Scenario work challenges the prevailing mindset
Today the mentality is to do things as soon as possible, in near real-time. Short termism and quick wins rule! In fact, things have gone so far that in many organisations one needs to fight hard to retain and expand resources for thinking and planning for the longer term.
Yet at the same time, no one would deny that they would love to have an omniscient crystal ball to see into the future! Doing predictive analysis, being one step ahead of your competitors, sensing your customers’ unarticulated and potential needs, understanding trends – all businesses want to excel in these areas. Despite this very few organizations carry out future or scenario thinking in a systematic way.
The fundamentals of thinking
Scenario thinking is about deliberative thinking – and its opposite is intuitive thinking. Both thinking styles are needed in business decision making. Intuitive thinking works well when complexity is low and you have good data on the possible outcomes of different options based on past experience. Deliberative thinking is needed when you make decisions on low-probability but high-impact events – i.e. something that you can test with scenarios.
Intuitive thinking is hardwired into human behavior, it is the easier and more “natural” way of thinking for us. The danger of intuitive thinking, especially in business decision making context, are the systematic biases and simplified decision rules it contains. Howard Kunreuther’s and Michael Useem’s new book, Mastering Catastrophic Risk – How Companies Are Coping with Disruption (2018), provides a list of these biases:
- Availability (WYSIATI – what you see is all there is) & hindsight bias (“I should have seen that coming”)
- Underestimation of risk (“it won’t hurt us”)
- Overconfidence (“we’re in control of this”)
- Minimum risk thresholds (“it’s not our department’s concern”)
- Myopia (“hey, our focus is next quarter’s earnings – we don’t need futurists”)
- Status quo bias & sunk-cost-fallacy (“we’ve already invested in this”)
With scenarios, an individual, business leader or strategist, takes a deliberative approach into planning for the (certainly) uncertain future. Strategy is about the future – and thus involves uncertainty. The success of a strategy is to a large extent determined by how well uncertainty regarding the business environment is understood and managed. Scenarios do require human judgement and creativity, but the processing is done in a systematic way and ideally with a group of contributors representing a variety of viewpoints.
A systematic approach to scenario analysis
M-Brain has recently renewed its scenario analysis offering to answer clients’ growing interest in this analysis approach. We follow a systematic scenario analysis framework which offers a tested route to plan for possible futures. We also have a team of strategic analysis experts, who are skilled at guiding clients through the scenario analysis journey – from mapping trends and signals all the way to scenario design and development.
With M-Brain, the client is guided through all levels of trends. We start with megatrends (= things we all agree, we know we know), move on to trends (= things we believe we know) and continue to spotting weak signals (= things we know we don’t know, i.e. elements we consider uncertain or unknowable). In the best case, we even reach the point of considering unknown unknowns (= things we don’t know we don’t know, aka Black Swans).
The scale of collaborative analysis goes from “What we can see now” to “What we are currently blind to”. With our client, we build the perspective – consider the opportunities and threats – and, ideally, we are even able to find solutions together for the organization to test.
Scenario analysis is done to explore several possible futures in a systematic way. Some think it is about predicting the future, although it is more about finding insights in trends that are observable today. Scenarios are aimed at challenging the prevailing mindset, and they are about studying our collective ignorance. The aim of scenario work is to understand market development and customers better – and to create business opportunities out of that. In order to do successful business also tomorrow, we all need to be part-time futurists and trendspotters.
Are you, too, seeking to identify the opportunities and threats ahead of you? Do you need to understand the future of your business environment better? M-Brain is happy to help you map the trends affecting your business and to guide your organization through a systematic scenario analysis process. To learn more, please contact Nora Kärkkäinen, VP Business Development, M-Brain.
Contributors to the article: M-Brain Finland Team: Nora Kärkkäinen, Sanelma Helkearo, Soile Mäkinen, Minja Alakoski, Daniela Rönnberg.
Sources: Kahneman, Daniel: Thinking, Fast and Slow (2011) and Kunreuther, Howard & USeem, Michael: Mastering Catastrophic Risk – How Companies Are Coping with Disruption (2018)