Turbulence is an ever-present property of most organizations’ operating environment. Thus, different applications of futurizing have become an important practice as we navigate towards uncharted waters ahead. But, paraphrasing on a previous blog-text I wrote, one could ask if our futurizing approach is focusing on the wrong futures?

One frequently used illustration in the scenario field is the onion-like graph, developed from the writings of Kees van der Heijden. The contextual environment surrounding the transactional environment, incorporating the actors, which surrounds the focal actor. Very logical. At the same time, the future of most focal actors is to a great deal determined by the future of its customers. Can it be that focusing on the focal actor, our organization, might lead to an insufficient understanding of the waters ahead?

Let us take a brief look at some big companies that might have looked at the wrong futures. General Motors was for 100 years a dominant company in the automotive industry. Focusing on profiting from financing, they did not pay attention to the changing landscape and the new demands from customers. Bankruptcy was the consequence for one of the worlds biggest companies. Kodak, that was one of the world’s biggest film companies, did focus and protect its film business although they recognized, and invested in digital solutions. The focus on their traditional core led Kodak to file for bankruptcy in 2012. A third similar example could be Nokia. The company had very hard to recognize the potential of smartphones, perhaps it had a hard time connecting to people, their customers. A major downfall and restructuring followed. These examples have strong connections to consumer markets. They also point out that focusing heavily on your own future may be an activity that focuses on a soon obsolete business. In industrial markets we see that for most B2B activities there is a small number of customers that form the core of the business. Disconnecting from the future of already a few might have profound consequences. Being too close to home might lead us to focus on the wrong futures, our owns in stead of those of our customers.

The customer as the core of strategic thinking is not a new idea. Personally, I have had the benefit of being a colleague to pioneering consumer centric strategic thinkers, the late “management guru” Richard Normann and Professor Christian Grönroos. Appreciating that the success of an organization is dependent on the success of its customers is key. And even broader, it is a question of the success of the value creating system that the company is part of, a system of interactions between actors like customers, suppliers etc., as so well highlighted in the seminal 1993 HBR article “Designing interactive strategy” by Richard Normann and Rafael Ramirez.

It seems to me that a very fruitful futurizing approach is to focus on the future of the value creating logic and its dynamic systemic future properties. This would naturally increase the complexity of the analysis, but at the same time reveals more potential opportunities and risks. A futurizing approach like this would also redirect the strategic conversation. To build on Norman & Ramirez, one would say that the key strategic task is the design and reconfiguration of roles and relationships among the constellation of actors to mobilize the creation of value in new forms and by new players. Guided by our understanding of plausible futures, the organization would design and develop its own value creating system, which has customers as a very central position. Shifting the focal actor of the analysis from the own organization to its customers, or its value creating system, will also enable engagement in more strategic dialogues with stakeholders, thus enhancing the understanding of what might come at you, given that one has the proper processes and competencies to interpret signals.

Many scenario-building approaches deal with the changes coming from the contextual environment. We build scenarios from plausible outcomes of e.g., technologies, macroeconomics, changing consumer behaviour etc. These approaches seldom incorporate how actors in the transactional environment might drive change, seizing opportunities, and sometimes create new maps that might change the landscape. Fortunately, we start to see fruitful analyses incorporating iterative interaction between the contextual and transactional environments. Naturally, more demanding but the approach does pay off. We might understand coming moves of major players and emergence of disruptors from the start-up field. The analysis might lead us to discover pockets of the future in the present, to quote Bill Sharpe and Tony Hodgson in their Three Horizons conceptualization. Perhaps the new Teslas, Amazons, Facebooks and alike would pop-up in the analysis. Extending this thinking is a topic for coming writings.

To build scenarios for plausible futures of our customers is central for contemporary strategic planning. Doing so brings a better understanding how we can continuously support our customers, and other actors in our value creating system, to prosper and make good in times to come.

Wrong futures?

Turbulence is an ever-present property of most organizations’ operating environment. Thus, different applications of futurizing have become an important practice as we navigate towards uncharted waters ahead. But, paraphrasing on a previous blog-text I wrote, one could ask if our futurizing approach is focusing on the wrong futures?

One frequently used illustration in the scenario field is the onion-like graph, developed from the writings of Kees van der Heijden. The contextual environment surrounding the transactional environment, incorporating the actors, which surrounds the focal actor. Very logical. At the same time, the future of most focal actors is to a great deal determined by the future of its customers. Can it be that focusing on the focal actor, our organization, might lead to an insufficient understanding of the waters ahead?

