by Jim Ware
As the television sports announcer Jim McKay once said of a star athlete, "His whole future lies ahead of him." And of course, that's true for all of us. And one of our strongest yearnings is to know what lies ahead. What's around the corner? What's over the horizon?
Those are interesting questions for us as individuals, but they are essential for organizations. Organizations make bets on the future every day. When McDonalds buyers place an order for potatoes and ground beef, they do so on the belief that they know how many orders for Big Macs and fries they'll get next week. When General Motors sets its production quotas for Chevrolet Volts, they are betting on how many cars the dealers will be able to sell a month from now.
However, those two examples are basic, tactical management decisions that depend on sophisticated market demand analysis, complex multivariate equations, and a dose of guesswork. But while that kind of demand forecasting may require massive computing power, it's simple in comparison to the need that senior executives have for understanding the bigger, broader, and more fundamental trends in the economy and society.
Will the economy get better? Or worse? When? How will it affect your company? Will your business thrive or struggle? What's going to happen to health insurance, Medicare, Social Security, climate change, unemployment, average wages? How will terrorism, violent weather, pandemics, and public policy affect your business?
The truth, of course, is that no one can really know the future (in spite of what many pundits try to tell us). It has also been said that "the best way to predict the future is to create it." However, as much as we'd all like to create our own future, that isn't a very realistic option.
The reality facing every senior executive is that the big decisions that determine organizational health are long-term ones, with long lead times. And as much as I value organizational agility—the ability to "turn on a dime"—the truth is that no one can build a world-class workforce, or a world-class factory, or a world-class high-tech product brand in a few weeks or months.
Strategic decisions are long-term, and they require a solid understanding of the future. Yet, as Gary Hamel and C.K. Prahalad pointed out over a decade ago, most senior executives spend almost no time at all thinking about the future or sharing those thoughts with their colleagues.
In their classic text, Competing for the Future, Hamel and Prahalad reported that most senior executives spend less than 40% of their time focused on the world outside their own organization, only about 30% thinking about the next three to five years, and no more than 20% of their time talking with their colleagues about the future to build a collective view. In other words, only about 2.4% of management time (40% x 30% x 20%) is focused on building a corporate view of the future (Gary Hamel and C.K. Prahalad, Competing for the Future, p. 4.).
Rethinking Strategic Planning
Historically, strategic planning was all about focusing an organization's attention on a particular marketplace and ensuring that it had the operational capabilities to compete effectively in that market segment. Most strategic plans make explicit assumptions about future trends, estimate probabilities, and include educated guesses about what's going to happen.
That kind of strategic planning has traditionally embodied several fundamental assumptions that are patently false in the current business environment:
- industry conditions are relatively stable and predictable;
- we can extrapolate current trends into the future with reasonable accuracy;
- customers and competitors are well known and will remain so;
- competitors play by the same basic rules that have governed the industry and its distribution channels in the recent past;
- there is one "right" picture of the future that can be predicted by the careful analysis of trends and their underlying drivers; and
- strategic planning can be done periodically (typically once a year) as a way to step back from daily operations and be reflective about the future.
The state of business today shows how totally irrelevant and even misleading those assumptions are. What we need instead is an approach to planning that moves at the speed of the Internet, embraces uncertainty, and prepares the organization to move in several different possible directions, often at the same time.
The only approach I know that meets those basic requirements is scenario planning. I believe that it is absolutely essential for workplace strategists and facilities managers to develop explicit, detailed pictures of the future right now, before the future passes them by.
Scenario Planning
Arie de Geus, Peter Schwartz, and their colleagues at Shell Oil in the 1970's are generally credited with being the "inventors" of scenario planning. Schwartz was also the co-founder (and remains Chairman) of Global Business Network, today's undisputed home of scenario planning. And if there is a "bible" of scenario planning—what it's about, why it's important, and how to do it—it's Schwartz's 1996 book The Art of the Long View (Currency Doubleday, 1996; link is to description on Amazon.com).
Scenarios are stories about the future that, when taken together, describe a range of plausible future states of an industry, its markets, and a particular business. Scenarios are a tool for dealing with rapid change, uncertainty, and inherent unpredictability. Scenarios are not predictions of the future; rather, they are images of possible futures, taken from the perspective of the present.
Because scenarios are developed explicitly to describe a range of possibilities, they enable managers to open their minds to the inherent uncertainties in the future, and to consider a number of "what-if" possibilities without needing to choose or commit exclusively to one most-likely outcome. Scenario analysis enables managers, business planners, and executive teams to develop multiple options for action that can be compared and assessed in advance of the need to implement them.
An effective scenario identifies critical implications for a business and contains personal meaning for the people who build it. Scenarios are useful tools primarily because they facilitate—indeed, require—a strategic dialogue about the unpredictable outcomes of today's rapidly changing business environment.
Scenarios are powerful tools for thinking about tomorrow. But they don't just happen by themselves, and they aren't a "normal" form of strategic planning. And like most meaningful management practices, scenarios demand special time and attention. Building them—and learning from them—requires an investment. Think of it like an insurance policy. What better way is there to guarantee that you'll be an active part of the future of work?
Building scenarios about the future of work is a core service offering of The Future of Work . . .unlimited. I'd welcome a chance to speak with you about how we can help "future-proof" your business.
What do you think? Please send your comments directly to me or post a comment here. We look forward to learning from you.
