Scenario Analysis: Planning for Uncertain Futures

Notes de l'éditeur

1. Challenges to effective prediction:1. Predict a faster pace of change (flying cars and jet packs predicted in the 1930s to be available in our present time)2. Under-predict the impact of small changes on economy and culture (Internet)3. Over-reliance on past experience in anticipating future trends and events4. Opacity of interplay of changing factors in a system-- thinking in silos or focusing on few variables in isolation5. Inability to foresee "Black Swans" -- the unexpectedly impactful nature of unlikely events. The most benign might influence fundamental structures that change the correlation of some category of economic activity or food production to population growth, the relationship of which is changed by introduction of new technology. The unexpected collapse of the Soviet Union, Hurricane Katrina and 9/11 are all examples of even more impactful black swans.
2. We forecast and plan, and also work to maintain a healthy degree of skepticism and strategic flexibility related to possible futures.
3. Scenario analysis allows us to build a shared baseline for strategic thinking and develop strategic early warning. This exercise is particularly useful when:Uncertainty is high relative to our ability to forecast or predictA firm or industry has faced a recent history of impactful, unanticipated change or eventsA firm has clearly missed new opportunitiesQuality of strategic thinking is low (who will admit to this, though?)There is a lack of a common language to describe uncertainty-- no shared strategic vocabularyVery strong difference of opinion of equal merit