Let us take a brief look at some big companies that might have looked at the wrong futures. General Motors was for 100 years a dominant company in the automotive industry. Focusing on profiting from financing, they did not pay attention to the changing landscape and the new demands from customers. Bankruptcy was the consequence for one of the worlds biggest companies. Kodak, that was one of the world’s biggest film companies, did focus and protect its film business although they recognized, and invested in digital solutions. The focus on their traditional core led Kodak to file for bankruptcy in 2012. A third similar example could be Nokia. The company had very hard to recognize the potential of smartphones, perhaps it had a hard time connecting to people, their customers. A major downfall and restructuring followed. These examples have strong connections to consumer markets. They also point out that focusing heavily on your own future may be an activity that focuses on a soon obsolete business. In industrial markets we see that for most B2B activities there is a small number of customers that form the core of the business. Disconnecting from the future of already a few might have profound consequences. Being too close to home might lead us to focus on the wrong futures, our owns in stead of those of our customers.

The customer as the core of strategic thinking is not a new idea. Personally, I have had the benefit of being a colleague to pioneering consumer centric strategic thinkers, the late “management guru” Richard Normann and Professor Christian Grönroos. Appreciating that the success of an organization is dependent on the success of its customers is key. And even broader, it is a question of the success of the value creating system that the company is part of, a system of interactions between actors like customers, suppliers etc., as so well highlighted in the seminal 1993 HBR article “Designing interactive strategy” by Richard Normann and Rafael Ramirez.

It seems to me that a very fruitful futurizing approach is to focus on the future of the value creating logic and its dynamic systemic future properties. This would naturally increase the complexity of the analysis, but at the same time reveals more potential opportunities and risks. A futurizing approach like this would also redirect the strategic conversation. To build on Norman & Ramirez, one would say that the key strategic task is the design and reconfiguration of roles and relationships among the constellation of actors to mobilize the creation of value in new forms and by new players. Guided by our understanding of plausible futures, the organization would design and develop its own value creating system, which has customers as a very central position. Shifting the focal actor of the analysis from the own organization to its customers, or its value creating system, will also enable engagement in more strategic dialogues with stakeholders, thus enhancing the understanding of what might come at you, given that one has the proper processes and competencies to interpret signals.

Many scenario-building approaches deal with the changes coming from the contextual environment. We build scenarios from plausible outcomes of e.g., technologies, macroeconomics, changing consumer behaviour etc. These approaches seldom incorporate how actors in the transactional environment might drive change, seizing opportunities, and sometimes create new maps that might change the landscape. Fortunately, we start to see fruitful analyses incorporating iterative interaction between the contextual and transactional environments. Naturally, more demanding but the approach does pay off. We might understand coming moves of major players and emergence of disruptors from the start-up field. The analysis might lead us to discover pockets of the future in the present, to quote Bill Sharpe and Tony Hodgson in their Three Horizons conceptualization. Perhaps the new Teslas, Amazons, Facebooks and alike would pop-up in the analysis. Extending this thinking is a topic for coming writings.

To build scenarios for plausible futures of our customers is central for contemporary strategic planning. Doing so brings a better understanding how we can continuously support our customers, and other actors in our value creating system, to prosper and make good in times to come.

Mental models, worldviews, and the challenge to perceive unpleasant futures!

Are the ”wrong trousers” here again, but now enabling the war in Ukraine? Analysing why the Kyoto protocol did not solve the climate crises professors Gwyn Prins and Steve Rayner claim [1] that we believed in the wrong mechanisms, we used the wrong trousers. Likewise, the world view in many Western democracies could not align itself with a scenario of a full-scale “traditional” war in Europe. Such a scenario did not exist in the public domain, and probably not in most closed chambers of leaders, not political nor business. Our western logic said it would be irrational or downright stupid. Our strong belief in institutions and mechanisms for peace, like the UN and the OSCE, said it would be impossible. The right for sovereign nations to decide their path forward said it would be wrong. Spheres of influence were a thing of the past. We were unable to put all what we had witnessed, from Grozny through Georgia and Syria to Crimea into a scenario which conflicted with what we believed was rational. And on February 24th, 2022, the “special military operation” started – Russian tanks, missiles, and troops began to shed Ukrainian blood.

