The "What if?" exercise (Episode Two)

Back in the first episode of this series I gave a very general idea of what the scenario thinking technique implied. If we go to a more detailed explanation, this method for planning is a structured process of thinking and anticipating the future, but assuming that the future is not predictable, determinable, or even able to be influenced in a major way. Instead, the objective is to identify the underlying driving forces that make systems evolve, in order to set the path for proper decisions. The outcome of the process is a number of narrative descriptions (the famous scenarios!) depicting possible ways the future could look like for some particular topic (or product, or market, or country, and many other ors); and based on these pictures of the possible future, a set of strategies to be implemented.

In simpler words, companies working this way would have a number of action plans that would help them act faster than those who don’t use this tool, no matter how the future unfolds. So far it sounds amazing, almost like magic: it’s like “Ok, our company can’t control the future, but no matter what happens we’ll be ready to be on the battlefield and perform fantastically well”. The bad news: first of all, building scenarios is not exactly simple (it’s not rocket science either, but it requires a lot of effort); and second of all, as any other tool, it’s not useful for just any case.

I found an interesting article on strategic planning in the McKinsey Quarterly written by Hugh Courtney, from where I borrowed the figure below:





What this figure represents are different levels of uncertainty a company -or any other organization or group of organizations: a particular sector or market, a government, a number of countries- can be immerse into when facing a certain situation. In fact, whoever we’re speaking about will be probably dealing with all four levels of uncertainty at the same time in different aspects of their operations.

Let’s take a company from the consumer goods sector as an example. If they have to buy copy machines for a new office, they can just study their consumption in the past years and decide based on those numbers and some estimations on whether the number of copies has been growing or reducing over the recent times. It wouldn’t make much sense to gather a group of specialists to interpret what are the underlying driving forces and making up descriptions and action plans.

We could assume that this same company is doing good in its market (that’s why they opened the new office): they have launched a product some months ago that the consumers are enthusiastic about, and their Marketing department has conducted some studies that indicate that in the near future the sales will keep on growing. In this situation, the company could be facing a crossroad: for working at a larger scale, they could purchase new equipment, work more hours, or outsource part of the production. This situation is clearly more complex than the one regarding the copy machines; still, a good decision tree seasoned with the opinions of some of the executives would probably be enough.

But now let’s say that this company is looking further than just the near future, and that they perceive some trends in the market. Like people wanting to consume healthier food, or expecting more from the products but paying the same price, or paying less for what the company offers today. These matters are way more complex, and probably less tangible or countable. What would be better, to launch a healthier line of products, or to modify the existing ones? To start operating in less developed markets, where the consumers wouldn’t expect so much from the products? And last but not least, what would the competitors do if the company decided to implement any of those strategies? (What’s worse, they could make the first move.)

I’m pretty sure you get the picture by now: scenarios are more appropriate for decisions belonging to levels 3 and 4 of the figure. Fantastic, now that we now when to and when not to use this technique, the next question is how to do it… find out next time!

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