Scenario planning can guide you through a disruptive world
Spotify has changed the core of the music industry. Skype has changed the perception of communication. Airbnb is the world’s biggest hotel chain and Uber the the world’s biggest taxi company, without owning neither hotels nor taxis.
The energy landscape is undergoing fundamental changes with growing rates, new solar cell technology, and smart electric grids. Currently, AI technology is emerging, which can change the conditions for most businesses, while flows of nationalistic ideals around the world can change the global interactions.
A changing world
Despite saying ”never again”, we are seeing more signs of xenophobia in Europe and increased protectionism across the globe. USA’s president Trump claimed that “A trade war is easy to win”, though no wars are easy to win as they bring about unpredictable consequences. The world is already facing a climate catastrophe – a catastrophe some deny despite a growing body of knowledge, and despite young people in all continents, with Swedish Greta Thunberg leading the way, doing all they can to generate awareness of the crisis.
We live in a world of rising uncertainty and disruptive changes in nearly all business areas. There is a genuine uncertainty of strategic importance – to individuals, organizations, and countries. We all need to understand what is going to happen, and what it might mean to our organization, our company, and ourselves.
However, can anyone know anything about the future? No, we can never know, in the true sense of the word. What we can is to study possible futures, through which we can create a preparedness for different developments. We can explore possible scenarios and consequences of these, and in times with a lot of uncertainty and fast changes this kind of exploration is a lot more important than ever.
Research also show clear links between the success of organizations and how prepared they are for the future. Organizations that works systematically and long-term analyzing the surrounding world and the future have 33% higher profitability compared to mid-ranking companies, and up to 200% higher growth [1]. It is basically both smarter and more profitable to prepare for the future.
Understand the future through scenario planning
Scenario planning is a well-known and well documented method to generate understanding of possible futures. It is about having a curios mindset in relation to changes in the surrounding environment and uncertainties combined with a variety of methods to create order in what seems like disorder – to transform insight into the future with strategic action.
The future of a question or an organization is decided by two main factors: what we can judge as a certain development – trends – and that which less predictable – uncertainties. That’s why a proper analysis of the surrounding world is meaningful – to find the most important trends and uncertainties. Doing this requires thorough research and that the analysis is based on a large body of evidence.
A good start is first to confirm your own uncertainties, to say “we are uncertain of how this will develop in the close future”. As most people who claim to know what the future will hold are wrong (there are a vast number of quotes from people who have been wrong about the future, for example have a look at 15 Worst Tech Predictions of All Time [2]). We should rather humbly approach the question “how might this develop, and what are the different alternatives?”.
Predicting the unpredictable
When Shell in the early 1980's wanted to increase their prospecting for gas in the North Sea, they asked themselves: What could threaten such an investment? The answer was surprising: If the Soviet Union opens up and starts exporting gas. Were there any signs that the Soviet Union would open up? No, not for those who didn’t dare question the status quo. However, the scenario planners at Shell started looking for weak, uncertain signals point towards it happening. Their work grew into different pictures of the future, where one scenario showed that under specific circumstances the Soviet Union would open up. Their scenarios were not complete fantasies but were based on thorough research and the courage to question.
So, when the Berlin wall fell in 1989 and the Soviet Union collapsed, Shell were ready.
You don’t have to work with questions of this magnitude, though a lot of inquiries about the future are important and contain many types of uncertainties.
Does the Baltic Sea have a future?
A couple of years ago, Kairos Future had the privilege of working with the WWF Baltic Ecoregion program on the future of the Baltic Sea. In this project, together with representatives from nine countries around the Baltic Sea and from a range of sectors and organizations, we investigated how the future of this fragile inland sea could develop. We identified two important strategic uncertainties: how countries, businesses, and organizations would succeed with the governance of the cooperation around the Baltic Sea, and what the development of our ecological footprint would look like. Based on these two strategic uncertainties we created four scenarios:
The four scenarios show completely different futures, depending on how people, organizations, businesses, and governments act, but also depending on factors such as technological development, military threats and other variables.
Today, WWF are using these scenarios in their work to influence policies and increase awareness in matters surrounding the Baltic Sea. They have even calculated the economic consequences for two of the scenarios, Clear waters ahead and Shipwrecked, to get more thorough insights into the societal costs associated with different possible futures.
The foundation of strategic decisions
Scenarios therefore form a foundation for the strategic work. It can be done on a higher overarching level, as in the case with the future of the Baltic Sea, or on a more organizational level, as in the case with Shell. However, scenarios can also be used to explore the future of a particular area of a business. Scenarios – and the process of developing scenarios – bring clarity to complex questions about the future. They help us realize that the world might develop in different ways from what we take for granted, giving us a tool for creating strategies and action plans to change even our own future.
Scenarios – for whom?
Everyone can make use of scenarios. Kairos Future have worked with single businesses, with local councils and government bodies, as well as groups of organizations in Sweden and globally. For example, we have helped the mining industry in Chile to gather businesses, authorities, and NGO:s to discuss the possibilities of sustainable mining in central Chile. We have led projects for local councils and regions in Denmark, on behalf of the Danish Architecture Center, to create visions of the future for Danish municipalities. Additionally, during the autumn 2018 we have analyzed different scenarios for the working life in Sweden 2030, on behalf of the Swedish Work Environment Authority. We have also completed scenario projects with a range of businesses.
Everyone can make use of strategically and systematically thinking about the future!
Are you interested in knowing more about scenario planning? Get in touch with Daniel Lindén.