Does this mean that scenario and foresight practitioners are unable to provide proper guidance to decision makers? Hopefully not. But the profession must acknowledge the fact that many times we have failed to either point to futures that do not follow the traditional rational, western liberal worldview of humans and how social systems evolve, and/or to get traction for unpleasant futures.

Perhaps this is a consequence of not thinking hard enough, or of an inability to distance oneself from the issue, thus being too close to see what might happen. Today’s scenario practitioners, or professional dreamers [2], are very much pressed on time, focusing on effectiveness of processes etc. There is not much room for such deep thinking that Pierre Wack, who developed the corporate scenario practice at Shell, was famous for. He devoted significant time to meditation and deep reflection, which led to unique understanding of how systems might evolve. Sufi mysticism and Zen Buddhism were, as we understand it, enablers of his ability to perceive the future with mental models different from scenario practitioners whose perception is bound by our western rationalism. By devoting more time to re-perceiving, one might have avoided conclusions about a potential Russian invasion of Ukraine as having no sense.

Another issue to pay attention to is the manufacturing [3] of scenarios. Mostly we see very structured manufacturing processes, processes that have an air of engineering. In those processes, choices of building blocks are made by logical reasoning bounded within prevailing value systems. Sometimes wild cards are thrown into the scenario puzzle, but the question is how much they influence the thinking if they do not fit the dominant mental models. Just think about the Talebian Black Swans. When using the end products, the scenarios, we forget about all the choices we made in the manufacturing process. Everything we did not pay sufficient attention to, things that did not fit the dominant logic, such as a new war in Europe.

Creativity comes into play first when making the scenarios come to life as stories of plausible futures, but it is far too late and does not change the fact that in most cases, the underlying scenarios are only different extensions of the present in new packages. And it is not because we, as Wack instructed us, created one surprise-free scenario to ensure managerial attention. The challenge is very much like the one the late Clayton Christensen described when addressing Excel and MBA students as the biggest obstacles for innovation. We need to increase our abilities to imagine, to think the un-thinkable.

There seems to be an increasing risk that we continue to use wrong trousers. The war in Ukraine seems to speed up a new geopolitical, bipolar structure. Our value systems might hinder us from correctly assess the dynamics in e.g.  Asia and how China’s position is evolving. We build stronger alliances with those who share the same understanding of the world. The US secretary of treasury, Janet Yellen expressed that the US would now favour “the friend-shoring of supply chains to a large number of trusted countries” that share “a set of norms and values about how to operate in the global economy”. Although such a development makes it easier to play in your own sandbox, it creates new risks as you do not understand what is happening in another sandbox.

Professional dreamers must learn their lesson. Scenario planners must adopt more lenses to their work, letting conflicting worldviews and value systems create a constructive dynamic platform for perceiving and re-perceiving. Different trousers must come into play. And decision makers, the clients of the scenarios, must be kept onboard the learning journey into futures.


[1] The Wrong Trousers: Radically Rethinking Climate Policy Gwyn Prins & Steve Rayner A Joint Discussion Paper of the James Martin Institute for Science and Civilization, University of Oxford and the MacKinder Centre for the Study of Long-Wave Events, London School of Economics – 2007

[2] See e.g. Professional dreamers: The past in the future of scenario planning. Cynthia Selin, Arizona State University in Sharpe & van der Heijden. (2007) Scenarios for Success: Turning Insights into Action.

[3] The term manufacturing is picked up from a slide from the Oxford Scenario Programme

Making sense of the senseless – understanding implications of the war in Ukraine

This cannot happen! This war is insane! What on earth are they trying to achieve? Outcries like these have been common since end of February. But unfortunately, Russia’s war against Ukraine is a fact. Another fact is that all the signs were there, including US intelligence predictions of the date when the invasion would start. But we could not interpret things correctly, mostly because the scenario of a war in Europe was so awkward. A tragedy is now unfolding before our eyes. But as decision makers, responsible for our organizations, we must make sense of the situation, cope with plausible tomorrows, and make decisions today.

 

SEEING PAST THE BIASES IS CRUCIAL IN SENSEMAKING

 

In real-time we see what is happening. Media, both traditional and social, report of different aspects. One challenge we have is that there are probably very few “objective” reports, all are looking at the situation through lenses, some intentionally stressing some aspects, some conveying wishful thinking, some pure propaganda etc. To understand why who is saying what is not an easy task.  And at the same time our perceptions and interpretations are very tweaked by our personal set of values.

