Each edition of The Antidote takes as itstheme one of the Issues currently on themanagement agenda. First, we carefullytrawl through ail the available material wecan find on the chosen subject fromaround the world. We then select thoseaspects that we think are of mostpractical benefit to senior managers.

The Antidote is produced by the Centrefor Strategie Business Studies (CISIBIS),a completely independent organisationwhich provides no consultancy services.We are therefore able to write andcomment completely objectively. All ofthis ensures that you receive an impartialoverview of important thinking andpractice on current management issuesto keep you well informed and up to date.

Visit our website atwww.theantidote.co.uk

Disclaimer

Publications Ltd, is designed to publish .information and comment to a wide publicaudience, in both print and electronic format(for example on CD ROM or the. Worldwideweb). This edition of The Antidote is forgeneral awareness and guidance only. Itdoes not, and stipula not be assumed to,provide specific and individual legal,technical, accounting, professional ormanagement advice. Individual adviceshould be sought on specific facts. Thisedition of The Antidote has drawn oninformation from third parties independentof CISIBIS Publications Ltd and TheAntidote. This information is subject torapid change. CISIBIS Publications Ltd andThe Antidote Are not able to verify theaccuracy of ail the information contained inthis edition. CISIBIS Publications Ltd andThe Antidote exclude all liability for actions

edition of The Antidote.

Photocopying Single photocopies of single

allowed by national copyright laws.Permission, and payment of a fee, isrequired for all other photocopying

avaîlable to educational institutions for non-profit classroom.use.

Permissions Except as above, no part ofthis publication may be reproduced, storedin a retrieval systern or transmitted in anyform or by any means, digital, electronic,

recording or otherwise, wfthout prior,

Issue 22Scenarios: The Search for Foresight

ContentsTOPICThinking about the future 4The price of not anticipating changes in the business environment is usually high

DESCRIBING THE SUBJECTTalking about scenarios 7A brief explanation of meanings and value

A perceptive and persistent pioneer 9Some of the scenario concepts that were developed by Pierre Wack at Shell,and the lessons that can be drawn from them

SCENARIO METHODOLOGIESWeaving plots for alternative futures 11An eight-step guide to developing scenarios

Creating the future 14A French school, La Prospective, argues against taking a fatalistic approach

Using scenarios to develop the right resources and capabilities 17A German approach to scenario management based on Systems thinking and future trends

Variations on a theme 20Some other techniques for generating scenarios and looking at alternative futures

Forming judgements 25What do structured group techniques and electronic meeting Systems contributeto scenario planning?

USING SCENARIOSPutting scenarios at the heart of strategy 29How scenarios can be used to 'wind tunnel' business ideas and strategies

Pitfalls in scénario planning 32A checklist of traps to be avoided

Putting scenarios to use 34Some examples of corporate, public body and generic scenarios

WWWSurfing around the subject 37

SNIPPETSMeanwhile, elsewhere... 38

Cover illustration: The Thinker (Le Penseur) (bronze) by Auguste Rodin (1840-1917)Private Collection/Bridgeman Art Library.

Issue 22 1999 The Antidote fromC\S\B\S www.theantidote.co.uk

EditorialN

o doubt in the period immediately running up to, and just after,the turn of the millennium, much of the world's media willindulge in an orgy of rétrospective reviews and future

predictions. It's bad enough at the end of a decade, so what it will belike at the end of a century, let alone a millennium, is difficult toimagine. No doubt by the end of it we'll all be sick and tired of beingtold where we've been and where we're heading.

Whatever the solemn prognostications or wild 'sci-fi' projections,business will go on (Y2K permitting, of course). It will, as always, beup to individual managers in individual organisations to develop theirown views of the changing nature of business and the technological,economie and socio-political environment in which it will beconducted. Indeed this Issue of The Antidote looks at a wide varietyof tools and methodologies designed for just that purpose.

However, if asked what area will have the biggest impact on the waybusiness is conducted in the future, and also where the greatestuncertainty about the nature of that impact lies, it would be difficultto avoid mention of what has become known as e-commerce ande-business. Despite, rather than because of, all the hype and frotharound the subject, most of us have a sense that many familiarbusiness models are going to be challenged over the next ten years.While e-commerce is generally couched in terms of a retail battlebetween 'bytes' and 'bricks and mortar', the much less widelypopularised world of e-business has far more potential to disruptcurrent thinking about how all businesses can and should be run.

So, before we enter the brave world of the new millennium, and getused to writing strange dates like 3/1/00 (or 1/3/00 in the US),The Antidote will be devoting its next two Issues to exploring equallyunfamiliar territory. This is a different world of web-orientedmarketing, procurement through extranets, video-conferencing viavirtual private networks and even cyber strategy! As usual, we willseek out the best or most distinctive current thinking and, cuttingthrough the buzzwords as best we can, provide you with a guide tomanaging in a digital economy. These issues should also provide auseful antidote to some of the more fantastical forecastswe are likely to hear over the coming months.

Editor

Tony Kippenberger

Associate Editor

Brün Gould

Our independent

contributing writers

in this issue

John Boyd

Peter Hïldrew

Chrissie Hogg

Jaclyn Kippenberger

Tony Kippenberger

Copy Editor

Jacky Lorimer

Editorial Assistant

Rachel Jones

Art Editor

Bernard Fallon

Business Manager

Peter Hïldrew

Subscriptions

Elaine Alexander

Information Services

Debbie Ormston

Directors

Mark Allin

Anthony Biddle

Richard Burton

Tony Kippenberger

Richard Koch

The Antidote is available bysubscription only (ten issues).Subscription queries:theantidote@csbs .co.uk

© Copyright 1999 byC|S|B|S Publications LimitedSt Thomas HouseSt Thomas StreetWinchesterHampshire SO23 9HEUnited Kingdom.Tel: + 44 (0) 1962 877377.Fax: + 44 (0) 1962 842848.E-mail: editorial@csbs.co.ukWebsite:www.theantidote.CQ.uk

The Antidote is originated byBernard Fallon Associates,

WinchesterPrintedby Optimum Litho Ltd,

Winchester

ISSN 1363-8483

www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22

Thinking about the future

More than one predictionabout the future has beenproved wrong. As thefollowing real (or attributed)quotes iliustrate:

"Everything that canbe invented has beeninvented."

CHARLES H. DUELL

COMMÏSSIONER

US PATENT OFFICE 1899

"Atomic energy mightbe as good as ourpresent day explosives,but it is unlïkely toproduce anything verymuch moredangerous."

WINSTON CHURCHILL 1939

In their 1994 bestseller, Competing for theFuture, management gurus Gary Hameland C.K. Prahalad describe asking senior

managers three simple questions. Firstly, whatpercentage of their time is spent on external,rather than internai issues? The usual answeris about 40%. Secondly, how much of this timeis spent actually looking some years ahead, asopposed to worrying about competitors'current tactics? The answer is around 30%.Finally, how much of that thinking-ahead timeinvolves developing a consensus view of theorganisation's future? The answer is about20%. Hence what Hamel and Prahalad calltheir "40/30/20 rule", the consequence ofwhich is that senior management actuallydevotes less than 3% (40% x 30% x 20%= 2.4%) of its time to building a "corporateperspective on the future". Thus manyorganisations are forced to rely on personallyheld, often idiosyncratic, views about what thefuture might be.

Personal views, of course, can prove to bedangerously wrong. Ken Olsen, founder ofDigital Equipment Corporation (DEC) andregarded as a model entrepreneur in his time,provides a good example. In 1977 he statedthat, "There is no reason for any individual tohave a computer in their home", and manywould have agreed with him (though as aprojection of the future it was clearly wrong).But this view became such a fixation that bythe early 1980s, when the world was alreadychanging rapidly, he imposed a blanket banon the words "personal computer" and anydiscussion of them within his company.Olsen's refusal to accept a future for the ITindustry in which PCs would play a large partcost DEC dear. From being a leading marketcontender with IBM at the start of the 1980s,in 1998 the company suffered the ignominyof being absorbed by Compaq - an upstart thatrode to the top on the PC wave.

Living off the pastBut Ken Olsen and DEC are not alone. Therecession-ridden early 1990s saw many well-known role models, such as IBM, Disney andGeneral Motors, stumble badly. What PeterDrucker calls their "Theory of the Business"had passed its sell-by date: "the assumptionson which the organisation has been built andis being run no longer fit reality." Theseassumptions - about markets, customers,competitors, necessary competences,technology and society - shape corporate

behaviour, values and decision-taking. Butmanagers forget that such assumptions arenot tablets of stone, that they simply form ahypothesis, a view taken at a particular time.They therefore forget to refresh and re-thinkthem. (For more on Peter Drucker's "Theoryof the Business", see The Antidote Issue 4 pages9-11 or www.theantidote. co.uk/articles/druckertob.html)

Holding fast to certainties and previouslysuccessful formulae, while the world ischanging around you, is a dangerous pastimein good times as well as bad. Highly regardedUK retailers such as Marks & Spencer and J.Sainsbury have recently been finding that out,as indeed have US companies like Motorola -challenged by Finland's Nokia in mobilephones - and even Compaq, hit by Dell's directselling operation.

A classic caseWriting in the Spring 1999 Sloan ManagementReview, Professor Peter Williamson of INSEADcites the Woolworth Corporation, founded byFrank Winfield Woolworth in 1879, as a classiccase of a company that became a victim of itsown success. By the time of the founder'sdeath in 1919, Woolworth's "five and dime"stores already numbered over a thousand andthe company's headquarters were in what wasthen the world's tallest building. Up to andimmediately after the Second World War thecompany thrived both at home and abroad,becoming a household name through itswinning formula of selling inexpensive,non-perishable general merchandise through"no-frills" self-service.

However, by the 1970s the Woolworth'sformula was no longer performing, particularlyin the US. By the early 1980s, it was clear thatthe business was in trouble with sustainedattacks coming from two quarters - Wal-Mart'sdiscounted general merchandise superstoresand speciality retailers like Toys 'R' Us. Aprocess of closure and retrenchment in theface of declining sales followed, beginning in1982 with the sale of its UK stores - 73 yearsafter the first one was opened in Liverpool -to the company now known as Kingfisher plc.

In the US and elsewhere Woolworth triedto respond by opening both discount andspeciality stores but found that it lackedcritical capabilities. It no longer understoodits customers, who flocked to the competing

Issue 22 1999 The Antidote from C|S|B|S www.theantidote.co.uk

retail formats, nor did it have thenew retail skills, such as Wal-Mart'sfabled logistics expertise, that hadbecome necessary to compete. Theconsequence was that Woolworth'soptions for the future were runningout: "The company had becomea prisoner of its past". Eventually,in 1997, Woolworth's last generalmerchandise store in the US - thecompany's original bedrock - wasshut. As Williamson puts it, thecompany "had refined and polishedits economic engine and deepenedits narrow range of competences intoalmost perfect extinction."

A changed viewIn Williamson's view, the companysimply failed to invest in the essentialknowledge and capabilities neededto succeed. This in turn brings us toan important part of the currentstrategy debate. As Henrick Duusof Copenhagen Business Schoolhas recently pointed out, attitudestoward companies and the businessenvironment have changed a lot overthe last 30 years. During the 1970s,and into the 1980s, companies wereseen as highly flexible units, ableand expected to adapt readily tothe shifting needs and wants ofcustomers, in a relatively predictableenvironment. Now, however, thefocus of strategic thinking has shiftedto one that views companies asbundles of distinctive resources,knowledge and capabilities built upover time.

From this new perspective - whathas become known as the 'resource-based view' of strategy - thecompany is much less flexible,simply because it takes a good dealof time and effort to develop newcapabilities and knowledge. Forthis reason companies may indeedbecome 'prisoners' of their past,dependent on outdated andincreasingly less applicable skillsand abilities - as in the case ofWoolworth. Simultaneously, asDuus points out, there is widespreadacknowledgement that the businessenvironment has becomeincreasingly unpredictable. (SeeThe Antidote Issue 17 pages 6-11 orwww. theantidote. co. uk/articles/rbvstrategy. html for an explanationof current thinking on resource-basedstrategy.)

Bad newsFor managers, of course, thisrepresents the worst of all worlds. Ifthis theory holds, they are in chargeof inflexible organisations in an evermore volatile world. Furthermore,it is a world in which past decisions,strategic choices and subsequentmanagement actions will all havedetermined the inherent capabilitiesand resources that a company has.These in turn will tend to restrictthe ways in which new resourcesand capabilities can be most easilydeveloped. Conceptually, therefore,companies are already stuck with aportfolio of current strategic optionslargely pre-determined by earlierchoices.

Thus, it is the task of seniormanagement to adjust and renewresources and capabilities as time,competition and change erode theirvalue - creating, in the process,new future options. Simply livingoff current resources and capabilitieswill, in the long run, lead toweakening competitive performance,increasingly restricted profitabilityand inevitable decline - as withWoolworth. So the strategic problemis to decide upon, and then develop,those resources and capabilities thatprovide a platform for the productsand services that will be needed inthe competitive markets of thefuture. These choices, about how andwhere to invest, are critical becausethey form long term commitmentsthat are difficult to reverse. Makingsuch decisions and commitments,in the face of real uncertaintiesabout the future, tests strategicmanagement ability to the full.

The remaining problemWhile managers are trying to resolvethese problems by re-focusing theirorganisations, clearly defining theircore competences and thenincreasingly relying on networksand strategic alliances to provideother critical capabilities andresources, the problem does not endthere. Changing the nature of theorganisation doesn't resolve thequestion of what the future holds.Companies do not trip up justbecause their past formulae no longerwork. Future plans can just as easilygo wrong if they assume a future thatdoes not materialise (as some récentinvestors in Internet stocks will no

doubt find out). For instance, many arecently re-designated life sciences'company, initially rewarded by thestock markets for their clever exitfrom cyclical bulk chemicals, havebeen banking on a wonderful futurefor genetically modified organisms.They have devoted considerableresources to re-focusing theirbusinesses and acquiring the newlyrequired competences. But right now,in Europe at least, this technology isnot the winner it was going to be.Large companies like Monsanto,Aventis and AstroZeneca thereforehave to readjust their mindsets to anew reality.

Grappling with the futureSo how can managers think about thefuture? Reflecting the differentanswers to this question, TechnologyFutures Inc, a US consulting firm, hasdevised a neat way of categorising thefive different ways people thinkabout the future.

The first group is the Extrapolators.They believe that the future is alogical extension of the past. Largescale, inexorable forces are at workdriving the future in a reasonablypredictable way. The future cantherefore best be forecast byextrapolating past trends in acarefully reasoned and logicalfashion. Next are the Pattern Analysts.They believe that powerful feedbackmechanisms in society, combinedwith basic human drives, cause

Jxends and events to occur inidentifiable cycles and predictablepatterns. Thus, analogous situationsfrom the past can be analysed toidentify probable future patterns.

The third group is the Goal Analysts.The best way to project the future,in their view, is to examine theexplicit and implicit goals of keydecision-makers and trend-settersand to evaluate the degree to whichthese, and the actions they take toachieve them, will affect the long-term. Counter Punchers comprisethe fourth group. Seeing the futureas the outeome of unpredictableand random strings of events, theybelieve that the only way to dealwith it is to keep an eye on a widerange of possible trends and events,monitor the technical and socialenvironment and stay as flexibleas possible.

www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22

"Who the hell wants tohear actors talk?"

H M WARNER, WARNER BROTHERS,

in 1927 when weekly cinemaattendance was about 5 million

a week. By the end of 1929,'talking pictures' were drawing

90 million a week.

"The bomb will nevergo off. I speàk as anexpert in explosives. "

ADMIRAL WlLLIAM LEAHY

about the Manhattan Project 1943

The final group is the Intuitors. Convincedthat the future is shaped by a highly complexmix of trends, random events and actions byindividuals and institutions, they believe thereis no rational technique for forecasting thefuture. In their view, the only way to handlesuch complexity is to gather as muchinformation as possible and then allow thebrain's subconscious, and personal intuition,to provide meaningful insights.

Using scenariosNaturally, many tools for each group areavailable, most of them quantitative. But thereis a big difference between trying to predict thefuture by extrapolating past trends and usingintuition to gain insights. Organisations willalways use forecasts (effectively predictions)because they need them in order to projectsales, create budgets and allocate resources.But to rely on forecasting techniques alone isto flirt with danger.

The gravest risk is that forecasts tend toproject conventional wisdom and currentassumptions forward. They fit well withexisting mindsets. Yet, time and again, thisis inadequate preparation for what the futureholds. Fresh thinking, leading to foresight,or even better insight, is the ideal in thecurrent business environment. So, at theintuitive end of the spectrum lies anothertool: scenarios. Designed to exploreunrecognised possibilities and challengecurrent thinking, scenarios provide an

important vehicle for 'Goal Analysts' and'Counter Punchers', as well as 'Intuitors',to use.

Over time, ways have been found to makethem at least partially acceptable to'Extrapolators' and even 'Pattern Analysts', asthis Issue of The Antidote illustrates. But, to beof use, they must break down preconceptionsand reveal blindspots, widen managerialthinking and re-focus it onto new, possiblealternative futures. Unfortunately, this meansthat scenarios have to tread a narrow linebetween stretching belief and maintainingcredibility - a problem cleverly captured byDenis Loveridge of the University ofManchester in Figure 1.

They need to arouse managers' interest andmake them question their thinking whilesimultaneously holding on to reality - not aneasy recipe. Nor are they a panacea. But whatthey do provide is one of the best, currentlyavailable ways to help managers avoid drivingan organisation into a dead end. And,incidentally - used correctly - they also meetHamel and Prahalad's admonition to build a"corporate perspective on the future" H

References: Gaiy Hamel and C.K. Prahalad,"Competing for the Future", Harvard Business School Press,1994, ISBN 0-87584-416-2. Peter Wiîliamson, "Strategy asOptions on the Future", Sloan Management Review, Spring1999. Henrik Duus, "Strategic Business Market Forecasting",Strategic Change, Issue 8, May 1999. Technology FuturesInc., www.tfi.com/ResCon/TF-Techniaues.html.

