning to strategic investments to projecting our talent needs. According to Frank Friedman, CFO, Managing Partner of Finance and Administration of Deloitte LLP, the company uses scenario planning to try to get ahead of an event.”
Part 3: Seminar Discussion
Scenario planning offers a circumstantial foundation for the four predominant elements of strategic technology management. Scenarios are basically imaginative descriptions of the events that may likely to happen or occur. However, the future that is predicted by scenario planning is just a means to a conclusion.
Irrespective of the increasing popularity of scenario planning, there are a plethora of misconceptions that are still prevalent about what exactly it means, what is the appropriate time to use it in the strategy framework, the means of deploying it, and the range of benefits it offers organizations. More often than not, scenario planning weakens into just beyond a predictable forecasting endeavor that encompasses allocating categorical possibilities to likely outcomes. Otherwise, at the other extreme, scenario planning essentially decentralizes into roughly grounded futurist reflections with little if any significance to existing scenarios. Another most general inaccuracy is to cast scenario planning as an intangible exercise that may offer value in the imminent future but has little or impractical application for instant decision making.
Accenture is another company that uses Scenario-Planning. In order to achieve high performance in this highly competitive and turbulent business environment, organizations are increasingly believing in Scenario-Based Enterprise Performance Management (EPM) – a concept coined by Accenture, in which unconventional outlooks of the future are assimilated into existing processes for effectively managing the business on a continuing basis. Accenture believes that the grouping of long-term trends and precise events is ensuing in greater unpredictability, ambiguity and risk. “Some of these trends include the rise of new economies, boom-and-bust commodity cycles, demographic changes, environmental concerns, global interdependencies and technological innovation.”
Scenario planning begins with offering leaders with a improved understanding of the business realm as well as the macro-drivers of change that are present. These inputs help leaders to drill-down to the operational-level decision making. The knack of scenario-based strategic planning is believed to link the domain of "what ifs" with down-to-earth decision-making procedures. Essentially, this translates to the fact that the requirement to decode 50,000-foot concepts into a flawless and persuasive inferences for markets, segments, and individual businesses. If effectively implemented or crafted in an imaginative, arduous manner with involved, unprejudiced stakeholders, scenario planning can be a priceless tool for acquiring instantaneous impact and a long-term benefit for the organization.
Part 4: Opinion about other’s Discussion posts
- Doomsday Preppers
This post seems to be presenting refreshingly new thoughts about the topic, and the example that has been chosen to relate the topic is something innovative. The video offers an attention catching introduction and is sequenced in a logical manner. This post speaks of how Doomsday Preppers program of the National Geographic Channel is a pertinent example of Scenario-Planning as the group of people in that program want to be in a standby mode when disaster strike out of the blue and chaos fall apart.
- UN 2030 Goals
This particular post seems to have put forth the argument or opinion in a convincing manner. The argument is very clear and highly relevant, as the post clearly explains of this particular video relates each step of the Scenario-Planning Process. The post puts forth views on how The UN could create multiple scenarios to help come to a decision and then we’d have an example of scenario planning. They could just as easily be researching and not using scenario planning as a strategy to come make a decision.
- Shell Scenarios
This post shows thorough understanding of the topic and the subject. The entire crux of the topic is clearly explained and presented with specific relevance to the case of Shell, which is regarded to be the pioneer in Scenario Planning and the company that has used scenario planning in the best possible way. Shell continues to pay a lot of attention to Scenario-Planning, and they even have a “scenario team”.
- Scenario Planning and Healthcare
This post also relates the topic very interestingly to the healthcare industry, as it can help the industry in planning for the future health of people, especially in cases of chronic diseases in the population of the nations like China and Brazil. The world keeps getting “smaller”; and as people travel increasingly, the result may be the increase in the possibility of bringing back viruses we do not know how to cure (i.e. Ebola) etc. Thus, applying scenario-planning in healthcare industry is really a great idea that can help in wonders to happen.
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Ingvar, D. (1985). Memory of the Future. Medline.
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Schwartz, P. (1991). The Art of the Long View. NY: Doubleday.
Shell Global. (2014). What are Scenarios? Retrieved from Shell Global: http://www.shell.com/global/future-energy/scenarios/what-are-scenarios.html
Wall Street Journal. (2012, September 12). CFO Journal - How CFOs Can Use Scenario Planning as a Strategic Tool in an Uncertain Economy. Retrieved from Wall Street Journal: http://deloitte.wsj.com/cfo/2012/09/12/how-cfos-can-use-scenario-planning-as-a-strategic-tool-in-an-uncertain-economy/
Wall Street Journal. (2012, September 11). The Four Phases of Building a Scenario-based Planning Model with Econometrics. Retrieved from Wall Street Journal: http://deloitte.wsj.com/cfo/2012/09/11/the-four-phases-of-building-a-scenario-based-planning-model-with-econometrics/