 

DO YOU HAVE THE TOOLS TO MAKE SENSE OF THE SITUATION AND ITS IMPLICATIONS?

 

The war in Ukraine was not more than days old when the first companies announced that they will withdraw from Russia. This was not based only on the sanctions imposed, but also on other considerations, including moral and ethical. Other decision might be less dramatic, but the situation is new, the playing field has tilted. Few organizations have scenarios and contingency plans for the situation with a war in Europe. These would be helpful to have, when making decisions in a new, and partly unknown situation. It is of utmost importance to start working on such plans now. Doing so, one must consider several plausible ways the war might unfold. Fortunately, there are tools and practices to support the planning process.

Lot of thinking power and energy is devoted to the immediate and acute challenges. The magnitude of the refugee tragedy is enormous. The anticipated recovery from the pandemic will be postponed.  The global financial system faces challenges etc.  At the same time, we already see that the war Russia has started has impacted other processes. Besides EU revamping unity and acceleration of discussions of NATO membership in Finland and Sweden, e.g. energy transition is not only a climate issue anymore, but also a security issue. And global sourcing and logistics are looked at in new ways. Recycling of especially rare earth metals will be looked at more intensively. A lot of issues emerge. Each organization face uncertainties that have not been on the radar screen before the war. It is beneficial to take a fresh look at the set of uncertainties impacting how the future context of the organization’s activities might unfold. Scenario planners are helpful doing this.

 

KEEP A COOL HEAD

 

Individuals are mostly very optimistic. Kahneman and Tversky made this evident in their seminal research. We are bad at dealing with unwanted futures. It is easier to condemn a war than dealing with the fact that there is a war and at least most medium-term consequences are challenging. Fortunately, structured scenario analysis is helpful. Analytical vigour can set personal feelings at rest for a while. The President of Finland, Sauli Niinistö, expressed himself along the same lines in his press release from March 3rd, 2022 “In the midst of an acute crisis, however, it is particularly important to keep a cool head and to assess with care the impact of past and possible future changes on our security – not hesitating, but with care”. For decades the scenario community has helped decision makers to keep a cool head while making sense of a senseless situation.

Brand owner! Why should you absolutely use foresight to help build your brand image?

Your task as a brand builder is to ensure you differentiate from competitors and alternatives and remain meaningful not only to your customers, but all your key stakeholders. In other words, you must continually develop your brand’s positioning, preferably by looking forward than backward. In addition, in their search for unique positions, means to provide added value and untapped markets, brands seek a forerunner status.    

Strategic foresight about the business environment is a useful tool not only for developing growth strategies, but for building the brand’s thought leadership position.

Why is that?

Leading brands not only envision their organization’s future state but engage their stakeholders in envisioning the future(s) of their shared business environment. By doing this, brands show leadership, prove their claims of being forerunners and shape their markets. Foresight and scenario thinking provide the means for envisioning the shared future(s). 

What’s in it for me, you might ask.

With foresight, we can imagine one or several scenarios of the future of your business environment. In the process we identify the most relevant future-oriented communication themes that resonate with your audiences and use those as building blocks in the scenario work.  The point is to have a foresightful view of the key questions you share with your stakeholders and invite them to co-operate in building a future where you and your stakeholders flourish. Here, foresight provides you with compelling content for your brand building – knowledge and inspiration about the possibilities of the future that is crucial both to you and your stakeholder. Better yet, scenarios of the future also provide a communication framework where you can illustrate the value-add of your brand’s innovations and offering in your shared context.

Forerunners like Shell, Wärtsilä and Bosch and many others have utilized foresight as means of brand building with great success. This is exactly what we did with Kemira when we imagined together the Future of Water, and you can read more about the case and its results here.

How do you build your brand and would you like to hear more about how you could benefit from strategic foresight as a brand builder?

Let me know and let’s talk!

Tomi Heikkinen kuva

Tomi Heikkinen
Director
+358 40 709 9530
tomi.heikkinen@capful.fi

Post ceteris paribus

In a not too distant past, we used to model and calculate how things would develop with a ceteris paribus assumption of all other aspects of the issue than those we analysed. There was, and is, a rationale for “all else being equal”. Complexity is reduced. Our computational and cognitive capabilities are at ease. And we can produce an answer, which, according to the late management thinker Peter Drucker, too often is more important than asking the right questions.