Figure 1: Relationship between scenario content and managerial response (Loveridge, adapted from G.L.S. Shackie,"Expectations in Economies")

Issue 22 1999 The Antidote from C\S\B\S www.theantidote.co.uk

Talking about scenarios

Ashappens so often in management,there is a problem with terminology:the way the word 'scenario' is used to

mean a wide variety of dissimilar activities indifferent organisations.

At one end of the spectrum, using scenarioscan mean trying out 'what if questions onan econometric model. At the other end, itcan mean the development of full length,detailed 'stories' about possible alternativefutures. The former tends to be an exercisein sensitivity analysis, adjusting existing datawithin a model - as in 'what if interest rateswent up by 2%?' The latter may involveseveral man-years of work and is a task thatcan only be undertaken with a good deal ofcommitment and at considerable cost.While neither activity is invalidated by theother, such a divergence in the use of thesame word can cause somemisunderstandings.

The Shorter Oxford English Dictionaryprovidas a number of definitions that tendto position the use of the word toward the

end of the spectrum:

scenario n. & v. L19. [It. F L scena SCENE]A n. PL -os: la A sketch orotidine of theplot of a play; ballet, novel, etc., withdetails of the scenes and situations. L19. bCinemat. A film scriptwitball the detailsof scenes, stage directions, Btc, necessaryfor shooting the film. ,E20. 2 A; descriptionof an imagined situation or a postulatedsequence of events, an outline intendedcourse of action; spec a scientific-description or speculative model intendedto account for observable facts. Also loosely,a situation, a sequence of events. M20. Bv.t. make a scenario (of abook, idea, etc);to sketch out M20.

In almost any discussion of scenarios,the influence of Royal Dutch/Shell as anexemplar of scenario-planning, and therelative dominance of their model as a primereference point, quickly becomes clear.Shell's own definition goes: "Scenarios aredescriptions of ALTERNATIVE futureswhich are PLAUSIBLE and INTERNALLYCONSISTENT. Scenarios are QUALITATIVEand QUANTITATIVE descriptions of futureenvironments which highlight keyUNCERTAINTIES."

For the purposes of this Issue of The Antidotewe use the word scenario to mean a detailed,descriptive plot of a possible alternative future.

OriginsIn the 1950s, the US Air Force began usingwhat were termed 'scenarios' to try to identifywhat its Soviet bloc opponents might do andso prepare alternative strategies.

According to historian Art Kleiner, it was thenovelist and screenwriter Leo Rosten who,finding a group of physicists hunting for aname for alternative descriptions of howsatellites might behave, first suggested theterm "scenario". "You should call themscenarios," he said. "In the movies, a scenariois a detailed outline of a future movie..."

In the 1960s, first at the US RAND Corporationand then at the Hudson Institute, HermanKahn, who had worked with the US air force,used scenarios in a non-military context.Although he is often remembered for lookingat the potential for nuclear war - he urgedpeople to think the unthinkable so that theywould be better prepared should it everbecome imminent - he also developed theuse of scenarios in a business context.

Kahn saw scenarios as fiction rather thanrigorous forecasts. The point, as he saw it,was not to make accurate predictions but tocorne up with a mythic story that brought thepoint home. Traces of this approach can stillbe seen in some of Shell's thinking on thesubject today.

TypesThe management literature tends to dividescenario methodologies into three categories.Explanations of all three, and othermethodologies, are included in this Issue.

1. Intuitive logic is a 'soft' method of scenariodevelopment focusing on changing mindsetsso that managers can anticipate differentfuture worlds. It involves creating a series ofalternative coherent and credible storiesabout the future against which decisions canbe tested. It does not try to predict but offersa means of thinking about the future, whilealso being a learning vehicle.

2. Trend-impact analysis is a 'harder'methodology that tries to predict the futureby looking at the effects of trends over time.It helps forecasters identify pertinent factors

"A severe depressionlïke that of 1920-1921is outside the range ofprobability. "

THE HARVARD ECONOMIC SOCIETY

16 NOVEMBER1929

"Very interesting,Whittle, my boy,but it will never work!"

PROFESSOR OF AERONAUTICAL

ENGINEERING AT CAMBRIDGE

UNIVERSITY TO A YOUNG

SIR FRANK WHITTLE, WHO WENT ON

TO PATENT THE BASIC DESIGNS

FOR THE TURBOJET ENGINE IN 1 9 3 0

www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22

and assess their impact on anestablished trend based on theprobability of their occurrence.While it has the advantage ofcombining traditional forecastingtechniques with qualitative factors,it is designed primarily for theevaluation of one key decisionor forecast variable which isquantitative and on which historicalinformation exists. As such, it rarelyallows for assessment of the impactof events on each other.

3. Cross-impact analysis is alsoassociated with 'harder' forecastingtechniques. It in volves expertsidentifying a large number of trends,potential events and conditions,which may affect the likelihoodof other events occurring. Each isassigned a probability and, using acomputer, different combinationsand cross-impacts are plotted. Itallows analysts to work througha large number of variables andscenarios, and to be explicit aboutthe interrelationships of particularevents and conditions.

It's worth noting, however, that theproponents of each methodologyhave little time for each other. Forexample, Steven Schnaars, author ofMegamistakes, describes cross-impactanalysis as "a family of exoticmathematical models that seek toquantify and manipulate thejudgemental estimates of experts.The procedure exemplifies themadness of models over substance."

Intended outcomesThe scale or scope of a scenarioexercise - which vary at theextremes from the ten man-yearsof work that Shell's 'global' scenarioscan take to a 50 minute 'electronicmeeting' - will depend on theintended use (and budget). Apartfrom superseding trend-basedforecasts, scenarios can add valuein many ways. The following aresome proposed by experiencedmanagers at C | S | B | S workshopswhere scenarios have beendiscussed:

• increasing management sensitivityto potential future shocks anddiscontinuities

• helping to identify and quantifythe unknowns during a periodof upheaval

• explaining why there may bemany possible answers to a singlestrategic question

• looking for future threats andopportunities

• generating future strategic options• creating a better and wider

understanding of the real businessdrivers

• gaining competitive advantage byrecognising an emerging futureearly

• helping senior managers torecognise that 'strategies they like'may not always be perfect andmay need changing

• assessing long-term investmentdecisions

• assisting in portfolio management• helping to make implicit

management mindsets explicit• building a common language

across the organisation for peopleto talk about issues

• developing a tool fororganisational learning

• crafting new strategies fordifferent futures

Going about it...Newcomers to scenarios confronta Catch 22 situation. Many pilotschemes or experiments, designedto 'prove their worth' are necessarilylimited. This means that the truepotential of scenarios may notberealised or that a contrary beliefdevelops - that no greatcommitment of resources is reallyneeded. The alternative is to proveby example - quoting companiesor organisations that have reallybenefited from their use. This isdifficult, not only for reasons ofcommercial sensitivity, but becausemany keen proponents find itdifficult to quantify the benefits,especially at the softer, 'learning'end of the spectrum. Predictors will,of course, only tell you when theygot it right. Unfortunately, manypeople have heard of Shell'sprediction of the 1970s oil pricerise, yet Shell's processes areintended to be non-predictive(see www.theantidote.co.uk/articles/shellscenarios.htmlfor more on this).

So there are a limited number ofalternatives:

1. Use generic, pre-preparedscenarios, created by strategicinstitutions or industry bodies.While such scénarios benefît frombeing externally produced, theyare also available to others, sono unique insights are likely.In-house scenario presenters mayalso lack familiarity with theinternai logic and consistencyinvolved in their creation. Afurther problem is that industry-specific scenarios may containcurrent conventional wisdom.So the way things have alwaysbeen done in the industry is likelyto predominate - thinking staysinside the box.

2. Use external consultants. Thisis a common route, but meansthat the selectors have to knowwhat they are after. This issue ofThe Antidote is designed to helpbecause it identifies manydifferent methodologies fromwhich to choose and the criteriafor making the choice. But the bigconsultancies will cost a leg andan arm, while medium and small-sized consultants will have morelimited experience.

3. Internai development or DIY isprobably the ideal route. It hasits problems, however, not leasta potential lack of experience.Once a scenario exercise has failed,it may take years to rekindleinterest in the process! So, unlessyou have people on your team withexperience of scenarios, considerbringing in a scenario expert asfacilitator - at least for the flrst fewattempts. As usual, external voicesalso carry more weight...

Having said all that, it is worthpersevering. The alternative, afterall, is to stick with extrapolated trendlines and hockey-stick forecasts! •

References: Steven P. Schnaars,''Megamistakes: Forecasting and the Myth ofRapid Technological Change", The Free Press,1989, ISBN 0-02-927952-6; "A Summary ofDiscussions on Scenarios", The Centre forStrategic Business Studies, 1995, £35.

Issue 22 1999 The Antidote from C\S\B\S www.theantidote.co.uk

A perceptive and persistent pioneerFor 12 years, from 1970 to 1982, Pierre Wack wrestled to create scénarios that were both

relevant and meaningful enough to change Shell management's mindsets

Pierre Wack, an economistby training, is credited,alongside Ted Newland, with the development ofscénario planning at Royal Dutch/Shell. Described

by his successor, Peter Schwartz (see page 11) as a"mysterious, elusive Frenchman, almost oriental inappearance", Pierre Wack learnt through a process oftrial and error what it takes to make the use of scénarioseffective. The story of how Shell developed and thenused scénarios to good effect, told in his own words, canbe found in two séminal articles in the Harvard BusinessReview published in 1985 (see références below). Thetrials and tribulations of the learning process that Shellwent through has also been extensively covered inThe Antidote Issue 10 on Organisational Learning(pages 35-40). That article, entitled "Over 25 Years ofLearning to Learn", is also available at:www.theantidote.co.uk/articles/shellscenarios.htrnl.

Hère, we look specifically at some of the scénarioconcepts that Pierre Wack developed and the lessons hedrew from his expérience. Since many organisations hâvetried using scénarios, with very différent degrees ofsuccess, it is instructive to reflect on Wack's own findings.

ForecastsWack accepts that straightforward forecasts can bereasonably accurate on many occasions. But he believesthat, paradoxically, this is their greatest danger, becausesooner or later they fail to predict some major shift. Andthis occurs at precisely the moment that organisationsmost need to know, or at least sensé, what the futuremay hold and, more particularly, what éléments of itmay quickly make their stratégies obsolète.

It is the ability to predict stormy change that would makeforecasting useful, and that is precisely the area where itis weakest. Too many différent forces are now at workfor it to be possible to get the right forecast, "no single'right' projection canbe deduced from pastbehaviour".

The alternativeInstead of looping for better forecasts - by perfectingtechniques or finding better forecasters - Wack arguesthat managers must "accept uncertainty, try tounderstand it, and make it part of their reasoning".Uncertainty is not just a short-term déviation from apredictable world, it is now an intégral part of businesslife. And, he argues, one of the best ways of managingthis uncertainty is the proper use of scénarios.

Scénarios - "pathways into the future" - acknowledgeuncertainty and set out to structure and understand it.This, he suggests, is very différent from simply criss-crossing multiple variables and then looking at scores ofpossible outcomes. Good "décision" scénarios, as fie callsthem, "are not a group of quasi-forecasts, one of which

may be right". Critically, they describe "différent worlds,not différent outcomes in the same world" (our emphasis).The aim is not to 'get it right1 but to "illuminate" the majorforces at work within the System, to illustrate theirinterrelationship and to highlight the key uncertainties.This he calls "the gentle art of reperceiving".

Some problemsFor those who hâve tried scénario planning and beendisappointed, Wack offers some thoughts. Many so-calledscénarios "merely quantify alternative outcomes ofobvious uncertainties"; for instance projecting a possiblerange of oil priées ten years hence. Thèse, he suggests,do not help décision makers, because they présent "rawuncertainties" but provide no basis on which managerscan exercise their judgement. As a resuit, no stratégieaction or thinking takes place.

Scénarios need to be structured in such a way thatexecutives corne to understand the nature of theuncertainties and thus corne to grips with them. Buteven good scénarios are insufficient. They can only helpmanagers when they change the décision makers'assumptions about how the world works and thencompel them to rearrange their mental models. To dothis they must create a bridge between the new realitiesof the outside world and the "microcosm" of themanager's mind.

The need to observeWack also highlights the need to separate what isuncertain from what is predetermined. By'predetermined', Pierre Wack means events that eitherha-ve occurred, or are almost certain to occur, but whoseconséquences are not y et clear. He likens it to monsoonstorms hitting the Ganges river basin - the fact that theconséquences will be felt in Rishikesh in the Himalayanfoothills within two days, in Allahabad three or four dayslater and at Benares two days later still, is predetermined.

By simply recognising the future implications ofsomething that has already occurred, effort can bedirected at what those conséquences mightbe. In Wack'sview, identifying what is predetermined is fondamental.But it is also an area of great danger. He quotes PaulValéry, the French philosopher: "A fact poorly observedis more treacherous than faulty reasoning." Errors inscénarios, Wack suggests, are more often the resuit ofpoor observation than weak reasoning.

Looking at the edgesWack sought out what he called "remarkable people".Thèse were "acute observers with keen, unendingcuriosity"; people who paid attention to the way theworld worked and, in the process had their finger on thepuise of change. For example, on one occasion in the

www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22

"T/râ 'téléphone'has too manyshortcomings to beseriousty consideredas a means ofcommunication. Thedevice is iriherentlyofno value to us."

INTERNAI MÉMORANDUM

WESTERN UNION 1876

HThe phonograph...is not ofanycommercial value."

THOMAS EDISON

ITS INVENTOR 1 880.S

1970s, Wack got into a stimulating conversationwith an Iranian physician. They became closefriends and each year Wack would visit himto see how his perceptions of the world werechanging.

Peter Schwartz, Wack's successor at Shell,explains why this was so important: "Pierrehad corne to believe that if you wanted to seethe future you could not go to conventionalsources of information. Everyone else wouldknow them as well and thus you would hâveno unique advantage." Scénario builders needperipheral, not tunnel vision.

Number and natureThe number and nature of the scénarios alsomatters. For instance, three scénarios along asingle dimension will tempt managers to pickthe middle scénario as the most likely. Twoscénarios - one optimistic and one pessimistic- will tempt managers to 'split the différence'.Wack's personal suggestion is that thereshould never be more than four and that theidéal is three, two différent worlds and onebased on existing thinking (the "surprise-freescénario"). The latter is included specificallyto show how fragile current assumptions are!

In terms of their nature, Wack argues thatscénarios must address management's deepestconcerns - what keeps them awakeat night. That way, they hâve immédiaterelevance. According to Peter Schwartz, PierreWack also believed that scénario création wasnot a reductionist process, it was an art full ofsubtleties - like good story-telling. Anecdotalévidence certainly suggests that Wack himselfwas an excellent story-teller.

Two testsWack suggests two tests for evaluatingscénarios. First, what do they leave out?Managers must not be able to look back andsee that important events were missed.Second, do they lead to action? If they do notpush managers to act differently then they arelittle more than "interesting spéculation".

In times of changeIn a rapidly changing business environment,the inability to see a newly emerging realitybecause of obsolète assumptions is a commoncause of stratégie failure, "particularly", Wacksays, "in large, well-run companies."Management mindsets, shaped by pastexpérience and sustained by standard forecastsand projections, frequently prove inadéquate.

Because of the sheer quantity and complexityof information available, managers' mentalmodels never match reality - they are alwaysconstructs. Thèse constructs tend to be nearerto reality when times are stable. When changeaccélérâtes, however, they "become adangerously mixedbag: rich détail andunderstanding can coexist with dubiousassumptions, sélective inattention toalternative ways of interpreting évidence, andillusory projections." This is when scénariosare of most value.

And success...Scénarios are intended to gather andtransform strategically important informationinto fresh perceptions. However: "Thistransformation process is not trivial -more often than not it does not happen.When it works, it is a créative expériencethat générâtes a heartfelt 'Aha!' from yourmanagers and leads to stratégie insightsbeyond the mind's previous reach." Intimes of change and uncertainty, scénariosin this context can provide real opportunitiesfor companies to achieve compétitiveadvantage M

Références: Pierre Wack, "Scénarios: Uncharted WatersAhead", Harvard Business Review, September-October1985 (reprint no. 85516); "Scénarios: Shooting the Rapids",Harvard Business Review, November-December 1985(reprint no. 85617); Peter Schwartz, "The Art ofthe LongView", John Wiley&Sons Ltd, 1998 (first published 1991),ISBN 0-471-97785-3, £14.99 PB; Arie de Geus, "The LivingCompany", Nicholas Brealey, 1997, ISBN 1-85788-180-X.

COMMENTUnlike many other Shell alumni, apart fromteaching scénario planning at HarvardBusiness School for two years in the mid-1980s and his two subséquent articles in

l HBR; Pierre Wack has remained réticent; about précise méthodologies. Perhaps this; adds to the air of mystery that surrounds| him and causes some among Ms puristfollowers to call him 'the Master'.

What is clear is that he understands theproblems inhérent in getting managersto reframe their mental models. Manywho hâve tried using scénarios expressdisappointment at their inability to achievethis goal. Revisiting Wack's views, outlinedabove, may^ help to explain the difficultiesinvolved and provide the encouragementto persévère.

Issue 22 1999 The Antidote from C|S|B|S www.theaiitidote.co.uk

Weaving plots foralternative futuresAn eight-step guide to developing scénarios

Peter Schwartz is a leading futurist andprésident of Global Business Network,an international think-tank and

consultancy based in California, USA. Hisbook, The Art of the Long View: Planning for theFuture in an Uncertain World, encapsulâtes hisapproach to scénario planning, an approachwhich reflects his expérience with StanfordResearch Institute as well as time spentworking for Royal Dutch/Shell in theirground-breaking planning team. As well asmany articles, he is also the co-author, withPaul Hawken and Jay Ogilvy, of SevenTomorrows, a book of global scénarios.

