Scenario Planning Helps Profit From Uncertainty

In Profiting from Uncertainty: Strategies for Succeeding No Matter What the Future Brings, authors Paul J. H. Schoemaker and Robert E. Gunther make a point about the discrepancy between the forces shaping a sector’s future, and where management tends to focus. Their claim is that about half the forces shaping the future value of a business – developments in the industry, and in the larger global environment –  are not monitored by management, and thus, “left to fate”.

Instead, management is compiling backward-looking internal and industry trend data to forecast future conditions. This is backed up by informal surveys by Gary Hamel & C. K. Prahalad, suggesting that senior management devote less than 3 % of their time and energy to building a collective vision of the future. (Competing for the Future, Harvard Business Press, April 1, 1996, p 4)

We need a working understanding of our external environment and the many possible futures that may emerge, as making plans based on a single notion of the future can increase risk even as, paradoxically, it reduces our sense of conflict about an unknown future. The world is simply too uncertain and complex for such single-point predictions; and they give a false, sometimes dangerous, confidence that we are in control more than we really are. At the other extreme, we cannot become paralyzed by what we perceive as too much uncertainty, as we become obsessed with avoiding risk. We must plot a course between prediction and paralysis, thinking about the future in terms of multiple possibilities in order to better create our desired future.

Action Plan: Make a practice of ‘learning from the future’. To kick off your 2011 strategic planning cycle, take your leadership team through a facilitated scenario-planning process. In the course of co-exploring 3-4 possible futures, defining a ‘desired future’ and gleaning strategic insights, your team will develop a much deeper capacity to mine profit in areas of high uncertainty – an area your competitor is likely spending 3% of their focus on!


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