The times we are living see change happening at an accelerating pace. The complexity of issues at hand is increasing, as we also appreciate the interconnectedness between micro, meso and macro level processes all around the globe. All in all, uncertainty is genuine. It cannot be reduced to risk and probabilities. The uncertainty we are confronted with in decision making does not follow the probability distributions underlying our traditional decision support models. This context indicates that we must accept living in a post ceteris paribus world.

Facing the complexity challenges, decision makers should not go back to tossing the coin. Fortunately, there are increasing possibilities to get support to deal with complexity. Advances in the computer technologies, not even to mention the emergence of supercomputers, allow us to simulate myriads of potential futures that the decision maker might experience coming at him or her. Artificial intelligence, making use of increased computational power, contributes with further support, especially in cases where elements of pattern recognition, in the broadest meaning, comes into play. The theoretical frontiers and their applications in domains like complexity, systems, chaos etc. are also advancing rapidly.  And virtual reality can support decision makers to experience futures etc. So, we do not need to include ceteris paribus conditions to be able to deal with complexity.

But there is one crucial constraint, our cognitive processing. Most of us are unfortunately not unconstrained in our capacity to deal with loads of information and tons of options to go forward. First, we are very selective in paying attention to information, and biased in how we allow our brains to process the information. Research shows that we tend to go with what is familiar, and, perhaps more worrying, we tend to put a higher probability to something that is in some way familiar to us to happen, than what is unfamiliar. One consequence is that we will face more surprises, the future did not play out as expected. But that expectation did probably not count for the unfamiliar part of the complex world coming at us.

So, tools are available, but all of us are not well prepared to benefit from them in dealing with the complexity of futures. Scenario planning offers one way to cope with the challenge. Pierre Wack, whose work at Shell, established scenario practice as a tool for strategic planners and decision makers to cope with genuine uncertainty in a world of accelerating change and increasing complexity. The manufacturing of logical consistent, analytical and emotionally sticking descriptions of plausible futures enables decision makers to make journeys into futures, futures which are outcomes of very complex dynamics but depicted in an understandable way. This enables cognitive processes to put output from decision support into different, and new perhaps previously unfamiliar, contexts and use it successfully.

Let us make complexity a friend, and enjoy living in a post ceteris paribus time.

Writer:


Mikael Paltschik
Senior Advisor
050 344 6953
mikael.paltschik(at)capful.fi

Scenarios, strategic options and scent of roses

“The 2020 election doomsday scenarios are endless: Dozens of lawsuits challenging state results.”

“Wildlife expert says black bears hunting humans is an extreme scenario.”

“Worst-case global heating scenarios may need to be revised upwards in light of a better understanding of the role of clouds, scientists have said.”

US banks have again been evaluated against adverse scenarios in annual stress tests, and the Finnish Air Force has trained key personnel in tactically challenging scenarios. Different transmission scenarios have been explored during the coronavirus pandemic, and recently published scenarios have already been updated to reflect the pandemic’s impact. Scenarios are frequently featured in the news – in a wide variety of contexts – and at first glance, they seem synonymous with alternatives. In strategic conversation, scenarios often refer to an organisation’s strategic options but also to different types of forecasts, quantitative models, economic modelling or sensitivity analyses. What do we mean when we talk about scenarios – and why does it matter?

Scenarios and strategic options – different tools for different purposes

What do scenarios and strategic options have in common? Both deal with alternatives. So, does it matter if strategic options are called scenarios? I think it does. Scenarios relate to alternative developments in the external environment of an organisation, whilst strategic options address the organisation’s own development pathways.

Shell, a pioneer of scenario work, has been developing scenarios since the 1970s and defines them as “plausible and challenging descriptions of the future landscape”. It is in this future landscape – illuminated by scenarios – that companies and other organisations must navigate and steer their operations, with alternative routes and directions available to decision makers – in the form of strategic options.

Strategic options are linked to companies’ own choices and opportunities, for example when pursuing growth. What are the dimensions of market growth and what are the company’s options and enablers regarding growth? A creative and systematic process helps build strategic growth options, discuss them in a structured manner and assess them systematically from different angles to draw up a well-founded growth strategy for the company.

Strategic options are a useful but underexploited tool. Based on research by Capful and others, a large number of companies believe that strategic options should be used as part of strategy work and decision making. In practice, however, very few companies systematically use them when developing strategies – due to firmly entrenched decision-making processes, avoidance of conflict or lack of time, among other things.