IntroductionA good scénario is one which "captures thedynamics of the situation and communicatesthe point effectively", he says. By puttingtogether a manageable number of suchscénarios, a future of infinité possibilities canbe represented by carefully chosen plotswhich will help an organisation to clarify itsown future. The best way of doing this, theauthor suggests, is to develop such scénariosat a two-day off-site seminar. Those attendingshouldinclude:

• senior managers, who bring credibility andtop level approval to the process

• people operating at the periphery ofthe organisation (functionally orgeographically) for the original perspectivethat they can bring

• people with a thorough knowledge ofdifférent organisational functions andopérations, for diversity

• outsiders who can be useful in provokingdiscussion.

Step 1. Pinpoint the key issueThe place to start, says Schwartz, is toestablish the major décision confronted by theorganisation - whether to build that factory,launch that new research programme, makethat acquisition. In this way y ou can ensurethat differing scénarios will impact differentlyon the organisation, and that they will berelevant to an individual situation. It is nogood looking at an organisation under variousdifférent économie growth assumptions, forexample, because the resulting scénarios willbe insufficiently varied, and will not bespécifie to the organisation.

In addition, scénarios can be a good methodof assessing the more generalised threatsfaced by the organisation, and the possibilitiesopen to exploitation. Envisaging future workpatterns, product requirements, and marketdevelopments, for example, can create usefuldiscussions, leading to a consensus viewaround which future strategy can be based.

Step 2. Establish the major localinfluencesWhat are the factors, at a local, micro level,that hâve a bearing on the organisation^key décision? Issues relating to customers,suppliers, staff, indeed ail stakeholders,need to be examined, and the effects theymight hâve on that new factory, researchprogramme, or acquisition, assessed.

Step 3. Establish the major globalinfluencesAgain, the local factors are influenced bythe macro environment, with trends on thetechnological, political, environmental, socialand économie front having varying degreesof relevance. Some forces at work are factualand predetermined, like demographics - asurge in birth rate five years ago, for example,would naturally create a surge in the teenageconsumer market ten or so years from now.Others are much more difficultto pin down -the influence of public opinion, for example.Schwartz refers to thèse as "criticaluncertainties".

This is the area in which establishing thetrends requires the most research. It is alsothe area where it pays to keep an eye on awide variety of trend indicators: from booksto music, to popular culture; from theInternet, to unconventional people who oftenyield remarkable insights, as well as thosefilters of information such as editors ofperiodicals, and other "sources of surprise".

Step 4. Classify the influences identifiedThe purpose of this stage is to identify which(two or three) of the influencing factors arekey, and which (two or three) are the leastcertain. So they need to be ranked accordingto their degree of influence on the keydécision established in step 1, and according totheir level of uncertainty. Scénarios can thenbe created which reflect the major différences.

"De Forest has said inmany newspapers...that it would bepossible to transmitthe human voiceacross the Atlanticbefore many years.Based on thèse absurdand deliberatelymisleading statements,the misguided public...has been persuaded topurchase stock in hiscompany. "US DISTRICT ATTORNEY PROSECUTING

DR LEE DE FOREST

INVENTOR OF THE VACUUM TUBE

FOR FRAUD IN 1 9 1 3

www.theantidotexo.uk The Antidote from C|S|B|S 1999 Issue 22

A useful variant at this stage of theprocess is to create an "officiaifuture", a relatively benign scénariowith no major changes to the statusquo. Varying the local and globalinfluences will rapidly start to showup which are the most influentialfactors, the critical uncertainties.It is not recommended thatprobabilities should be allocated toparticular scénarios, as the naturaltendency is then to consider onlythe most likely scénario, whichdestroys the point of generatingdifférent scénarios in the first place.

Step 5. Choose the basisof the scénariosThe ranking process outlined in step4 provides the two or sometimesthree axes for a matrix on whichthe differing scénarios are based,the "scénario drivers". So a carmanufacturer might hâve fuel costsfor one axis, market protectionismfor another, perhaps environmental

Plots to weàveSchwartz also identifies t&n différenttypes of "plot" which commonlyârise in detailèd scénarios, andwhich caïi prove useful whenstories are bèirig "fleshed out":

Winners and losers - hère theunderlying assumption is thatonly one company can dominatein a zero-sum game where oneorganisation^ gain is another's loss.Alliances and the balance of powerare the issues which predominate.The Pepsi-Cola/Coca-Cola conflictîs cited as an example, with everymove or advertisement by onebeing met and counteracted bythe othër.

Challenge and response - in whichan impending threat or challengeis met or seén off, a plot communto adventure films orbooks. A crisisis metby more or less successfuladaptation to the new set of circum-stances. À good example is the issueof sustainable development/with thecontradictory goals of économiegrowth and environmental qùality.Damage to the environmënt leadsexperts to assign limits to industrialdevelopment, but countries andcompanies find new ways of doingthings which enable theni tobypass

awareness for a third. Scénarioswould then be based on différentcombinations of extrêmes: high fuelcosts/market place accessibility/environmental sensitivity, andso on.

Two or three axes, or driving forces,for the scénarios might appear tobe an over-simplification, but theresulting multiple possibilités forcombining them, together withthe addition of other influences,rapidly créâtes more than enoughcomplexity. The task then becomesone of clustering sets of events,identifying the patterns of the trendsthat link them, and recognising thefundamental structural issues andrelationships.

However Schwartz cautions againstusing more than four or fivescénarios, because it tends to becomequite difficult to distinguish betweenthem. He also points out that

those limits. As a resuit, sustainabledevelopment becomes a realistic andachievable possibility.

. Evolution - in which smallincrémental changes occur over aperiod, and cumulatively amount tosomething more radical. Technologyis perhaps the best illustration ofan evolutionary plot, with minordevelopments suddenly enàbling awhole new approach to be adopted.Witness IBM's eàrly failure tocomprehend and exploit the growthof personal computers.

Good news/bad news - in whichboth désirable and undesirablefutures are examined. Valuablebecause the latter is often neglectedout of a natural reluctance toconsider the unpalatable.

Révolution - in which majorunpredictable events ordiscontinuities occur, such as theémergence of Russia from years ofcommunist économies, the rise ofOPEC in 1973, the change in publicattitude towards the environmënt.

Cycles - where often predictàbleséries of events take place,examples of which might be thè

whenever three scénarios are underconsidération, the temptation is tochoose the "middle ground" scénarioand treat it as a "most likely" forecast.Thebenefits of scenario-basedplanning lie in its variety, and hesuggests that the optimum approachis four scénarios, two of which areprobable, two improbable but eachwith high impact.

Step 6. Add détail to the scénariosCreating a cohérent, mémorable anddetailèd narrative that incorporâtesdifférent critical uncertainties andscénario drivers is the next stage inthe process. The key trends andissues need to be covered in détail,and making them as realistic aspossible helps to improve credibility.Schwartz suggests that imaginativeand mémorable names for thevarious différent scénarios helppeople to integrate them intoday-to-day corporate thinking andconversation.

link between interest rate policyand inflation, or cyclical industrialmarkets such as shipbùilding orsteel production which àrç protie toprice compétition/consolidation/investment/overcapacity cycles.

Infinité possïbility - trying out theoptimistic inevitability of growthand improvement In the 1980scomputer sales attained growthlevels that were hithertounthinkable.

The lone ranger - in whichestablished practices areoverturnedby a new protagonist,for ëxample, a Branson taking onBritish Airways, Apple computerversus IBM, etc.

My génération - in which plots takeaccount of new cultural groupings,egbaby boomers or the overseasChinese network. Their powerstems from the collective ability ofa given génération or culturalgrôup to make a différence.

Perpétuai transition - m which themarketplace is vast, foreverchanging and has °no régulation,control, or limits". The Internetexemplifies such a plot line.

Issue 22 1999 The Antidotefrom C|S|B|S www.theantidote.co.uk

Step 7. Review resultsAt this stage it should be possible to assess the focaldécision defined in step 1 in the light of the scénariosdeveloped, to see how it stands up under various visions ofthe future. If it is vulnérable only to minor variations, or itlooks sensible in only one set of circumstances, thestrategy needs to be changed. In many cases the strategyis adjusted so as to enable the company to be moreflexible, more capable of responding to a variety ofdifférent challenges suggestedby the scénarios.

Step 8. Choose early warning signaisAfter creating the scénarios, it is worthwhile to try andestablish some early warning signais which mightindicate which of the various scénarios applies. A fewkey indicators - early and sometimes weak signais - canforewarn astute observers. Thus a rise in job vacancies inparticular catégories might herald a country's économierestructuring, as may the launch or rise in circulation ofcertain types of journals, magazines and periodicals.Much of the benefit of creating scénarios cornes from theincreased awareness within the company for spotting thetrend changes that really matter.

CONCLUSIONAs Schwartz says, "You can tell you hâve good scénarioswhen they are both plausible and surprising; when theyhâve the power to break old stéréotypes; and when themakers assume ownership of them and put them to work.Scénario making is intensely participatory, or it fails." •

Référence: Peter Schwartz, "The Art ofthe Long View: Planning for theFuture in an Uncertain Worîd", John Wiley & Sons Ltd, 1998 (firstpublished 1991), ISBN 0-471-97785-3, £14.99 PB.

COMMENTPeter Schwartz has spent much of his working lifeinvolved in scénario building, from his tirne with SRIin the 1970s, through four years with Shell in the mid1980s and, since then, as a co-founder of GBN. AsPierre Wack's successor at Shell (see page 9), he hasproduced définitions and méthodologies where Wackrefused to do so, lest the subtleties of scénario buildingwere lost. Given that many Shell planning alumni(including Wack) are members of GBN, this looks likethe best publicly available insight into the basicprocesses that they developed.

Critically, users should be aware that this step-by-stepguide is designed to produce scénarios for managers'to think in'.

Although based on intuition and logic, they are notintended as predictors or forecasts but instead aredesigned to challenge mindsets and assumptions.Read with care (there is a lot of diversion anddéviation within it), this book provides therudimentary tools for managers to hâve a go atscénario building themselves. But if you are going tobe rigorous, don't expect it to be either quick or easy.Shell devoted many man-years to creating each setof its "global" scénarios and, whilst they were hugelyambitious projects, even scaled-down versions requirea lot of dedicated hard work to be really worthwhile.If you are not going to be rigorous, don't expectto get the same benefits. And beware that you don'tend up misleading yourself !

www.theantidote.co.uk Tlie Antidotefrom C|S|B|S 1999 Issue 22

CREATING THE FUTUREA French school, la Prospective', argues against taking

a fatalistic approach to the future

Michel Godet is a Frenchstrategy specialist who hasbuilt on the work

undertaken in the 1950s by GastonBerger. A philosopher, manager andcivil servant, Berger was theoriginator of La Prospective, anapproach to scenario planningcharacterised by its future-orientedattitude. Havingbeen involved inscenario planning when employedby SEMA Consulting Group duringthe 1970s, Godet is now Professorof Strategic Prospective at theConservatoire National des Artset Métiers and Director of theLaboratoire d'InvestigationProspective et Stratégique, Paris.He is the author of From Anticipationto Action: A Handbook of StrategicProspective, published in 1993.

La Prospective''La Prospective is neither forecastingnor futurology, but a mode ofthinking for action and againstfatalism," writes Godet. It in volveslooking far into the future on a broadfront, as well as in considerabledetail; it involves risk, because wemust change and adapt in the lightof what we foresee; and it is ahumane process, intended toimprove our situation and, byextension, the lot of mankind. LaProspective does not pretend to makean uncertain future certain, but heargues that it does help to highlightthe çhoices we can make todaygiven various possible futures. Thebenefits of the possible futures lienot so much in their accuracy but inthe process of involvement with it,and whether they prompt the rightdecisions to cope with them.

As the future becomes ever moreuncertain and complex, and the paceof change accelerates, organisationsneed to respond not just by reactingto change, but by anticipating it -indeed by provoking it. "The fasteryou drive, the further your headlightsmust shine." Additionally, asstructures and patterns of behaviourbecome more complex, the inertia to

be overcome in order to change bothof them increases. Fatalism, saysGodet, passively letting the futurehappen, is no longer an option.

He points out that forecastsfrequentry go wrong because thedegree of technological change hasbeen exaggerated, and the degree ofinertia understated. He also observesthat managers are not known forusing their powers of anticipation,believing as they do that this is anunnecessary luxury when things aregoing well. And when things are goingbadly, they react in short-term panic.

Dismissing forecasting as too proneto a quantitative approach, foresightas being insufficiently proactive,and futures studies as being toobroad in scope, Godet espousesthe merits of "strategic prospective"as an exploratory, long-range andimaginative process.

Transforming anticipationinto actionPeople are far more likely to act onan idea if they've thought of itthemselves, or at least think thatthey have. The corollary of this isthat if people don't buy into an idea,they won't do anything about it.People think rationally andemotionally, so for action to occurwe have to appeal to both aspects oftheir thinking. Similarly scenarioplanning depends on both intuitiveand logical thinking.

There is always too much data, saysGodet, yet it is never complete.Models are never wholly satisfactoryas a means of processing that data,and interpretation is necessarilysubjective. But credible resultswhich survive different assumptionsand models are possible - and themajor benefit of the process is to getpeople thinking and talking.

Godet outlines four computer-basedtools to stimulate imagination anda sense of ownership, which, heclaims, are simple for clients to use.

• Use futures workshops andMICMAC to classify the keyvariables

• Use historical studies andMACTOR to assess the trends andthe actors' strategies

• Use morphological analysis andDelphi techniques to filter out anyunlikely scenarios

• Use multicriteria analysis and theMULTIPOL method to generateand screen options

*The acronyms MICMAC,MACTOR, MULTIPOL and SMICrefer to specific computerprograms developed by Godet.Morphological analysis is asystematic technique for breakingdown a problem into itscomponent parts andrecombining them in as manyways as possible. Details of theDelphi technique can be foundon page 25.

MICMAC, for example, is a methodby which the interrelationshipsbetween the variables can behighlighted, and the complexmultiple interactions between themassessed in a more systematic waythan is possible with a simplifiedapproach. A database of variables isconstructed from which a matrix -plotting their influence anddependence on each other - can becreated. This analysis preventsundue emphasis being placed on thestatus quo, and helps users to resistuncritical extrapolation of the pastinto the future.

The MACTOR method then helpsthe scenario builder to look at theways in which the actors - thehuman beings involved, whether asindividuals, companies, industries,or countries - converge or divergeover a set of issues or objectives.It is used to show the effects ofdifferent strategic influences. SMICthen helps to estimate probabilitiesof different combinations ofhypotheses or events occurring.

Issue 22 1999 The Antidotefrom C|S|B|S www.tlieaiitidote.co.uk

His scenario methodA scenario, says Godet, is "adescription of a future situation andthe course of events which allowsone to move forward from theoriginal situation to the futuresituation". Scenarios are "not a futurereality but a way of foreseeing thefuture". He distinguishes betweentwo types of scenario: an exploratoryscenario in which the past andpresent trends are extrapolated intoa likely future; and an anticipatoryset of scenarios which incorporatesdifferent visions of the future. Hismethod of generating scenariosin volves four linked steps:• analysing Systems• reviewing the past• defining the strategics of those

involved• adding detail

The hypotheses on which thescenarios are based must beappropriate, consistent and likely,but scenarios can be defined as'possible' (everything that can beimagined), 'realisable' (everythingrealistic), or 'desirable' (possiblebut not necessarily realistic).

Figure 1 illustrates the sequencefollowed in creating scenarios andgenerating the strategies that flow

Using probabilitiesGodet acknowledges the distastethat many planners have for usingprobabilities, but makes a case fortheir usefulness by citing his workwith the French iron and steelindustry. In an article for LongRange Planning, co-authored withFabrice Roubelat in 1996, heexplains how six scenarios wereconstructed, each based upondifferent combinations of threehypotheses: weak economic growth,strong envirornmental constraints,and strong competition from othermaterials. The scenarios were:

* Black - weak growth of GNP,strong competition from othermaterials

• Gloom -weak growth ofGNP,weak competition from othermaterials

• Trend driven - continuation ofthe current situation

• Ecology - strong environmèntalconstraints

Figure 1.Godet's scenario method

• Optimistic steel - strong growthof GNP, competitivenessfavourable to steel

• Optimistic plastic - strong growthof GNP, competitiveness

. favourable to other materials

Expert assessment of theprobàbilities of earchof thehypotheses occurring, andsubsequent computer processingof those, lead to the realisation thatin total they accounted for only 40%o{ the possibilities, Reassessmentof the possible combinations ofhypotheses unearthed three hithertouncônsidered ôr discountedpossibilities. These were:

• Black ecology - weak; growth inGNP, strong environmentalGonstraints, strong competition

•\ with other materials (dismissedinitiàlly as an improbable luxury,and therefore not worthconsidering)

• Green steel - weak growth in GNP,strong environmèntal constraints,weak competition with othermaterials (dismissed for the samereason)

• Green plastic - strong growth inGNP, strong environmèntalconstraints, strong competitionfrom other materials (dismissedinitially as unlikely, as steel wasconsidered to be moreenvironmentally friendly - butthe possibility of recyclable orbiodegradable plastic had beenignored)

These three hitherto uncônsideredcombinations of hypotheses eachturned out to be more likely thanany of the first six, and accountedfor thë missing 60 % of possibleouteomes, So probability analysismay not be useful as a decisioncriterion, argues Godet, but it canbe helpfuul in exposing new avenuesworthy Of further investigation.

www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22

HIt wïll be years - notin my time - before awoman wiïl becomePrime Minister."

M ARGARET THATCHER 1974

"I have travelled thelength and breadthof this country andtalked with the bestpeople, and I canassure you that dataprocessing is a fadthat won't last ontthe year. "

BUSINESS BOOKS EDITOR

AT PRENTICE HALL 1957.

from them. Godet considers from his experi-ence that this approach has "stimulated strategicthought and communication; improvedflexibility of response to uncertainties andbreakdowns; and reoriented policy options".

Inappropriate use of scenariosJust as the use of the word 'scenario' can eonferundeserved respectability on a combination ofhypotheses, so it is unnecessary to constructcomprehensive scenarios for each and everyeventuality. Eventualities of low probabilitysimply do not warrant the time spent on them.

