Many companies carry out scenario planning or strategic planning.
They are not the same thing. I carry out such planning sessions for companies large and small and I have seen many over the years. Many get it very wrong. What is scenario formulation? Well that is an exercise to prepare for the future, and also to open up the vista for new opportunities for the company. Scenario planning is a case of asking: "what if?"
First let us ask: Can you predict the future? The answer is a definite yes and no. Back in the days of Jan van Riebeeck landing at the Cape, one could ask: what will an ox wagon look like in 20 years time. The answer was simple; virtually exactly the same. So predictability of ox-wagon evolution over decades back then, was easy. But today if you ask: what will a home computer system look like in 20 years time, the answer is that we have no idea. It will change so much.
On the other hand, right now I know that a spacecraft the size of a small car is scheduled to land on Mars on 18 February and I know that it will land in the Jezero Crater, and I know where in the crater. If you had asked Jan van Riebeeck; when will the postal ship arrive in Rotterdam; your answer would have been: 'I have no idea.'
We now have accurate predictability about things like when a spacecraft will arrive; or what an underground rock formation looks like, but very little predictability of what production-line automation will look like, or even what consumers will want a few years into the future.
In the days of Jannie vR it was the other way around: day-to-day life changed little, but long-range predictions were impossible.
Scenario planning is like looking down a trumpet. Narrow at the close-end but rapidly widening as we move away. That is your certainty becoming less precise. In scenario planning the next few months is not too difficult, but as we move into the future the uncertainty widens dramatically.
People carry out scenario planning for a company and work on a five-year time horizon. They come to a conclusion about the path ahead. In the academic literature that scenario is called the Default Scenario. Sadly it is known that the Default Scenario is almost always incorrect. But many companies follow this Default Scenario on the assumption that it is an accurate strategic plan. So from day-one they start out to follow an incorrect path.
Numbers of times I get called to help when there is already a mess. After a few minutes examination it is often clear that the snags could have been spotted a year earlier.
In a scenario planning exercise you have to ask difficult questions. Often people don't want to do this so they automatically exclude important alternative views. Imagine making municipal development plans for Berlin in 1989 just before the Berlin Wall came down. Just look at how the oil price fluctuated a few years ago, going up more than double very fast, and then soon after dropping by more than half. Who could have predicted those events? Clearly that was difficult. Remember the One Hour film-processing labs of a few years ago. Did they foresee digital photography?
So in a scenario planning exercise it is necessary to force participants to contemplate possible upper and lower deviations which could occur. Then you need to do imaginative thinking about what would happen to your operation if events near those limits do really happen. You have to honestly think: will we survive. Or, what drastic action would we take to be able to survive. Many of those thoughts are difficult to contemplate, and that is why many company in-house scenario planning exercises just skip them.
There is a flippant comment in lateral thinking theory which is called; The First Law of Lateral Thinking, and it says: it is easier to keep digging the hole that you're digging than to start a new one.
It is difficult for a company to acknowledge that maybe they are doing the wrong thing and should move sideways a bit, and make a dramatic change. But when the hole is shoulder-deep it is even more difficult to decide to get out and to move 5 m sideways and to start again. Much more mental energy should be expended to think ahead rather than just following the Default Scenario and calling it a company Strat Plan.
Dr Kelvin Kemm is a nuclear physicist and is CEO of Stratek Business Strategy Consultants, a project management company based in Pretoria. He carries out business strategy development and project planning in a wide variety of fields for diverse clients. Stratek@pixie.co.za
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