In the midst of the coronavirus crisis, it’s useful to look at the large number of uncertainties in the external environment and make scenarios for what might lie ahead; anticipate how and when we’ll get out of the pandemic and what the post-crisis world will look like. It also makes sense to take full advantage of strategic options – identify, describe and evaluate them against different criteria and scenarios – to make informed choices. But in the context of strategy making, it’s also advisable to keep in mind that scenarios and strategic options are not the same: Scenario-based strategy work is different from strategy work based on strategic options. If they look and smell like strategic options, why call them scenarios when they in fact are strategic options.

Scenarios or forecasts – what’s the difference? 

From the outset, pioneers of scenario work – like Herman Kahn, Pierre Wack, Shell, SRI International and GBN – opted not to assign any probabilities to scenarios: all scenarios are treated equally possible. This may have been partly in response to companies being overly dependent on quantitative model-based projections in their strategic planning. Since the early 1970s, forecasting errors had become more frequent; they were at times dramatic and in some cases disturbingly large. What were the conclusions then, and what are the implications for scenario practice today?

  1. Scenarios should be used to identify plausible futures – not to predict probable futures.
  2. All scenarios presented should be taken as equally possible – for managers to thoroughly analyse the implications of each scenario and to compose backup plans for each scenario.
  3. Scenario work should reveal several possible futures – not to pinpoint the most credible future or the most likely one that is consistent with some underlying assumptions.

To spot genuine uncertainties and discontinuities or to anticipate radical structural changes and dramatic shocks in the external environment, we need a method that allows us to think the unthinkable and imagine the unimaginable – free from probabilities. It is not possible to foresee significant step changes using forecasts that are based on today’s and yesterday’s knowledge, frameworks, cause-effect relationships, continuities and trends.

Why is it important to emphasise the difference between scenarios and forecasts? Our thoughts and perceptions are – often unconsciously – controlled and guided by the desire to predict the future and the belief of past events repeating themselves. Scenarios are a tool, not only for dealing with uncertainty, but also for challenging decision-makers’ existing worldviews and mental models. To make this possible, we should avoid falling into the probability trap and steer clear of dominant thinking in scenario work.

The road from scenario thinking to the world of forecasting is paved with probabilities: when one starts talking about the likelihood of future developments, one shifts from scenarios to forecasts. Scenarios help you ask the right questions, whereas forecasts are used to find the right answers. Many strategic missteps stem from trying to find the right answers (problem solving), even though the right questions have not yet been asked (problem framing).

Forecasts and scenarios serve different purposes, and it’s prudent to keep these concepts and associated methods and practices separate in the strategy toolkit. A forecast is intrinsically uncertain, but this does not make it a scenario. If it looks and smells like a forecast, it’s a good idea to call it a forecast.

What are scenarios in strategy work – and what are they not?

The coronavirus crisis has revved up scenario projects. There’s an exceptionally high level of uncertainty regarding the future, and scenarios make it possible to address the uncertainty in a meaningful way. But in the thick of the action, it’s worth keeping the concepts of scenarios, strategic options and forecasts separate. Below is a brief summary of what scenarios are and what they are not in strategy work.

The economic, environmental, technological and other forces affecting organisations are increasingly complex and intertwined, and unexpected events like the Covid-19 pandemic can radically increase volatility in the external environment. But complexity and uncertainty need not prevent us from preparing for the future. Scenario-based strategic planning helps decisionmakers develop flexible strategies for an uncertain future, whilst new tools like Capful’s Scenario BuilderTM help make the process agile and effective.

When embarking on a scenario-based strategy project, it’s a good idea to make the rules of the game clear to all participants. The purpose of the process is not to prop up the ‘official’ future, determine a probable or preferable future, or seek support for existing management views. Quite the opposite, there’s now an opportunity to delve into issues and topics that call into question the official worldview or are otherwise ‘forbidden’ or ‘impossible’. To make the most of the project, it’s also necessary to clarify the concepts and help project participants distinguish the charming scent of scenarios from the equally wonderful smells of strategic options and forecasts.

Quotes from: CNNCBCThe Guardian


Arto Kaunonen
Founder, Senior Partner
+358 50 356 0717
arto.kaunonen(at)capful.fi

Making the strategic conversation a process

Managers tend to be rational decision makers. Their rationality is mostly bounded by the recognized options available. The preference for rationality is well supported by the corporate calculus machinery. Net present value, or metrics alike, is looked at when considering the next steps in the strategic dance around the competitive equilibrium. Actors are supposed to move in a predictable way. And, as long as predictability reigns, things are very well.