There is also a risk of using scenariodevelopment as entertainment for managerswho are unskilled in the process, says Godet. Inparticular, failure to ask the right questions andformulate the key hypotheses properly rendersany resulting scenarios useless, and the modeloutlined in Figure 1 can prove invaluable, hebelieves, in ensuring rigour and eliminatingcontradictions.

Scenarios should be clear and easy to read,otherwise users of the scenarios tend tomisunderstand or reject them, and the wholescenario effort is wasted. Attractive scenarioswith catchy titles to capture the imaginationmay have little more use than as pieces offictional entertainment.

Attempts have been made by some futuriststo incorporate scientific techniques from otherfields, such as bifurcations or chaos theory.But transferring such techniques from one fieldto another is fraught with complications andrarely proves useful, he argues.

Often the scenario approach is inappropriatebecause of the number of people required orthe time needed to make it work - perhaps asmuch as 18 months. Godet suggests that it isbest to establish in advance what can beachieved in the desired timeframe. Five orsix scenarios is usually the maximum numberto consider, so it is ail the more important toensure that the key variables, trends andstrategies have been properly thought through.

Finally, projects should be limited to a periodover which it is possible to keep the scenario-building team together, as frequent changes ofpersonnel have an adverse effect H

References: Michel Godet and Fabrice Roubelat, "Creatingthe Future: The Use and Misuse of Scenarios", Long RangePlanning (Elsevier Science Ltd), Vol 29 No 2, 1996; GUIRingland, "Scenario Planning: Managing for the future",John Wiley &Sons Ltd, 1998, ISBN 0-471-97790-X, £19.99HB; A. Khalifa and P. Bennett, "Incorporating Conflict intoScenario Building Process: An Outline of a GameTheoretical Approach", workingpaper ref 94/11, 1994,Dept of Management Science, University of Strathclyde.

COMMENTAt first sight, Michel Godet's approachsounds similar to Peter Schwartz'smethodologies (page 11 ) and not toodistant from Pierre Wack's views (page 9).

|| However, there are marked differences.Godet includes significant use of computer-based tools to enhance the team'simagination, intuition and logic. And healso argues the case for using probabilities- at least in one part of the proceedings.

Godet's use of computer-based tools is a farcry from Wack's emphasis on developing adeep and intimate understanding of theforces at work. A computer whizzingthrough the calculations may indeed beable to handle much more complexity andsave you time, but it also removes theneed to personally and painstakinglyunpick the interaction between largelyunseen forces and key uncertainties. It isthis process that both adds to learning andprovides remarkable insights.

The emphasis on experts also differsfrom Wack's and Schwartz's search fornon-expert thinkers, often on the fringe.Schwartz recounts Shell's scénario studyof the Soviet Union in 1982-83 which

identified that dramatic change would beafoot if a virtually unknown man at thetime, Mikhail Gorbachev, came to power.Shell often presented its global scenariosto 'friendly' governments and everySoviet expert, with one exception, thoughtthey were mad. The CIA is reported tohave said, "You really don't know whatyou're talking about. You just don't havethe facts." Sobeware, experts alone maybox you into a 'current conventionalwisdom' corner.

On the other hand, Godet's emphasis onthe need to avoid a fatalistic approach -the passive acceptance of the future - andhis recognition of the key role of'actors'(in whatever form) are critically important.So is his emphasis on communication,debate and the use of causal logic. He alsourges scenario planners to use commonsense, acknowledging that what he calls"the prevailing forces" are less than ideal,and that most decision makers want ascenario project completed too quickly.Godet's thinking is on the grand scale,with its talk of "humane process","fatalism"and "the lot of mankind". Dabblers beware!

Issue 22 1999 The Antidote from C\S\B\S www.theantidote.co.uk

Using scénarios to develop theright resources and capabilitiesA German approach to "scénario management9 based on future trends

Juergen Gausemeier is Professor of ComputerIntegrated Manufacturing at the Heinz NixdorfInstitut, University of Paderborn in Germany. An

article written with researchers Alexander Fink andOliver Schlake in 1998, "Scénario Management: AnApproach to Develop Future Potentials" summarises hisviews on scénario development. "Enterprises", he writes,"should not look only for one visionary view, which ismost likely to correspond with the expected view, butinstead they should try acquiring various views thatdescribe the whole 'window of opportunities'."

Différent needsOrganisations in the past used to be able to survive bymanaging cashflow and profitability, whereas today theymust hâve the resources in place to ensure futuresuccess: "precontrolling" their "success potentials", asGausemeier puts it, ensuring that in the future they willhâve the right new products, new markets and newtechnologies. In his view, stratégie management is ailabout controlling the balance between currentperformance and future potential, and about recognisingthe need to assess success in terms of benefits todifférent groups of stakeholders.

The rôle of scénariosScénarios are a way of helping organisations to reducethe uncertainties inhérent in developing the right"success potentials" in time to retain competitiveness.

Gausemeier's approach to scénario management is basedupon two strands: Systems thinking and multiple futures.The first emphasises the need to consider an organisationas one élément in a complex System - "a sub-systemwithin an overall System" - which is subject to manydifférent interrelated influences, which in turn aresubject to changing trends. "Enterprises hâve to think interms of linked influences." The second strand recognisesthat predicting the future is an impossible task, so a singleprédiction makes no sensé. Creating multiple futuresthrough scénarios enables executives to incorporate thenecessary variety of possible visions into their stratégiethinking and décision making.

A typical scénario projectGausemeier's approach is based on trend-impact analysis,in which key factors are projected forward under différentassumptions, creating realistic visions of the future.Typically a project is a five-stage process: préparation,field analysis, projection, development and transfer.

1. PréparationThe basis of the scénarios must be established bydefining the décision field under considération. As anyscénario project is intended to assist in the making ofbusiness décisions, it must relate to a key décisionregarding, say, a new product or technology. Figure 1illustrâtes both the décision and scénario fields for amanufacturer of automatic teller machines (ATM).

Figure 1: Décision field and scénario field (adapted from Gausemeier)

www.theantidotc.co.uk TJie Antidote from C|S|B|S 1999 Issue 22

Scénario field:Environment oftheATM-manufacturerThe scénario fieldbasicaily includesexternal factorswhich cannot bedetermined by theATM manufacturer.

Decision-field:ATM-manufacturerThe décision fielddescribes what ascénario project ismeant to develop

External factorsExternal factors are part ofthree environment areas:

industry

industry environment

global environment

Décision fietd éléments

mission statement

core compétences

product program

market stratégies

technologies

Détection of relevant key factors byanalysis of interconnections betweeninternai and external factors...

Figure 2: The process of scénario création

2. Fiéld analysisFigure 1 highlights the multitudeof influencing factors at work, bothinternai and external. For instance,the external factors can relate tothe industry itself (eg directcompetitors), the industrialenvironment (suppliers, customers,etc) or the global environment(technology, économies, societalshifts etc). Figure 2 illustrâtes theprocess of scénario création, with amyriad of influences being identifiedby, for instance, brainstorming.Gausemeier suggests that threetypes of scénario field can bedeveloped: external, internai orwhat he calls "Systems" scénarios.This latter connects internai andexternal factors and seeks to capturetheir interrelationship.

An influence analysis can then beundertaken to assess which are thekey factors at work. Thèse becomethe focus for scénario création.Figure 3 shows an influence matrixwhich illustrâtes, for example, thedegree to which home shoppinghas a major impact on the use ofcrédit cards in the ATM market.

By grading each factor's influenceon every other factor, a grid can bedrawn up to help détermine thecritical influences that need to beconsidered.

3. ProjectionThis is the key part of the créativeprocess as shown in Figure 2, witha time horizon being deflned forthe scénarios and each influencing

...description of several possibledevelopments of each of them...

factor projected forward to thechosen time horizon. Gausemeiersuggests that each individual factorcan be developed in up to threedifférent ways. This is importantbecause it is not just probableprojections that are of interest, butextrêmes too. It is thèse that willhelp to define the "window ofopportunity".

!

...and finally grouping of them forscénarios free of contradictions.

4. DevelopmentCombinations of projections,"projection bundles", need to bechecked for consistency. Forinstance, in the ATM example,cashless money transfer isinconsistent with no increase inelectronic bank services. Thiséliminâtes many theoreticallypossible combinations, and the

Figure 3: Scénario field analysis

.Issue 22 1999 The Antidote from C|S|B|S www.tlieajitidote.co.uk

remaining projection bundles areassigned to a suitable number ofscénarios through "cluster analysis"- clustering similar attributes. Thenumber of scénarios chosendépends on the complexity of thefuture situation and the degree ofvariety within the projections. Manyscénarios will share basicpreconditions, and the descriptionscan be developed from that basis toaccount for the effects of différentdisruptive factors, différent degreesof robustness and sensitivity tochange.

5. TransferEach scénario generated bythis process has conséquencesfor the business, each highlightsopportunities and threats of varyingplausibility. Organisations must thenincorporate thèse aspects into theiroverall strategy. How they do so is aculture-based issue dépendent uponwhether they are planning-oriented(anticipating forthcoming e vents);responsive (reacting to unforeseenchanges); or proactive (anticipatingand shaping the future). Gausemeierargues that, using his approach,companies can either plan aroundone référence scénario (focusedplanning), or plan on différentscénarios (future robust planning).The resulting variety of possibleapproaches is illustrated in Figure 4.

Other aspects of scénariomanagementGausemeier suggests that theprocess of scénario création andmanagement he describes ties inwell with other modem stratégieapproaches. "Mission statementsoften include future potentialsthat show the value that everystakeholder can draw out of thisvision"; core compétences areclosely linke d to "success potentials"and help direct how strengths canbestbe utilised. Concepts of productportfolio management also link wellwith scénario analysis.

CONCLUSION"In order to deal with uncertaintiesand to préserve their compet-itiveness, enterprises must focustheir stratégie thinking to morethan only one simple and allegedprognosticable future," writesGausemeier. He argues that scénariomanagement is a powerful and

Figure 4: Main approaches for scénario transfer

practical way of constructingstratégies that are robust enoughto withstand a variety of différentfutures. Most of ail, it forcesmanagers to think ahead M

Référence: Juergen Gausemeier, AlexanderFink and Oliver Schlake, "ScénarioManagement: An Approach to Develop FuturePotentials", Technological Forecasting andSocial Change, Vol 59, 1998, Elsevier ScienceInc.

COMMENTDespite Gausemeier's claim thathis is a trend-impaot approach, thisfeels awfully like a cross-impactUne of attack - at least as definedon pages 7-8! But, in a sensé, that is „by the way. While he does not usethe term, what he is arguing is thatscénarios can be used for theresource-based view of strategy.This is an emergingbody ofthinking about strategy, which we .covered extensively in Issue 17of The Antidote, pages 6-11 (seewww.theantidote.cQ.uk/articles/rbvstrategy). See also pages 4-6 .inthislssiie.

The point is that in a fâst-movingworld, how can yoù work out theresources anii câpaMLîties thatyou need to develop how so thatyoù can compete successfully inthe future? While applicable .Worldwide, it no doubthasparticular résonance in Germanywhere thè Mittelstand, or mid-sized

company, has been the long-runengine of growth. Manufacturing-and engineering-oriented, thisiswathe of, often family owned,companies faces a less clear futurein the présent business climatethan it has at any time in the lastÔOyears. ^

Gausemeier'3 suggested approachis eîaborate arid complex, thoughhe has a particular process foreach sfep of the Wy. As such, itrepresents a mechanistic rathertriananôpenlyintuitiveapprbacii ,to scénario création; If this appeaïsto you, Ms Original article describesin quite fine détail wjïat jon needtc\do. Repririt rèquests foç thearticle srîould bè àédî éskè$, ïoA. Fink, UniversitaJ Paderbô|n; :

Furstenallee 11; b33ÏQ2Padefborn, Gerrharty, or e-mail< afink@hni.uni-paderboni.d^ >/quoting the référence above.;

www.thcaiitidote.co.uk The Antidote from C|S|B|S 1999 Issue 22

Strategy based on thescénario with the greatestprobabilityConventions! one-dimensional planning is easyto communicate - buttraditional prognoses andmost probable scénarios cornetrue less often than plannersthink.

Safeguarded strategybased on the scénariowith the greatestprobabilityConventional strategy which issafeguarded by alternativescénarios.

Strategy based on thescénario with the greatestopportunitésPowerful but risky strategy toachieve the best possible results.

Strategy based on thescénario with the greatestthreatsRisk-avoiding strategy touse in Crisis Management

f . j£ _ s& p. m

Viirfiiticift^ thème

The différent méthodologies formanaging alternative futures fallbroadly into three catégories:

• Intuitive logic - a 'soft' methodof scénario development

• Trend-impact analysis - a'harder' methodology that triesto predict the future by lookingat the effects of trends

• Cross-impact analysis - alsoassociated with 'harder' forecastingtechniques. It involves expertsidentifying trends, potentialevents and conditions that mayaffect the likelihood of otherevents occurring. (For more détailon thèse catégories, please seedéfinitions on page 7.)

Examples of each are given below:

SRI (intuitive logic)SRI International (StanfordResearch Institute International,the Californian-based think-tank)first started work on scenario-basedplanning in the 1960s. Its currentintuitive logic process took shapein the late 1970s, following a majorrevision of its methodologyalongside Royal Dutch/Shell Group.The process assumes that business

décisions are based on a complexset of relationships among a numberof (mostly external) variables. Itdeflnes scénarios as "devices forordering one's perceptions aboutalternative environments in whichone's décisions mightbe played out".

SRI's methodology is decision-focusedrather than environment-focused andoccurs in a joint client-consultantworkshop. It has the advantages of:

• being simple and transparent,thus easy to put into practice

• being flexible and adaptable• identifying and clarifying issues• encouraging a high degree of

'ownership' of the final product

The six steps of the process are:

1. Deciding what stratégie decision(s)the scénario aims to address.

2. Defining the key décision factors- what the management needs toknow about the future in order tomake a better décision.

3. Analysing thèse key décisionfactors and mappingenvironmental forces at both

the micro (industry and market)level and the macro (social,économie, political andtechnological) level. The resuit is adetailed assessment of theinfluence each environmentalforce exerts on the key décisionfactors, and their uncertainty level,thus filtering the "relativelyunpredictable" from the "veryuncertain".

4. Developing scénario logics(differing views of the way theworld might look in future)which incorporate ail the criticalenvironmental forces anduncertainties. This step establishesthe basic structure of the scénariosand is seen as the core of thewhole process.

5. Describing the scénariosfrom the basic logical structures.Typically descriptions consist ofa two or three page story, a tableshowing scénario différences andsome quantification of the keyfactors. The scénarios are notconsidered 'optimistic' or'pessimistic': each présentsopportunities and threats to theuser organisation.

Figure 1 : SRI's process flow from scénarios to strategy

Issue 22 1999 T7zeA«M?tefromC|S|B[S www.theantidote.co.uk

îlire are i i i i f tttitr ïf- §«îlï|iiis, Swift ni pripriffaff

6. Deciding the stratégieimplications - participants usethe scénarios to help understandthe implications of futuredécisions and to assess therisk-reward of différent stratégieoptions (see Figure 1).

NCRI Future MappingMethod (intuitive logic)Developed by Northeast ConsultingResources Inc of Boston,Massachusetts. By the mid-eighties,scénario planning had become asomewhat cumbersome process.Future Mapping was an attempt toreturn to the simpler yet morerobust techniques of the 1970s.

Future Mapping has two basicassumptions:

• the shape of the future dépendson the activities of certain peopletoday

• striving for compétitive advantageresults in structural change inmost industries.

It uses two sets of tools:

Endstates, or snapshots- of anindustry at a particular point in thefuture (typically three to five yearsahead), created intuitively by theclient together with NCRI analysts.Usually written in sets of four orfive, they should be short (one page),high level, holistic and divergent.Each endstate set can contain amixture of différent technologiesand différent business models.

Events, or "spécifie, observablemanifestations of a key trend orissue", which hâve two importantcharacteristics. It mustbe possibleto tell that an event has occurred(by, for example, being able toexpress a tpend in terms of a dateand a happening), and for anyevent there must be people inthe industry who actually makeit happen. Usually written in setsof 150 to 200, each event is enteredon a separate card and grouped bytopics to cover the full spectrumof issues facing an organisation.

The issues addressed by thèseendstates and events can be onany scale from geopolitical throughindustry, company, right down toproject or even function.

The Future Mapping Process hastwo phases:

• A working meeting tasked withproducing four to five endstatesand 150 to 200 events. A"conventional wisdom scénario"is built to help managers thinkdifferently and ensure that theirexisting decision-making contextis explicit. While the resultingmental model can be unpopularor uncomfortable, the discussionsbetween group members aboutthe likelihood or not of an eventoccurring can reveal disagreementsand ensure there is no misinter-pretation of information.

• For the second phase, the groupis divided into teams. Each isallocated an endstate and askedto think out a logical séries ofevents leading up to it (thushelping managers to understandthe relationship between certainevents and the endstate outeomes).Each team then has to concoctan industry and a businessdéfinition that they can build intoa compelling success story in thecontext of the scénario.

At this point, teams can go one oftwo ways:

• the common features approach,which highlights events commonto ail the scénarios. Thèse eventscan be used as leading indicatorsin a monitoring System. Thescénarios can be used for awarenesstraining for managers on how toreact in the face of unexpectedupheavals in the industry.

• the aggressive change approach,which allows companies to beagents of change. Each manageris asked to rank endstates in termsof desirability and attainability;thèse scales can be used as thebasis for structured discussion onthe direction of the industry andthe organisation.

Shaping Factors-ShapingActors (intuitive logic)This method was developed by theEuropean Commission's ForwardStudies Unit and used for severalof their studies carried out in the1990s. Its basic premise is that theimplication of différent futures is

bound to affect people's behaviourtoday. For example, primitivehunter-gatherers considerablyincreased their chance of survivalby constantly thinking 'what if (asin, 'What if there's a sabre toothedtiger behind this rock?')

So-called foresight studies fell intodisuse in the 1970s and 80s so thereturn to think-tanks in the 1990swas welcomed. The ShapingFactors-Shaping Actors techniquediffers from the Delphi method towhich it is related in that it is lessformai and more adaptable, usingsmall groups of nominated experts.There are two stages in themethodology: fîrst identify theshaping factors and shaping actors,and then identify the main linkagesbetween them. (The Delphitechnique is explained in more détailon page 25 of this Issue.)

A typical project involves initialdata collection. Then the shapingfactors are identified - a list of issueslikely to be important in shapingfuture outeomes. They couldberégional, local or national; socio-economic, political or cultural;they could be hard or soft issues,including feelings. Next the shapingactors - the individuals or groupslikely to hâve an influence on theshaping factors - are listed.

Identifying the linkages between thefactors and actors takes place at anexpert workshop. The outeome isusually three 'intuitive' scénarios:one 'pessimistic', one 'optimistic'and one 'surprise free'. The wholeprocess is itérative - as eventsunfold, a second phase is oftenneeded and the whole processrepeated.

The strength of this approach toscénario building is its ability toinclude divergent opinions (whereasthe traditional Delphi method tendsto be convergent). Its weakness liesin the fact thatbecause relatively few•experts are involved, it can only be apartial view. The choice of expert isessential to the method's success.

Futures Group (trend impact)The Futures Group (a strategy andpolicy research consultancy based inConnecticut) first developed trendimpact methodology and is its best

www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 2.

"In ail lïkelihoodworld inflation isover. "

MANAGING DIRECTOR

OF THE IMF 1959

"The concept isinteresting and well-formed, but in order toearn better thon a 'G,the idea must befeasible."

MANAGEMENT PROFESSOR AT.

YALE UNIVERSITY MARKING

FRED SMITH'S PAPER PROPOSING

A RELIABLE OVERN1GMT DELIVERY

SERVJCE. SMITH WENT ON

TO FOUND FEDERAL E* PRESS

known exponent. A typical project hasthree stages:

1. Préparation• Define the focus of the scénario in terms

of what issue needs to be addressed, whatpossible future development needs to beexamined, what the future timescale is,what forecasts need to be made.

• Chart the driving forces. A brainstormingsession with the organisation^ key décisionmakers is held to identify the 100 to 150drivers essential to the system/environmentin the study.

2. Development• Construct a range of possible future

scénarios by systematically arrangingthe way key drivers can react together.Any that are implausible or outside thetimeframe are discarded.

• Select the alternative worlds to be detailed.Choose a small number (usually four)of thèse alternative worlds that cover mostof the major opportunities or threats.

• Prépare scénario-contingent forecasts.Identify which trends and events areessential for each of the selected alternativeworlds to happen, and project a time trend(either qualitative or quantitative) for each.

3. Reporting and Utilisation• Document the scénario by creating a simple

chart and description of each tocommunicate the assumptions andoutcomes to the people who will use them.Writing scénarios should combine theclient's detailed knowledge of the industrywith the consultante imaginativeprojections of possible futures. The resultsshould be vivid and convincing, and shouldchallenge assumptions about the future.

• Contrast the implications of the alternativeworlds. Each scénario is handed over to aninternai team headed by a senior stratégieexecutive who use workshops to prépare astrategy that would allow them to prosperin their future world.

• At the final workshop a "Strategy Merge"process is undertaken. Stratégies that workwell across différent worlds make up a coreor robust strategy - one that should beeffective in a number of possible futures.

BatteUe's BASICS (ci-oss impact)This computer-based scénario developmentand analysis methodology was developed byOhio-based consulting group Battelle in the1980s. BASICS (or Battelle Scénario Inputs toCorporate Strategy) uses a combination of:

• cross-impact technique, developed at theRAND Corporation and the University ofSouthern California

• BatteUe's computer-based algorithmformulated in Geneva

• an expert judgement methodology

Thèse are combined into a user-friendlyPC program.

A BASICS project has three steps:

1. Identifying the issues - what does theorganisation need to know, what questionsdoes it want answered? Thèse issues areteased out of a séries of group meetingswith client managers and Battelleconsultants, from which 20 critical factorsmight be identified.

2. Trend analysis - the client, helped by aBattelle researcher, then writes an 'essay'on each factor, describing its importance,immédiate history and current situation.Unlike other cross-impact analyses, theBASICS method allows for up to four likelyoutcomes for each factor. Thèse outcomesand the probabilities of their happening areproduced by the researchers based on theirjudgement.

3. Cross-impact analysis and matrix - theBASICS program is then run and a matrixproduced, with the critical factors on oneaxis and the alternative outcomes on theother. The matrix cells contain index valuesof how the occurrence of each outeomewould change the probabilities of ail otheroutcomes. Any différences of judgement inthe completed cross-impact are discussedand reconciled. The BASICS algorithmorganises outcomes with high probabilitiesinto sets that are internally consistent.From thèse, analysts can detect a clearpattern of the most likely outcomes, whichare written up in a report outlining the fourprincipal scénarios and delivered to theorganisation^ senior management.

D y n a m i c Scénarios (a différent way oflooking at scénario building which does notfit neatly into a methodology category)The fondamental concept behind dynamicscénarios is that the real world is an ever-evolving System, not a static set of conditionsthat can be charted on a matrix. Thecompétitive arena and the broader social andpolitical environment facing any organisation isboth complex (many variables to be consideredand a variety of relationships between them)and dynamic (différent types and rates ofchange occur).

Scénarios are one tool in the study of thatenvironment, another is the discipline ofSystems thinking - employed together, rapidlearning can occur. Décision makers areprovided with a methodology that enables themto identify and better undérstand the complex

Issue 22 1999 The Antidote from C|S|B|S www.theaiitidote.co.uk

relationships that are at the heart ofany System, and the dynamic natureof how thèse relationships change.

A typical dynamic scénario createdby a company to help consider futurestrategy consists of seven steps.

l.Generate scénario event ideas.Achieved by intelligence gatheringabout the issue in question,considering the expectations ofsenior management, and holdingfocus sessions with selected keyindividuals from the company(including some maverickthinkers). The sessions generatedues to the future in the form of60 to 100 event ideas.

2. Discover scénario dimensions.Related events are then groupedinto clusters. Each is given amémorable label (a word orphrase) and becomes a scénariodimension - 75 event ideas mightproduce seven to ten scénariodimensions. The focus sessionsare then repeated to give moreevent ideas and scénariodimensions. Duplicates areremoved to produce a complèteset of clustered events.

3.Develop divergent scénariothèmes.Thèse are based on what hasbeen learned about how eventssurrounding the issue in questioncould possibly unfold. The resultingscénarios (typically three to five)would be essentially différent. Asthe team works to assemble relatedideas into scénario thèmes, thefacilitators note any comments onrelationships between events andthen make sketches of therelationships. This starts theprocess of understanding thedynamiçjforces at work in theSystem under considération.

4. Discern patterns of behaviour.For each scénario thème,approximately ten events areidentified that appear important tothe thème's underlying logic, andthen the key variables associatedwith the events are considered.Thèse variables could be 'hard'(egfacts and figures), performancemeasures (eg sales growth rates,performance ratios),or 'soft' (egexpectations, confidence levels).

5. Diagram scénario structures.Some of the key variablesidentified will be common toseveral scénario thèmes andcan be linked in causal looprelationship diagrams. Thèse arethen joined to create one diagramrepresenting the whole System -a dynamic scénario generator orDSG - which is effectively amodel of the dynamics withinthe whole System.

6. Write the scénario scripts.With the DSG showing the outlineof the plot and the scénariothèmes adding content, the teamcan trace the effect of a change inone key variable (or criticaluncertainty) through the wholeSystem. For each of the plausiblebut distinctly différent scénariosalready identified, they thenproduce scripts in the form of atwo-page narrative which is clear,compelling, and which offersstratégie insights.

7.Assess stratégie choices.Distinctive stratégies are thendevised for alternative investmentand operating choices. Theirquality is tested in a dynamicscénarios matrix, in which rowsrepresent stratégies and columnsrepresent scénarios. At theintersections the conséquence ofeach strategy within each scénariocan be evaluated. No-risk stratégiesthat work in ail scénarios can beimplemented, no-go stratégies that.work in none can be eliminated.It is on those high-risk stratégiesviable in one or more scénariosthat the team has to work,reassessing them to ensure thattheir key variables and drivingforces are understood, then honingthem as potential stratégies,refining the scénarios, andassessing risk and reward.

Inevitably, step 7 will lead to theidentification of important newkey variables that need to be addedto the DSG, and the process isreiterated. Once the basic structuralrelationships between variables hâvebeen established, it is relativelysimple to assess the effect of adramatic change in one criticaluncertainty on the whole System,and for new, plausible scénarios tobe created and conséquent stratégie

options devised. In the same way,new learning can effectively beincorporated into the System.

Simulation Models (a toolfor scénario anàlysis ratherthon a methodology)Scénarios open up a wide range ofpossibilities for exploring alternativesin our environment. However, anorganisation has to go further - it hasto be clear about those possibilitiesand commit to courses of action totry to ensure an effectiveperformance.

Computer simulation models ofscénarios can expose inhérentassumptions and help organisationsto prioritise variables. This makesit easier to sélect the fundamentaldrivers of future outeomes and tounderstand the relationshipsbetween them. Whereas peopleonly hâve the mental capacity tofocus on a few hypothèses of causeand effect in their business,computer simulation models hâvefar more scope for considering inter-dependencies and possibilities forexplaining results. They allowmanagers to dérive the implicationsof relationships by playing outcomplex interactions.

Using computer modelling withscénario anàlysis also adds value tothe process by providing a fullerexplanation of model relationships,revealing the implications ofassumptions and producingquantitative estimâtes.

Integrating computer simulationwith scénario anàlysis can beachieved in four steps:

1. Détermine the purpose of thesimulation. A computer modelessentially focuses on a particularissue. A concise statementexpressing this has to be writtenand the core variables impingingon the issue need to be identified.

2. Specify model structure.Specify the relationships betweenthèse variables and develop causalloop diagrams. Gather data toquantify relationships (which arethen turned into équations) andexpand the diagrams into a set ofcomprehensive computer-basedmodels of the whole business,

www.theaiitidote.co.uk The Antidote from C|S|B|S 1999 Issue 2

"I do not believe theintroduction ofmotor-cars will ever affect theriding ofhorses."

MR SCOTT-MONTAGUE

UK MEMBER OF PARLIAMENT 1903.

"Tkis is typical Berlinhot air. Theproduct isworthless"

THE HEAD OF BAYER'S

PHARMACOLOGICAL INSTITUTE

REJECTING FEUX HOFFMANN'S

INVENTION OF THE ASPIRIN IN 1 8 9 7 .

including fînancial models, models ofproduction, human resources, sales andmarketing processes, etc, throughout theorganisation.

3. Test the model to ensure it works.Use a wide range of inputs to check thatits outputs are plausible under a variety ofconditions. Testing is an itérative processwhich reveals what revisions are needed tothe model structure and équations.

4. Use the scénarios to help groups ofmanagers learn. The model can be usedfor analysing scénarios and testingalternative stratégies with larger groups ofpeople. Simulations allow managers toassess the impact of a variety of différentstratégies under différent scénarios. Aprimary output from this "exercisingscénarios" activity is implementation ofnew actions in the workplace.

IDON (a facilitation tool)The Idon Group's approach to practicalscénario building offers the chance fororganisations of ail sizes to create DIYscénarios using visual tools (whether magneticshapes on a whiteboard, or the same shapeson a computer screen). The kits of shapes andthe software are inexpensive and corne withfull instructions, enabling organisations tocreate their own well-defîned stories ofpossible future worlds, and to décide whatdifférent options for action there are in each.

A typical session creating and writingscénarios with a group using the Idontechnique would involve a facilitator and anIdon kit (whiteboard and pens, about 40magnetic hexagons, a PC with Idon software).In bare outline the steps are:

(i) clarify environmental factors(ri) create prototype scénarios(iii) generate multiple images of the future(iv) verify through environmental scanning(v) map décision issues(vi) apply scénarios to décisions

Although simple, the Idon technique isinherently powerful and its use isrecommended by a number of leadingscénario exponents, including ex-Shell

scénario experts Arie de Geus and Kees vander Heijden. They highlight Idon's emphasisand advice on facilitation, and the création ofa common language which brings together thethinking of a wide range of individuals withinan organisation. (See page 29 for more onKees van der Heijden, and Issue 10 page 35for more on Shell.)

Off-the-shelf scénariosMany industry associations and some strategyoriented organisations and institutionsproduce generic scénarios. Carried out in avariety of ways, they hâve the advantage ofsaving both cost and time, but are short on theshared learning and insightful moments thatoccur in actually creating scénarios. Industrygenerated scénarios also tend to be inwardlyfocused and are more likely to be based onthe 'lowest common denominator' rather thanto contain really radical alternatives •

Références: GUI Ringland, "Scénario Planning: Managingfor the Future", John Wïley &Sons Ltd, 1998, ISBN 0-471-97790-X, £19.99 HB; A. Khalifa and P. Bennett,"Incorporating Conflict into Scénario Building Process: AnOutline ofa Game Theoretical Approach", workingpaperref 94/11, 1994, Dept of Management Science, University ofStrathclyde; Liam Fahey and Robert M. Randall (eds),"Learning from the Future", John Wïley &Sons Inc, 1998,ISBN 0-471-30352-6, £29.95 HB; Charles M. Perrottet,"Scénarios for the Future", American ManagementAssociation Management Review, Jan 1996; D. H. Mason,"Scenario-Based Planning: Décision Model for the LearningOrganisation", Planning Review, Mar/Apr 1994, Vol 22 No2; Miriam Galt, Gary Chicoine-Piper, Nela Chicoine-Piper,and Anthony Hodgson, "Idon Scénario Thinking", Idon Ltd,1997, ISBN 0-9530421-0-3.

COMMENTClustered around the concept of eitherthinking^about or trying to reasonablypredict the future are a range of models.Many sound the same but are différent inprocess and typical outçome. Each has itsproponents and most hâve their advantages.What this says is that an organisation, andmost particularly the commissioningmanagers, must think through what theyare trying to achieve and what they are àbleto attempt. If, as a manager, you becomeinvolved in a scénario process, it also helpsto recognise what that process is. Don't letconsultants pull thé wool over your eyes!.

Issue 22 1999 The Antidote from C\S\iï\S wvw.theantidote.co.uk

Forming JudgementsWhat do structurée! group techniques and electronicmeeting Systems contribute to scénario planning?

No one can predict the futurewith any certainty but onecan reach some sort of

conclusion about a range ofouteomes that are more or lesslikefy. In order to conclude what thefuture might hold for a business,industry, even country, one has touse one's judgement. The moreinformed that judgement is thebetter, and the greater the numberof informed minds involved inmaking that judgement, the better.Or at least in theory. Is thejudgement of a group of expertslikely to be more accurate than anindividual expert? Or is the grouponly as good as its mostknowledgeable member?

Problems with groupsGène Rowe, from the Departmentof Psychology at the University ofSurrey in the UK, wrote an évaluationof group decision-making techniquesin Forecasting with Judgment. He citesresearch that shows that unfacilitatedgroups often perform below theirpotential. For example, individualswithin the group may:

• be just as likely to be swayed by apoorly informed team member asby a knowledgeable one

• ignore the member who isunconfident but knowledgeable

• be motivated by 'political' or selfinterest

• end up cgnforming rather thanreaching consensus

So how can group décision makingbe improved? By using a number offormalised structuring techniquesthat eut out négative interaction andcontrol information flow. One suchtechnique is the Delphi process.

THE DELPHI TECHNIQUEThe Delphi technique for forecastingand décision making was developedin the late 1950s at the RANDCorporation in the US. It was named

after the oracle in the Greek city ofDelphi. The citizens would go to theTemple of Apollo to ask the priestessabout their fate. Her utterances werewise but ambiguous.

Delphi was created as a statisticalmethod of obtaining consensus froma group of experts. It is essentiallyan itérative process, in whichthrough a séries of questionnairesindividuals can modify theiropinions in the light of controlledstatistical feedback provided byfacilitators. It allows individuals toexpress their opinions privately.

The processThere are many variationsdepending on the context, but theprocess usually goes as follows:

1. The first round is unstructured.Members of a panel of expertswrite down what they judge to belikely future events, or issues theysee as important.

2. The facilitators assemble thèseinto a cohérent set of scénariosand give them back to thepanellists as a structuredquestionnaire for them to rank bygiving quantitative estimâtes oftheir likelihood or importance.There is also opportunity foranonymous comment.

3. The questionnaire is analysed anda statistical summary of the wholepanel's opinions is fed back topanellists for them to consider andalter their earlier estimâtes, if theywant.

4. The questionnaire is re-presentedand re-analysed over a séries ofrounds until people hâve stoppedmaking changes to their estimâtes.Quantified group consensus is thendeemed to hâve been reached,with each item represented by themédian response.

EvaluationSo is Delphi just a technique forachieving consensus? Delphi isadopted on the basis that its use ofaggregated expert opinions willimprove forecasting. As Rowesuggests, however, it is difficult totell whether the decreases invariance as the cycle progressesgenuinely reflect consensus. It maybe that panellists' opinions convergeas a resuit of seeing what is revealedas their peer group's norm. It maybe, he says, that they alter theirwritten estimâtes (ie conform) butnot their opinions (consensus).

Are itsforecasts or judgements moreaccurate than they would hâve heenotherwise? Assuming a number ofcaveats - for example, that the levelof expertise is both high and in therelevant area, that the facilitating isgood, and that the purpose of thetask is appropriate - then, accordingto Rowe, most studies comparingDelphi's effectiveness with that ofother interacting groups generallyshow that the technique can addvalue, and that it can be accurate,at least in the short term.

But some versions of Delphi, arguesRowe, are of more limited valuethan others. The statistical feedbackoften consists of a single figure, amédian value, and so can only showparticipants where the norm lies.One study, for example, found thatwhen a Delphi group was givenfeedback on participants' reasoning,its outeome was significantly moreaccurate than the group not giventhat information. It may be, Rowesuggests, that this is due to the shiftin less firmly held opinions amongthe "swingers" (the less expertpanellists) towards the more stableopinions of the "holdouts" (the moreexpert panellists). But it seems that,on the whole, using arguments infeedback may lead to greateraccuracy.

www.lheantidote.co.uk The Antidote from C|S|B|S 1999 Issue 2

ELECTRONIC MEETING SYSTEMSIncreasingly sophisticated computer technology meansthat some of Delphi's limitations - maintaininginteraction and feedback without surrenderinganonymity, for example - can be overcome. Thèseelectronic techniques are referred to as "group décisionsupport Systems" (GDSS) or electronic meeting Systems(EMS), depending on the purpose of the task.

Such Systems may include teleconferencing and softwarethat allows electronic commenting, décision documenting,vote tabulation and display, and statistical programs likedécision analysis. It allows users to develop, as Rowe putsit, "a shared understanding of their problem", enablingthem to corne up with "a clear plan of action". Moreover,participants can 'discuss' sensitive issues without having toreveal who is saying what.

Depending on the software being used, such electronicSystems can be also be used for developing and analysingscénarios. In an article in Long Range Planning, RobertBlanning and Bruce Reinig* describe how EMS worksand provide a case example of EMS in use (see grey box).

Four pros and a conAccording to Blanning and Reinig, there are fouradvantages of EMS:Anonymity - participants need notbe identifîedInteraction - participants can enter into discussions witheach otherEfficiency - participants can enter their comments inparallel and analysis takes place in real timeDocumentation - sessions are recorded for later analysis.

However, they point out that EMS relies not only onfacilitators who are very familiar with the software, butalso on participants who are comfortable using akeyboard and mouse - still a potential problem withsenior managers.

The setupAs Blanning and Reinig make clear, EMS is only a tool tosupport the process of constructing scénarios: "it is notintended to automate it". The authors go into some détailbut, broadly, an EMS would normally in volve:

• a PC for each participant• a local area network Connecting the PCs• software for integrating the PCs and managing the

meeting. ,

The software would include:

• a commenting tool - allowing participants tobrainstorm a list of significant events they believeshould be included for considération, and to entercomments, anonymously but for ail to see

* Robert Blanning is Professor of Management at VanderbiltUniversity, Nashville, Tennessee, US. Bruce Reinig is AssistantProfessor in the Department of Information and Systems Managementat Hong Kong University of Science and Technology. Their work onEMS took place while Professor Blanning was on leave at Hong KongUniversity of Science and Technology.

• a voting tool - allowing participants to enter numbersrepresenting the strength of their préférences,and to vote on "the probability that the events willoccur and the degree to which the events are favorableor unfavorable" for the organisation, industry, etc.

Getting goingThe authors propose three alternatives around which theevents of a scénario mightbe organised:

• optimistic - not utopian but more favourable thanunfavourable

• pessimistic - not disastrous but more unfavourable thanfavourable

• realistic - relevant and most likely to occur

An event can be optimistic and realistic - ie bothbénéficiai and likely to happen - or pessimistic andrealistic, but it cannot be both optimistic and pessimistic.

Participants are asked to put each possibility into oneof thèse catégories, with their reasons. From this thefacilitators draw up a comprehensive list of events andallocate them a number. Participants assign a probabilityscore (P) and a favourability score (F) to each item onthe event list on their screen. Thèse scores are averagedand plotted according to their event number onto anEvent Matrix - the horizontal axis representing theprobability of the event: the vertical, the degree to whichit is considered favourable or not.

Developing scénarios from the Event MatrixScénario construction, say the authors, "is an art, nota science". The rôle of EMS at this point is to helpidentify which events in the Event Matrix shouldappear in which scénario:

• the optimistic scénario will contain the high P/high Fevents, and the médium P/high F events

• the pessimistic scénario will contain the high P/low Fevents, and the médium P/low F events

• the realistic scénario will contain ail the high P events

Some events will not appear in any scénario - forexample, those with a médium to low probabilityscore: they are judged most unlikely to happen.EMS itself does not allow any discussion of therelationship between events (ie how one might leadto another) - it is up to the facilitators to do this as theyconstruct the 'story' from the events that make up thescénario. The authors point out that although the P andF scores will not appear in the scénarios themselves,the scores do suggest how the events should be describedin the scénarios.

ConclusionBlanning and Reinig conclude the EMS is "useful indiscussing sensitive topics", as in the case of the HongKong business executives (see box) where anonymityallowed them to express their views more freely thanthey might otherwise hâve felt able to do. Using EMS todevelop scénarios can be very helpful "where économieopportunities, political restrictions, and substantial riskscorne together".

Issue 22 1999 The Antidote from C|s|B|S www.theantidote.co.uk

But to go back to Gène Rowe, hefound that the various studies intothe effectiveness of Delphi and EMScame up with mixed results - somewere more positive than others.There are so many factors to betaken into account (for example,"influential forecasters may be ableto effect events so that theirforecasts are more likely to occur")that the use of such techniques isitselfamatter ofjudgement M

Références: Gène Rowe, "The Use of StructuredGwups to Improve Judgemental Forecasting", in"Forecasting with Judgment", (eds) George Wrightand Paul Goodwin, John Wiley &Sons Ltd, 1998,ISBN 0-471-97014-X, £45 HB, Roben W. Blanmngand Bruce A. Reinig, "Building Scénarios for HongKong Using EMS", Long Range Planning (ElsevierScience Ltd), Vol 31 No 6, 1998.

COMMENTIn looking at the Delphi technique,a long-established methodology,and EMS, its computer-aidedcounterpart, we hâve corne a longway from the type of scénariosenvisaged by Pierre Wack andothers (see pages 9-16). IndeedDelphi is essentially a forecastingtechnique. But so much dépends onwhat 3 ou are looking for.

The Hong Kong example illustrâtesan excellent way of quicklycapturing ideas and possibilitiesthat can be put to immédiate use.But it can onfy just be graced withthe term 'scénario'.

The deeper, more complexdiscontinuities remainedunexplored, Although there ismention of tension between Chinaand Taiwan, where is the possibilityof an Asian fînancial collapse? Howdoes China's protracted entry to theWorld Trade Organisation play out?The greatest danger of limitedscénarios is that people think theyhâve really thought about thefuture. Sadly that takes a lot of timeand effort. The Hong Kongscénarios looked inward rather thanoutward - not surprising given thecircumstances - but that is part ofthe problem that scénarios areintended to overcome.

The business future of Hong KongIn Octôber 1997, 16 Hong Kong business executivestook part in a 50 minute session using EMS to createscénarios around the business future of the région.Some three months earlier, at midnight on 30 June1997, Hong Kong had ceased to be a British DépendentTerritory and become instead a Spécial AdministrativeRégion of the People's Republic of China. This had madeits future very uncertain.

There were to be three commenting rounds - onefor drawing up a list of events that would be désirablefor the future business environment of Hong Kong,one for pessimistic events, and one for realistic events.Participants were presented with a screen for eachof thèse alternatives, laid out for thémto enter theirviews (see Figure 1).

Figure 1: Comments on the optimistic scénario

www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 2:

Figure 2: Using the Event Matrix to construct scénarios

The EMS commenting toolallocated a number to each idea asit was entered. The facilitators thenconverted thèse into nùniberedevents. For example, the commentnumbered 8 on the screen inFigure 1, 'More talents will corneback to Hong Kong winch makesHong Kong successfur, wassuccinctly rephrased to become:'Talented HK people who hâve leftwill return' in the session's listof events .

Participants were presented with ascreen listing ail the events (52 inthis case) so that they could entertheir estimâtes of the likelihood ofeach event occurring and whetheror not it would be good for thebusiness future of the région.(For example: 0 = will not happen,5 = 50% chance, 10 = will happen;0 = very unfavourable^5 •= neutral, 10 = very favourable.)The voting tool calculated themean for each event and plottedthèse onto the Event Matrix.

Three scénarios were thenmapped onto the Event Matrix(see Figure 2). The facilitatorschose approximately ten events

per scénario, with some overlapbetween them.

The skeletal scénarios the authorsput forward went as follows:

The optimistic scénario Income taxremains low (event #1) and HongKong remains economically stable(13), with capital investmentsprotected (48). The governmentinvests more in schools (22), leadingto an improvement in children'séducation (20). The région is in closecontact with businesses in China (6)and becomes an important gatewayfor investing there (47). It couldevenbecome the financial centre ofChina (21). Indeed, China is a majorworld économie power (43), so thatHong Kong is the most importantcity in Asia(15). ,

The pessimistic scénarioEconomically, Hong Kong facesincreased compétition from othercountries in Asia (36), and the costof living goes up (32). Foreign fundsgo to the rest of China rather thanHong Kong (29) and businessesmove there to make use of itsworkforce (34). Socially, Hong Kongbecomes overpopulated (52) and the

gap between rich and poorincreases (39). And politically,China intervenes in Hong Kongpolicy making (27, 45), and there isconflict between China and Taiwan(35). Corruption is on the increase(31), with less political freedomand freedom of speech (44, 28).

The realistic scénario There is acloser relationship with businessesin China (6), and more of them arelisted on the Hong Kong StockExchange (3), which raises capitalfor them (16). Income tax remainslow (1), but there is more foreigndirect investment in China (14) andso many Hong Kong factories movethere (51). Mandarin is morewidely used in Hong Kong (50).

Less likely but still realistically,there will be fewer disputesbetween Britain and China (8);Hong Kong is financially stablewith high reserves (13); and moreis invested in éducation (22). Therégion faces increased compétitionfrom other Asian countries (36)and becomes more reliant onChina's economy (37), And thegap between rich and poorincreases (39).

Issue 22 1999 The Antidote from C\S>\B\S www.theantidote.co.uk

Putting scénarios atthe heart of strategy

How scénarios can be used to 'windtunnel' business ideas and stratégies:scénario planning explained

Kees van der Heijden is Professor of General andBusiness Management at Strathclyde Universityand is a visiting professor at Nijenrode University

in the Netherlands. Previously he spent 3£) years withRoyal Dutch/Shell, latterly as head of Shell's internaistrategy consulting team and then head of Shell'sBusiness Environment Division, responsible for scénarioplanning. His expérience of using scénarios in strategydevelopment is the basis of his book Scénarios: The Art ofStratégie Conversation.

Strategy as rationalistMany organisations adopt, unwittingly, the rationalistapproach to strategy formulation. Its main éléments arethat the organisation^ objectives follow the mission ofthe business, and stratégies are formulated to achieve theobjectives. The underlying rationalist principle is thatthere is a 'best strategy'. Often, the effects on theorganisation^ objectives are tested by best case/worstcase sensitivity analyses. Thèse are frequently referredto as 'scénarios' (see page 7). The organisation istherefore lulled into believing that it has explored the fullextent of its stratégie possibilités. In fact, very often, it isbusy refming aspects of a previously assembled strategy,while ignoring signais that the environment is changing.

Paradoxically, successful organisations that adopt arationalist approach are habitually those most susceptibleto an unforeseen shift in the environment in which theyoperate. The smoking wreckage of corporations thatignored the threat on the periphery of their restrictedfields of vision serve to remind us of the dangers of takinga half-hearted view of what might happen.

Strategy as processIn contrast to the rationalist approach, scénario planningbelongs to an entirely différent view of the process bywhich stratégies are formulated. First of ail, the thinkingbehind scénario planning runs entirely counter to theidea of a 'best strategy'. True scénarios are formed aroundmultiple futures, each equally plausible, chosen to reflectthe underlying uncertainties facing the organisation. Themain assumptions used in constructing each scénario arecontinuously assessed and the observations used to feedback into management activity.

Van der Heijden uses the analogy of the wind tunneltesting of a new type of aircraft. The performance of anaircraft design is monitored, and the results fed back intoredesigns. Wind tunnel testing is not a once-off activity.It is a continuous process that leads to incrémentalunderstanding and development of the positive aspectsof the design. Equally important is the sélection ofconditions under which the design or strategy is beingtested. The range of conditions must be adequately broad

to reflect the uncertainty of the environment in whichthe strategy is being tested. Too broad, and the strategywill become over-engineered and cumbersome; toorestricted, and the strategy will be vulnérable to somereasonably predictable conditions. As van der Heijdenputs it: "although a global nuclear conflict cannot beruled out, few planners will benefit from planningaround such an outeome."

Putting structures, not strictures, on thinkingScénarios provide the business planner with a means ofbringing together apparently unconnected fragments ofinformation into views of the future. To be effective,scénarios need to hâve their feet on the ground, but theirheads in the clouds. Scénarios that are too far removedfrom current reality will be seen as implausible. And, bythe same token, those that are too close to reality will notexpand the vision or imagination of the organisation.Van der Heijden illustrâtes how individuals develop theirpartly formed ideas into more concrète views by quotinga concept developed by psychologist Lev Vygotsky,câlled "scaffolding". Social interaction betweenindividuals engaged in thinking through the sameproblem provides a framework on which an individual'sthinking can be structured - a structure between theground and the clouds.

Stratégie conversationsIn the same way that individuals rehearse futureevents in their minds, van der Heijden suggests thatscénarios, properly constructed, can fulfil the samepurpose for organisations. The wind tunnel analogyreflects the process described by various observers oforganisational and individual learning. Observationsand reflections, based on concrète expériences, allowabstract théories and concepts to be developed.When tested, thèse concepts form the basis of newexpériences (see The Antidote Issue 10 pages 6-7 orwww.theantidote.co.uk/articles/kolbstyles.html).In organisations, scénarios built on the collectiveexpériences and inventiveness of groups of individualsare stronger than those developed by individuals.Scaffolding helps to give individuals a way in which theycan articulâte thoughts based on imperfectly formed tacitknowledge, within a structure offered by groupreasoning and expériences. The process also adds to theunderstanding of the group.

The importance of using groups to develop scénarios isillustrated by an observation he made in the mid-1980s.Van der Heijden recounts how, when he took onresponsibility for scénario planning in Shell, he decidedto find out why some scénarios had failed to inspire theorganisation. He consistently found that scénarios formedby planners who facilitated groups had succeeded, but

www.theantjdote.co.uk The Antidote from C|S|B|S 1999 Issue 2:

those that had been developed byplanners with preconceived ideas,had failed. The ingrédient necessaryfor success, a dynamic dialoguewhich van der Heijden calls "thestratégie conversation", is one of theprincipal ingrédients of usefulscénarios.

The Business IdeaManagers engaged in the stratégieconversation need a shared view ofthe nature of the business and whatgives it its distinctive character. TheBusiness Idea, as van der Heijdenputs it, expresses the distinctivecompétences of the organisation fromwhich the compétitive advantages ofthe organisation follow (see Figure 1).Through positive feedback loops,use of the distinctive compétencesand compétitive advantages generatethe financial and physical resourcesto perpetuate the advantagespossessedby the company (seeThe Antidote Issue 17 pages 6-11 orwww.theantidote. co.uk/articles/rbvstrategy.html for an explanationof current thinking on resource-basedstrategy).

Van der Heijden recommends theuse of facilitated workshoptechniques to extract perceptionsof the true nature of distinctivecompétences from managers andto obtain a consensus view of the"success plan" for the organisation.This then becomes the model, whichis tested against the conditionsoperating under chosen scénarios.

Evaluating stratégiesIf, under various scénarios, theBusiness Idea is lacking in someway, then work is needed toreinforce it by considering theaddition of new compétences. Thèsestratégie options can be grouped toidentify those th at strengthen thepositive feedback loop in theBusiness Idea. Ideally, this shouldresuit in a clustering of stratégieoptions with each set of optionsaddressing the principal concerns ofthe business. The quality of each inturn is then assessed in terms of howthey meet four main criteria:

Financial performance Does theoption meet the desired financialaims of the business?

Figure 1 : The generic Business Idea

Risk What sorts of risks are inhérentin each of the options whenmeasured against the conditionsprevailing under the selectedscénarios?

Stratégie fit Does the option makegood use of existing distinctivecompétences, or do thèse need to bedeveloped for the strategy to work?Van der Heijden makes the pointthat most Business Ideas are built upover a number of years. Thecréation of stratégies around newcompétences is less likely toproduce workable stratégies.

Cultural fit Although it is notimpossible to change cultures inorganisations, a strategy based onthe need to undertake radicalcultural change is almost certain tocontain higher levels of risk.

Van der Heijden favours the use of ascénarios/stratégies matrix in whichaspects of each strategy areevaluated against each of thèse fourcriteria. Although this invites areturn to the rationalist approach ofselecting a *best strategy', managerswho hâve been involved in theprocess of constructing scénariosand stratégie options are moreinclined to continue to 'wind-tunnel'the stratégies, seeking to optimisethe chosen stratégies and search fornew alternatives.

Strategy and imcertaintyThe one certain aspect of stratégieplanning is that the future cannot bepredicted. Given that the scénariosshould represent a range of equallylikely futures, the process of wind-tunnel testing should assess whetherthe range of stratégie options isadéquate to meet the conditionsbeing anticipated. Van der Heijdenquotes the four types of strategy thatdeal with uncertainty in différentways (originally identified by StevenSchnaars):

Robust stratégies are typically thosethat meet the circumstances across avariety of scénarios. Both the risksand returns are similarly modest.

Flexible stratégies are those thatseek to position the organisation toexploit a range of uncertain futures.Such stratégies seek to keep asmany choices as possible open forthe maximum amount of time.Thèse are best suited to veryuncertain futures and lendthemselves naturally to the useof option-based théories (see TheAntidote Issue 17 pages 20-22 orwww.theantidote.co.uk/articles/realoptions .html)

Multiple coverage stratégies alloworganisations to cover ail the likelyscénarios by simultaneouslypursuing multiple outeomes.

Issue 22 1999 The Antidote fromC\S\B\S wwAV.theantidote.co.uk

Understanding evolvingneeds in society

DistinctiveCompétences

CompétitiveAdvàntage

Resources

Entrepreneurialinvention

Results

Such an approach requires acceptance that some of thestratégies being pursued will be jettisoned in the courseof their development. They are not appropriate fororganisations with scarce or limited resources.

Gambling stratégies that are aimed at reaping abnormallyhigh returns from the émergence of a limited set ofoutcomes. Such stratégies are sensibly only adopted inthe knowledge that if the desired scénarios do notémerge, then lasting damage will not resuit.

Scénarios and cultureThough scénarios shed a penetrating light on stratégies,one of the great benefits they offer is what Kees van derHeijden refers to as the stratégie conversation.

Organisations that develop scénarios to test theirstratégies, by virtue of the itérative nature of the process,constantly revisit their stratégies. The process of strategycréation is one that involves people at many levels ofthe organisation, and the scaffolding of thoughts bringspeople together to articulate their tacit knowledge.Ail of this entails broader involvement in formulatingand testing stratégies than in those organisations wherestratégies are declared at senior levels.

There is évidence to suggest that the process ofarticulating tacit knowledge is a strong component oforganisational learning. Sharing the common view aidsorganisational cohésion and builds a culture thatis adept at learning and observing. Not only does thisimprove the organisation^ ability to pick up and takeaction on weak signais - the early warnings that apreviously rehearsed scénario is about to unfold - but itcréâtes the environment for inventive thinking.

There are warnings attached to the scénario buildingapproach, however. Without the appropriate controls andinterventions, the organisation loses cohésion bydeveloping increasingly fragmented views. At the otherend of the scale, too much identity with one set of viewsleads to group thinking (see http://www.csbs.co.uk/articles/sh8106.html). with conséquent loss ofinventiveness and diminishing levels of awareness.

Left to its own devices, an organisation will evolvetowards one behavioural type or the other. The rôleof management is to sensé the drift and bring theorganisation to a position where strong identificationwith stratégies is tempered with a désire to innova te.This is only possible in an environ-ment whereexpérimentation is nurtured and encouraged •

Références: Kees van der Heijden, "Scénarios: The An of StratégieConversation", John Wïley and Sons Ltd, 1996, ISBN 0-471-96639-8,£19.99; Kees van der Heijden, "Scénarios, Stratégies and the StrategyProcess", Nijenrode University Press, 1997, www.nijenrode.nl/library/publications/nrp/1997-01/1997-01.html. Steven Schnaars,"How to Develop Business Stratégies from Multiple Scénarios", in"Handbook of Business Strategy", W.D. Guth (ed), Warren, Goshamand Lamont Inc, 1986.

COMMENTAs is évident from this Issue of The Antidote, the-- . " ,nurnber of scénario méthodologies, and the litèrature,on them, abounds. In,part, that is because there .are--consultancy fées to be earned. However, what few . .writers on the subject do is explain clearly whatmanagers are expected to do with a set pî scénarios.

It is this absence of best practice application that/ .makes\Kees van der Heijden^s book so valuâble. - -Hère is someone who wxnrked at Shell during the ; >entire perîod in which scénario planning-wasintroduGed and continuously devéloped. And who, ;,at the end of his c'areer there, w&s in charge of firsttheir internai strategy consultancy^arid then scénario,development. His advîce is therefore baséd onconsidérable knowledge and expérience. His- ~ --"'-iJ

concepts of wind tunnellïng strategy and the neàâ for"stratégie conversations" ambasedontooth. ' •

For anyone wanting to ayoid scénario création as* a> .-*"-one-off exercise, or who really needë to underatamd,wbat scénario planning aetuâlly is, tMs is -- ' : .recommendedjeading. But, as no doubt van^dér 1. ^Heijden wôuld agrée, nobody says that it is easy! : : .

www.theajitidote.co.uk Issue 22,1999. TheAntidoteiiom C|S|B|S

Pitfalls in Scénario PlanningA checklist of traps to be avoided

Paul Schoemaker has writtenextensively about scénarioplanning. He is currently

Directorof Research, EmergingTechnologies Management ResearchProgram at The Wharton BusinessSchool in the US.

He has corne across 20 commonpitfalls and divides them into twoparts:process - problems with the waythe scenario-creating activities areconductedcontent - problems with the qualityof the input.

Tien process pitfalls1. Failure to ensure topmanagement supportMembers of the top team will be theones to détermine any signifîcantchange in strategy so they should beinvolved early on. Failure to do thisis to risk a lack of real feeling for thealternative futures that émerge.

2. Not enough contributionfrom outsideIn the early stages, when broad ideasabout the future are being explored,outside experts - eg customers,suppliers, regulators, analysts, etc-can provide valuable knowledge.This diversity of input helps to givea fuller picture of the possibleéconomie, technological and societalenvironments of the future.

3. Lack of balance between lineand staff peopleStaff personnel, typically fromstrategy, are often the ones chargedwith conducting the scénario projectbut they should 'enlist' linemanagers - they also hâve valuableknowledge and will be the ones todeliver strategy.

4. Unrealistic expectationsManagers need to understand: a) theextent to which scénario planning isconcerned with the long term; b) thatthe future cannotbe extrapolatedfrom the past; and c) that althoughbasic trends can be identified, thereare key uncertainties that cannot bepredicted, only explored.

5. and 6. Poorly defined rôlesand failure to keep on trackLetting go of assumptions about thefuture is unsettling. To prevent theprocess unravelling or drifting offcourse, rôles must be well defined.Create a core group who are taskedwith keeping activities on track.Identify dates, assign tasks andresponsibilities, and set milestones.Senior management's rôle is to sélectthe key trends and uncertainties thatneed clarification.

7. Too many scénariosDevelop no more than five alternativescénarios, otherwise attention (andtime) is diluted. A set of three or fouris even better.

8. Not enough time allowedScénario planning is a learningprocess - learning what living andworking in each of the possibleenvironments would entail. Timemustbe allowed for this.

9. Failure to link toexisting processesScénarios do not exist in isolation.They must be linked into existingorganisational processes such asbudgeting and planning (see page29). Techniques such as riskassessment and real options analysiscan be used to anchor them to therealities of costs, compétition andprofit.

10. Failure to link toour everyday world"Scénarios initially look at the worldfrom the perspective of an orbitingsatellite." To make thèse potentiallynebulous stories spécifie to our worldon the ground, devise imaginaryheadlines to act as mémorable"signposts". Thèse might announceprovocative mergers, new products,bold moves from competitors,changes in régulations, etc.

Tfen content pitfalls1. Failure to take the long viewScénarios investigate opportunitiesfive, ten, even 20 years ahead, thetimeframe depending on the industry,the rate of technology change,

regulatory environment, etc.Too often, says Schoemaker,organisations are short-sighted,focusing on existing products,markets, ways of working, etc.

2. Failure to take the wide viewLook beyond your own industry tosee how factors such as globalisation,deregulation, new technology, etc,hâve affected other industries athome, and abroad. Organisationsoften fail to see how the turmoil ofthe past will go on affecting thefuture. Use imagination as well asknowledge to develop a wide rangeof outeomes.

3. Too much attention to trendsFocusing too narrowly on currenttrends leads to a limited range ofouteomes. It means that the past issimply projected forward andunpredictable possibilities areignored.

4. Too homogeneous a rangeof viewsCompanies tend to see the future "asif it were a T-shirt that only cornes insmall, médium and large" - variationson the same thème. Capture the fullrange of opinions from inside andoutside the industry: include the onesthat shape the future differently.

5. Lack of internai logicCheck that the scénarios don'tcombine éléments that wouldn'thappen together in the real world, forexample full employment with zéroinflation. Scénarios may be storiesbut they do hâve to be crédible.

6. Failure to look atdeeper-level causesInstead of just concentrating on theimmédiate factors that impinge onthe organisation - interest rates orunemployment, for example -scénarios should explore theunderlying drivers of such indicators.

7. Failure to challenge mindsets"A scénario that merely confionsconventional wisdom is of little use."But so is one that is too difficult tocontemplate. There needs to be a

Issue 22 1999 The Antidote fiom C|S|B|S www.theantidote.co.uk

balance between the two - far-fetched views can bediscussed and "reined in": butbeliefs mustbe challenged.

8. Failure to make the scénarios dynamicA scénario is not a static snapshot. It tells a story, has acontext and shows how that particular future came outof this particular présent.

9. IrrelevanceBut the scénario stories hâve to be relevant. Décisionmakers must be able to identify with them, otherwisethe scénarios will make no différence to their stratégiesfor the future.

10. Failure to create a real breakthroughThe aim of scénario planning is to generate new stratégieinitiatives. But adopting fresh approaches ma}^ appeartoo risky to those who did not take part and whotherefore may not understand the thinking behind themoves. Schoemaker advises companies to "viewbreakthrough insights about the future as valuableoptions. Such options, much like financial call options,give the firm the right to play in case one of the scénariosmaterializes." B

Référence: Paul J.H. Schoemaker, "Twenty Common Pitfaïls inScénario Planning", in "Learning from the Future: Compétitive ForesightScénarios", (eds) Liam Fàhey and Robert M. Randall, John Wiley & SonsInc, 1998, ISBN 0-471-30352-6, £29.95 HB.

COMMENTPaul Schoemaker spent ari extended sabbatical atShell in the 1980s and worked closely with Keesvan.der Heijden (see page 29). Thèse pitfaïls aretherefore written from a scenarios-as-learningviewpoint, on the Unes of Wack's and Schwartz'sthinking outlined on pages 9 and 11. Having saidthat, many of thèse, pitfaïls are likely to occur inany scénario building or planning process.Theytherefore serve as a vâlidlist of cheçkpoints to .consider when êmbarking on such activities.

managers with expérience oï scénarios, a nunïbèrof other - ratlier mor^ riitty-grit^ - problem arèasw'efè îdêrîtifilèd. TÏïëse tèlâtëâpârticularly to

management tèàm: . • j , ' : ' ; r

• a senior management view that a single scénarioexercise nieàns 'we've clone that, soyou can putit away now' - ie neither commitment norcontinuity / "

• persuading managers who like to work withcertainty that they hâve to work with 'might be'and stilî take the exercise seriously

• their desife to argue about the détail, the numbersand quantification issues rather than addressthe real questions bèing raisedby the scénarios

• the move toward Yturf protection' if the scénarioouteomes seem to threaten particular activities -

. ie défensive behaviour• trie désire of a strategy-forming senior-management

team tô avoid perceived IQSS of faceby trying toshow that their stratégies will work in ail scénarios

• the danger that a scénario which really challengesexisting strategy may fece fierce rejection by thosewho created it in the first place

• finally, watch out for attempts to avoid having toconfiront a future thrèat or danger^ Often noticeablewhen a senior management team seeks its comfortzone by dismissing scénarios as 'only somethingthàt may happen\ -

Two additional words of warning about scénario teamcomposition emerged. Beware of mixing high and lowlevels of knowledge and expérience - theknowledgeable quickly become bored.

ALso, working with a group that is too large andcumbersome câniead to loss of impact and loweredlevels of involvement and commitment. Try tostrike a good balance.

www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22

Putting scénarios to useScénarios corne in ail shapes and sizesand can be put to many différent uses

Typically, the effort involved inscénario création means thatorganisations are loath to

make them public. This is evenmore the case if they provideimportant compétitive insights.However, examples can be found.

CORPORATE SCENARIOSThe following are now in the publicdomain:

Statoil - coping with suddeninstabilityIn 1987 the Norwegian government-owned oil and gas company, Statoil,used scénarios to develop a long-term research and developmentstrategy for its exploration andproduction division. It was a time ofunstable oil prices and stock marketcrashes Worldwide and so scénarioswere seen as a tool to help managerswith the conséquent uncertainties.

The scénario team identified at least60 micro and macro forces thatimpinged on their R&D planning.The high uncertainty-high impactfactors were then clustered intothree areas of uncertainty:

• the supply and demand structureof the energy market - would itbea buyer's or seller's market?

• the Norwegian economy - wouldit be energy dépendent or becomemore diversified?

• technology - would it evolve in afragmented or, an integratedmanner?.

Thèse three "axes of uncertainty"helped structure the team's thinkingand were the basis for four nationalscénarios:

A.Norway dominatedby the oil andgas economy

B. Norway using its oil and gasbenefits to diversify

C. Norway struggling in a depressedworld, using its energy resourcesfor national économie survival

D. Norway driven from oildependence by globalrestructuring

"Capsule narratives" were written foreach scénario and their implicationsconsidered in détail. Scénario D wasthen elaborated as it was the mostchallenging potential environmentfor Statoil.

Digital Equipment Corporation -searching for new businessmodelsDEC, the US-based IT company,faced considérable challenges inthe early 1990s as it witnessed itssegment of the mini-PC market (alarge share of which it had capturedin the 1980s) change dramatically.Now forced to compete withsuppliers of new low-priced yetpowerful PCs, and cope withadvances in network technology,DEC used the future mappingmethod of scénario planning (seepage 21) to consider the way ahead.

Managerial teams were challengedto define the séquence of events thatmight lead to one of five particularendstates or outeomes. Eachendstate represented a différentperception of current realities in theform of business models, rather thanlong-term visions. The endstatemodels looked at DEC as a:

• commodity business• architectural franchise or

technology-driven business• networking and utilities business• systems-integration business• "legacy" business

The scénarios formed the basis fora "common language" that DECpersonnel could use in decidingwhen to shift from operating in onebusiness model to another. DECalso used several methods to analyseand understand its situation better,including linking the scénarios toportfolio analysis, and probing into

interdependencies between thedifférent business models. Oncescénario planning's value came tobe appreciated, its use spreadthroughout the company.

US Defence Industry - handlinglarge-scale discontinuitiesIn the early 1990s, a group of USdefence companies commissioneda set of scénarios to help theminvestigate the industry's futureshape, following the end of theCold War, the shift of économiepower to the Pacific Rim, and theaccompanying impact on demand.

The four key issues were boileddown to:

• the level of US diplomatie,économie and militaryinvolvement Worldwide

• the characteristics of the"countervailing military power"

• the strength of the US economy• the level of world stability

Thirteen scénarios were developedfrom the combination of variables,ajthough three were subsequentlydiscarded as illogical or implausible.Detailed forecasts were producedfor six of the remainder, ail withplausible éléments. Thèse scénarioswere entitled:

The US-Driven Market - US militaryforces ready to respond to instabilityDangerous Poverty - cost-conscioussecurity-minded world, highinstability, anti-USRégional Markets - active non-traditional defence market, highinstabilityPeace and Prosperity - low militarypriorities, focus on économies,depressed defence marketConfused Priorities - poor economy,unfocused defence priorities, USdefence spending erraticIsolationist's Dream - low instability,strong economy, low demand fordefence

Issue 22 1999 The Antidote from C|S|B|S wAvw.theantidote.co.uk

Charting US defence expenditure in eachscénario showed that there were seriousimplications that the defence companies hadto consider.

US IT company (unnamed) -understanding new économie structuresIn 1988 an American IT company used crossimpact scénarios (see page 22) to helpforecast changes in the European IT market.The company had a successful Europeanopération but wanted to increase its marketshare for abroader range of IT products, inthe face of considérable compétition.

Specifically, the company needed to know thelikelihood of the European Commission (EC)achieving its stated goal of a single Europeanmarket by the end of 1992. It also wanted toknow whether an integrated EC would lead toa 'Fortress Europe' mentality about USproducts, and what effect (in terms of growthand compétition) a more integrated EC wouldhâve on the IT market.

The resuit was four scénarios:EC 1992 works - deemed "most likely". Mostmarket cohésion goals met, considérableintégration apart from currency andmonetary policy. East-West relations friendly,no more or less protectionism than in the restof the world. IT market growth medium/high.EC 1992 disappoints - slower évolution ofintegrated market. Despite this, IT growthmoderate.EC fails - little progress towards intégration,EC declining, reduced protectionism, ITmarket growth low.The US of Europe - 1992 goals reached/exceeded. EC integrated into powerful state,protectionism no more or less than the restof the world, IT market growth high.

The company concluded that momentumfor EC cohésion was strong, an integratedEuropean market was likely, but that aFortress Europe, protected market wasunlikely. Because the IT market growth inthe EC was likely to be médium to high, withstrong compétition from European-based ITcompanies in ail market segments, thecompany realised that it should establish aprésence at the European customer end of thevalue chain.

PUBLIC POLICY SCENARIOSThe European Commission -understanding geo-political forcesIn the mid-1990s, the EC Forward Studies Unitundertook a Shaping Factors-Shaping Actorsstudy (see page 21) on the prospect for North-South relations. It concentrated on the évolutionof North-South interdependencies in achanging geopolitical situation, and suggested

parameters for a global EC strategy based ongood governance and the promotion ofsustainable social and économie development.

The study looked at how the deep underlyingtrends in population growth, poverty andenvironmental dégradation were likely tointerrelate and influence the future of boththe North and the South.

Two scénarios were developed:Business as usual - highlighting the risksfor North and South if the future was anextrapolation of current trends.Graduai change to a sustainable future -illustrating possible gains for ail as aconséquence of a steady move to sustainableéconomie and social development.

The identification of actors highlights the rôleand influence of particular centres of powerand of vested interests, which fits with theCommission's key fonction of "promoting thecommon interest". Scénarios such as thèseprovide a backeloth for policy discussions anddécisions.

GENERIC SCENARIOSIndustry associations increasingly developscénarios for use by their members, but thèsecan run the danger of reflecting conventionalindustry wisdom. Two UK-based organisationshâve recently produced publicly availablereports on life in 2020. The approachesadopted by the Chatham House Forum andThe Henley Centre illustrate the two ends ofthe continuum that is scénario planning -from a "context to think in" to a "forecast ofthe future" respectively.

The Chatham House ForumThis was established at the UK's RoyalInstitute for International Affairs in 1995, toassist forum members (mainly UK companiesand government departments) to think aboutand plan for their future. The Forum's 1998report, "Open Horizons", sets out threepossible scénarios for 2020.

The Forum envisages a world facing greatchallenges. The governments of wealthyindustrialised nations already hâve to copewith growing claims and declining revenues,while developing countries lack theinstitutions necessary for orderly growth.Resource constraints, security concerns,environmental damage and an unstable andunaccountable capital market will affect ailnations. On the other hand, human capacityto solve problems and seize opportunitieswill be greatly enhanced by advances inaccess to and use of knowledge. Educatingand organising people to use their knowledge,though, will be critical.

"Mon will notflyfor50 years. "

WILBUR WRIGHT TO HIS BROTHER

ORVILLE1901

"Who the hell wants tocopy a document onplavn paperl"

LETTER TO CHESTER CARLSON,

INVENTOR OF THE XEROX COPIER

1940. OVER 20 COMPANIES REJECTED

THIS "USELESS" IDEA BETWEEN

1939 AND 1944

"640Koughttobeenough memory foranybody. "

BILL GATES

CHAIRMAN

MICROSOFT, 1981.

www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22

The three scénarios are verydifférent:

Market Quickstep - complexity islargely left to manage itself. The freemarket and individualism are out ofcontrol. An increasingly fragmentedsociety trades more and morefrantically. Commercial returns areadéquate but not lasting, as newproducts and projects are constantlybeing devised. The rich nationsbecome richer, but people areincreasingly overwrought and needmore and more skills if they are notto be treated as a cheap resource.

Atlantic Storrn - an even worsescénario for industrialised nations.Waves of "hot" money flow aroundthe world's capital markets, makingany attempt at corporate planningimpossible. Unemployment risessteeply, the population ofindustrialised nations grows olderand few governments hâve madeproper provision for their welfare.National politics become skewed toextremist or claimant groups.Fragmentation occurs as the USbecomes more market driven (butwithout accompanying économiegrowth), while an increasinglyprotectionist Europe expériencesinstability, ideological battles andintroversion.

Wise Counsels - wise use is madeof unprecedented wealth andknowledge. More and more peoplehâve access to the rapidly expandingpool of knowledge. They can react toevents more quickly through theirmany informai personal links, andthey understand the interaction ofcomplicated Systems. As technologyenables almost anything to beachieved, the critical skill becomesdeciding what to do. Today's "knowl-edge management" develops into "thesecond invisible hand", ensuring goodsocial outeomes from the market.

The Henley CentreThis UK consultancy spécialises inanalysing the impact of économie,social, political, cultural andtechnological change on consumermarkets. It calls its process"futurology", a product of analysisand judgement, extrapolation andspéculation. It involves makingprojections about the future andexamining the assumptions behindthe projection to judge the likelihoodofit happening.

In 1998 Henley was commissionedby Barclay s Life, the insurance armof Barclays Bank, to provide acomprehensive study across a broadrange of issues. The resuit, entitled"2020 Vision", provided threeéconomie scénarios:

Paradisiac - (the most optimisticscénario, 20% probability ofoccurrence) A booming economy isfuelled by increasingly open worldtrade and strong growth in emergingmarkets. Growing affluence leads tohigher income levels, with manymore middle-class householdsWorldwide. Employment,productivity and wealth-creatingbenefits of new technology faroutweigh the cost of future job losses.Pressure on the welfare state isreduced, low public borrowing andhigh personal saving resuit in lowinterest rates and strong investment.Incomes increase by two-thirds inrealtermsby2020.

Mediocritas - (the middle scénario,60% probability of occurrence) Realincomes hâve risen by 40% butgrowth in discretionary incomes ismuch lower as people hâve to fundtheir own personal welfare(pensions, healthcare, éducationetc). The electorate refuses to payhigher taxes because of a corporatesqueeze on employées' grossincomes to ensurelrising profits.

Globalisation and increasinglymobile capital also limit the abilityof governments to raise taxes at thenational level. New technologyresults in many new jobs but a skillsmismatch leads to unemployment ingeographical pockets and among theunskilled. Labour compétition fromoverseas workers leads to downwardwages pressure.

Dégradation - (the worst scénario,20% probability of occurrence)Some disastrous event exposes afondamental problem (eg a stockmarket over-valuation) and theresulting économie collapseréverbérâtes around the world.Unemployment rises to 1930s levels,and although real incomes rise byabout 10% there are significantdifférences between socio-economicgroups. Birth rates fall, homeownership déclines, people reducetheir standard of living, pressure forjobs puts paid to politicalcommitment to environmentalimprovements, and on-lineéducation booms as people try toimprove their skills at low cost.The working génération objects topaying the pension costs of itsparents, and there is a schizophrénieattitude to savings as people wantto put money away but distrustfinancial institutions •

Références: GUI Ringland, "Scénario Planning:Managing for the future", John Wiley &SonsLtd, 1998, ISBN 0-471-97790-X, £19.99 HB;Mark A. Borough and Charles W. Thomas,"Alternative Scénarios for the Défense Industryafter 1995", Planning Review, May-June 1992;European Commission, "The Future ofNonh-South Relations", Cahiers ofthe ForwardStudies Unit, 1997, ISBN 92-827-7597-6; "OpenHorizons: Three Scénarios for 2020", The 1998Report from the Chatham House Forum, RoyalInstitute of International Affairs, 1998, ISBN 1-86203-094-4; "2020 Vision Report", avaïlablefrom Barclays Life, Tel 020 74891995.

Issue 22 1999 The Antidote from C\S\B\S www.theantidote.co.uk

COMMENT : . , • Interestingly, looking at examples scénario ràther than allow oiirThèse (and some identifïed on page serves to. highlight twb of the natural . imaginations io haye full rein ..37)arejustasampleofthe. -.- responses thatean impair the use ôf (heavily aided and abetted when -scénarios that cânbe found. Màny; . scénarios..We tend to eheck the older probabilitiesaregiven). Remembêrlike British Airways' "Wild Gàrdens" onesto see if they were (accuràteV Pierre Wack's cautions on pagesand "New Structures" havebeen .. and ,thenew onesto see whichwe 9-10... : . -fairly widelypûblicised^ashave, . ..believe willbe'right\Thisillustrâtes . . . . : . ..many of ShelFs scénarios. the human tendency to 'pick' a

Surf ing around the subject: scénariosFor speed go to our live links at: www,theantidote-co-uk/artic[es/surf22,htmi

Two things can be gained by surfîng the web forscénarios. The fîrst is to find worked examples,some in quite good détail, that illustrate the many

uses to which scénarios can be put. The second is todiscover just how much they challenge our own currentviews of the world!

First, although not referred to in this Issue, there isa fascinating interview with Betty Flowers, Professorof English at the University of Texas, who was invitedto become editor of Shell's 1993 global scénarios athttp://www.systems.org/HTML/fsj-v01/rd-f/shell-1 .htm. There are real insights hère, for instancethe lobbying that develops as people try to influencescénario outcomes. A good read. Elsewhere, if you wantto see what Peter Schwartz (pages 11-13) means by'driving forces', an analysis of the Asia-Pacific régionprovides examples in From Siïk Road to Silicon Road athttp://www.gbn.org/scenarios/Silk/Silk.html. Also, ifthe use of probabilities in the scénario process interestsyou, there is an extended debate on the subject availableat http://www.gbn.org/scenarios/Probabilities/Note.html. Many of the participants are Shell alumnibut the debate contains contrary viewpoints. As Keesvan der Heijden says at one point, there is a danger thatsemantics get in the way, but it provides interestinginsights *- however esoteric.

As for scénarios themselves, don't forget that the oneswe created for Issue 20 of The Antidote, in April 1999,are being updated at http://www.theantidote.co.uk/y2k/scenario.html. But there are many more to fînd.For example, there are two sets of scénarios, looselybased on the same subject, that merit comparison. Thefîrst set contains three scénarios created by the IDEAgroup to help their sponsor, Vancouver City CréditUnion (Vancity), plan its future stratégies in an e-commerce world. Entitled "Corporations Rule","Crypto-Anarchy" and "Third-Sector Ecotopia", they canbe found at http://edie.cprost.sfu.caA; idea. Remarkablytheir recommendations, based on thèse scénarios, arealso publicly available on http://edie.cprost.sfu.ca/~ idea/recommend.html and, to see how well they hâve

been followec , you can check out their sponsor'swebsite: http://www.vancity.com.

While Vancity's scénarios are company and countryspécifie, the second set of thought-provoking scénarios,also looking at life in the information society, is globalin nature. "Civic Islands", "Cyber Woodstock", "BladeRunner" and "Money Islands" hâve been produced byFuturescape, a small, interdisciplinary group withinSiemens tasked with identifying long-term 'megatrends'and discontinuities that will influence informationand communication technology. Ail four are availablein web format or as downloadable pdf files athttp://www, siemens.de/sbs/en/company/activities/futurescape/scenarios/index.html.

A single scénario looking at the world in 2015, "NewWorld Disorder", was written by Peter Schwartz for thefîrst issue of Wired magazine. It can be found athttp://www.gbn.org/scenarios/Disorder and providesinteresting reading, not least because some of its storylines hâve already failed to matérialise (eg 'Président'Robert Dole and the break-up of NATO because ofGerman récognition of Serb nationalism). If Wired isyour scène, then you can check out a set of fourpretty zany scénarios at http://www.wired.com/wired/scenarios/build.html. Called "I will", "Consumerland","Ecotopia" (heard that one before somewhere) and"New Civics", they présent worlds far removed fromwhere we are today.

The Global Business Network website•(http://www.gbn.org/home.html) contains lots ofinteresting things. For instance, the Destino Columbiaproject provides four scénarios about the future ofColombia, created by a team of 43 influential leadersdrawn from almost ail sectors of Colombian society(http://www.gbn.org/scenarios/colombia). There isalso a set of scénarios about Japan. Named "The LongHollowing", "Crash and Rebirth" and "Hercules Départs",they can be found at http://www.gbn.org/scenarios/japan.

In the mid/late 1980s, Anglo-American Corporation, thelargest company in South Africa, asked Pierre Wack (seepages 9-10) to develop a set of scénarios about the futureof apartheid. Two particular scénarios emerged: "lowroad" and "high road". The fîrst showed theconséquences of continuing apartheid policies, whilethe second showed a différent vision - a South Africain which apartheid^could end without the blacks drivingout the whites. Senior Anglo-American executives gavea séries of public speeches, based on thèse scénarios,and a book about them became a bestseller in SouthAfrica. It is believed that F. W. de Klerk, who becameSouth Africa's président in 1989, took thèse scénariosseriously and that they may hâve helped to open theway for Nelson Mandela's release in 1990.

This fîrst scénario process was foliowed up in 1991 whena team led by Adam Kahane (also from Shell in London)put together four scénarios for South Africa's futurebetween 1992 and 2002. Called the Mount Fleurscénarios, they were published in 1992 as a spécialreport in South African newspapers and also presentedto political parties and institutions across the wholeof South African society. The background to themand the results they created can be found athttp://www.gbn.org/scenarios/fleur/fleurlntro.html.The four scénarios themselves, "Ostrich", "Lame Duck","Icarus" and "Flight of the Flamingos", canbe found athttp://www.gbn.org/scenarios/fleur/fleur.html.

www.theajitidote.co.uk The Antidote from C|S|B|S 1999 Issue 22

Meanwhile, elsewhere...T

he work/life balance is tippingtowards the wrong side of thescales, affecting peoples'

health, relationships and family life,according to a highly publicisedsurvey "The Price of Success" fromthe magazine Management Today andthe work/life consultants CeridianPerformance Partners. The survey,covering 2,000 managers across theUK, has prompted calls for organisa-tions to introduce a 21st centurymanifesta for improving the workplace.

Britain's senior managers aresacrificing their personal lives to keepup with the rat race in which 55%face fréquent stress at work with 50%admitting to having too little time tobuild relationships outside work. Toease the "strain drain", as it has beenlabelled, 20% sometimes drink toease the pressure and 8% hâveturned to therapy or counselling,although on the more positive sidethe majority of respondents partakein exercise/sport and regular {

holidays. Even so, three in ten péoplesay their health and sex life aresuffering because of work.

On the bright side, two out of threemanagers are happy in their jobs.Those in smaller organisations wereeven more positive, with higherlevels of trust, satisfaction and moralethan larger organisations. Rétentionof staff is a problem as 40% of menand 50% of women will look for anew job in the next 12 months, and70% say they would seriouslyconsider an approach from aheadhunter. But when asked whatwould make them actually leave theirjobs, 44% stated lack of challenge,

36% money, with the work/lifebalance coming only third at 35%.Worryingly, it appears the UKmanager equates working long,pressurised hours at a desk withfeeling challenged: 48% of managersfeel guilty if they leave work on time.As one maie respondent stated in asimilar survey from the UK's NationalWork-Life Forum: "Where I workthere is also a culture of'you mustbeseen to work late or unsociable hoursand weekends to be part of the team'which is very sad."

Sad it is indeed, if this outlook ishaving an adverse affect on healthand family life. The inability tobalance work and life is by no meansa UK phenomenon. An internationalstudy from Gemini Consultingentitled "International WorkforceManagement Study: Capitalising onthe Workforce Révolution" covered13 industrialised nations across theworld including Russia, Japan, theUnited Kingdom and the UnitedStates. Far from there being majordifférences between workers in <,différent countries, the globalworkforce shares a common set ofdesires and beliefs, with "balancingthe needs of work and family orpersonal choice", as one of the topthree choices. It may help toremember the old maxim that noone ever lay on his deathbed sayingthat he wished he had spent moretime at the office.

Stress-related physical illness is themost important new area of researchsince smoking and cancer werelinked 40 years ago, according to amajor new médical study from the

US Harvard Médical Institute. Heartdisease and ulcers, as well asanything from an immunitydysfunction to colds and flu, diabètes,obesity and even brain damage, hâvebeen linked to stress. People whoexperienced regular stress at work orat home were up to five times morelikely to fall sick than those who didnot, according to a 1998 study fromthe Carnegie Mellon Institute.

The costs and implications forbusiness are high. Ill-health anddysfunctionality directly impacts onthe motivation and commitment ofthe workforce. Organisations who saythat introducing flexible workingpractices would mean an increase incosts hâve no excuse. An analysis byProfessor Shirley Dex of CambridgeUniversity showed that there arealmost no additional financial ororganisational costs incurred byintroducing flexible workingpractices, only benefîts, primarilythrough an increase in productivity.As Bill Cockburn, Group ManagingDirector of BT UK says: "We ail hâveto adapt to social and technologicalchange if we are to succeed. Makingfull use of technology is one way ofhelping to get a better balance in ourlives. Let's work smarter - not longer- and hâve more fun."

Copies ofthe research report, "The Priceof Success", are avaïlable from CeridianPerformance Partners, tel: +44(0)207420 3800, priced£45 + VAT Forcopies ofthe report, "LooldngforBalance", The National Work-LifeForum, contact Ben Hewitt atHobsbawm Macaulay CommunicationsLtd, tel: +44 (0)20 7292 6504.

Issue 22 1999 The Antidote from C|S|B|S www.theantidote.co.uk

Hâve fun at work! "We don't employ peopleto hâve fun," as the chairman of a Germancompany retorted to the suggestion that 'fun'be added to the company's new statement ofcorporate values. Needless to say, the resultingstatement of values had very little impact onthe staff or the company ("Big following for thefun factory", Financial Times, 16 July 1999). Butif you are looking for fun at work - and don'twe ail deserve it - how about a new form ofbingo? Lingo Bingo is pure jargon glory forthose who want to slip as many buzzwords aspossible into their meetings. Print out the card

for yourself, and several colleagues, and try toinclude as many buzzwords as possible in yourdiscussion without attracting too much puzzledattention. The first person to use ail the wordsin the line wins (see sample below). Theultimate jargon accolade has to go to theperson who can include 'negaholic', 'cathedral'and 'technoplegic' in the same sentence! Getthe cards on:http://www. workunlimited.co.uk/Plavtime/Lineo Bingo/1.1870.40980.00.html

adaptive

operationalise

cathedral

negaholic

value-added

stand-alone

upgrade

flesh-it-out

proforma

team building

manageability

ergonomically

brain fart

market segment

irritainment

future-proof

A Lingo Bingo card

''Worldwide demandfor cars will neverexceed one million,primarïly becauseofa limitation in thenumber ofavailablechauffeurs. "

RESEARCH PRÉDICTION

IN 1900 FOR MERCEDES-BENZ

DiscountedpricesforAntidotesubscribersat twofortheomingconférences

www.theantidote.co.uk The Antidote from C|S|B|S 1999 Issue 22

CONFERENCES

The 1999 Stratégie Reward Convention of which organisational learning modelThe Berners Hôtel, London on 29-30 is best for your business - virtual, classroom -September 1999. The convention aims to style, top-down training or individual bottom-inform organisations how to use stratégie up programmes. Antidote subsci îbersreward to drive organisational vision and receive a 10% discount.objectives. Oxfam discuss how they link IQPC, tel: +44 (0)20 7430 7300, fax:reward strategy to corporate culture and +44 (0)20 7430 7301 or e-mail:organisational development, and the corporateuni@iqpc.co.ukEmployée Share Ownership Centre willprésent the challenges of implementing the In keeping with the subject of this Issuenew government all-employee share plan. of The Antidote:Twenty-one leading reward experts from Scénario Planning for CompétitiveAsda, Oxfam, Barclays Bank pic, AdvantagePricewaterhouseCoopers, ING Barings, Kingsway Hall, London on 26-27 OctoberWilliam M Mercer and Warner Lambert, will 1999. Gill Ringland, whose excellent bookprésent their reward programmes. Antidote "Scénario Planning: Managing for the Future"subscribers get a 10% discount off the is referenced on pages 20-24 and 34-36, willconférence price. Contact IQPC, tel: +44 be discussing the challenges of the knowledge(0)20 7430 7300, fax: +44 (0)20 7430 7301 or society and global economy, and how toe-mail: reward@iqpc.co.uk adapt to a pattern of rapid and dramatic

change. Ged Davis, vice-président of GlobalRestructuring Organisational Learning Business Development at Shell International,through a Corporate University will discuss scénario building and use, whilstThe Alexander Hôtel, Dublin on 29-30 Tim Bolderson and Richard O'Brien,September 1999. Hear case studies from principals of Global Business Network, willMotorola, Sears and Roebuck and Unipart chair an interactive masterclass on dealingwith virtual educational and development with uncertainties and linking with businessprogrammes presented by DaimlerChrysler, implications. Contact Ark Conférences Ltd, tel:Manpower and British Aerospace. The + 44 (0)20 8785 2700, fax: + 44 (0)20 8785 9373conférence aims to address the question or e-mail: info@ark-group.com