Unfortunately, uncertainty has become the new norm. The options available become both vaguer, and more options might appear on the strategic radar screen. In the preface to the second edition to his seminal book on scenarios, Kees van der Heijden writes ‘Uncertainty has the effect of moving the key to organizational success from the “optimal strategy” to the “more skillful strategy process”’. The subtitle of the book is “The art of the strategic conversation”. Today, more than ever, when a lot of decision processes are highly influenced, not to say paralyzed, by the consequences of Covid-19, managers are well advised to move away from the sphere of illusionistic predictability and adopt another approach to cope with navigation and decision making.

Strategic conversations are about how to find a fit between plausible futures that might come at the organization, and what repertoire of activities the organization can mobilize.  Well designed they bring a multitude of perspectives making the conversation very rich. But the richness will turn into information chaos if there is no way to structure it. The scenario practice has proven to be a very powerful tool to cope with vast amounts of information and uncertainty. Scenarios not only bring structure, they engage in an inspiring way with plausible futures, allowing managers to make journeys into the future, and back. Decision making in the present is then informed by their “memories of the future”.

We see very notable examples how organizations use scenarios as a central ingredient in making the strategic conversation a process. A classical design is to have scenarios informing the strategy review at the beginning of an annual strategy process, and then evaluate the strategy proposal against the scenarios before decisions are taken. Another way to engage with scenarios is to have scenarios to inspire the generation of strategic options. Most scenarios are built on key uncertainties. Another use to stage the strategic conversation based on scenarios is to have a series of workshops, or alike, around the uncertainties, and perhaps, letting the learning not only inform the strategic conversation, but also the scenarios, potentially calling for revisions. We do also see how business intelligence systems are used to track and inform on signals connected to the uncertainties encapsulated in the scenarios.

The turbulence managerial decision makers must cope with, will probably not diminish. To live in a world of predictability is to call for trouble. To design a proper process for the strategic conversation, supported by e.g. scenario thinking, is a way to increase the probability of making intelligent choices in an uncertain world, and sleep well at night.


Mikael Paltschik
Senior Advisor
050 344 6953
mikael.paltschik(at)capful.fi

The fruitful interplay between strategy execution and scenarios

We very often hear that engaging with scenario work while being simultaneously tasked with delivering the company’s present strategy is a particularly hard undertaking for executives. A good set of scenarios casts new light on many of the assumptions the strategy is built on, and perhaps calls for reconsideration of the present strategy, making life for the executive more difficult. The easy solution is to stick to the strategy and hope that the future will fit the chosen strategy.

The executive dilemma comes from mixing two different conceptual worlds. Richard Normann, who was one of the leading thinkers in management and strategy, distinguished between two conceptual worlds: The World of Management and the World of Business. In the former, executives are focused on making the existing strategy a success, working with the total repertoire of managerial tools. Budgets are set, and they are to be met. Rewards are linked to the agreed goals. As an executive, you tend to limit yourself to the transactional environment while making sure the whole organization is progressing in the same, agreed direction. Thus, no ambiguity about goals and direction exists when you start work in the morning.

The mental model in the World of Business is a different one. You focus on the context of your present business and try to get your head around how that context might change, and how those potential changes might impact and change the transactional environment in which you are executing on your present strategy. This includes a multitude of issues that you cannot control, but the outcomes of which will certainly impact the conditions for your business. Trends and uncertainties occupy your mind. Somebody might even look for a black swan or spot a pink elephant. All in all, this is where scenarios can be helpful. A proper engagement with scenario thinking can help to perceive futures coming at you, carrying with them new opportunities, but also threats. Having spent time in the future, you make the journey back to the present, but with scenarios, the stories of plausible futures, you have the potential to institutionalize memories of the future.

The World of Business meets the World of Management when trying to understand the fit or misfit between future conditions, as described by the scenarios, and the dominating ideas manifest in present strategy. Sometimes you can sleep well, when the future, as understood by you, appears as your current strategy should expect, but more often the need for rethinking the strategy is apparent. The fit/misfit analysis between your strategy and scenarios is not only to be taken as a burden making your life harder, since it may also disclose new opportunities to be exploited or reveal risks that are mounting up. All these impactful steps are taken in the World of Management.

The strategic conversation that brings success to the organization should include a proper, well-structured interplay between the dominating ideas underlined in the present strategy, and the memories of the future, manifest in scenarios. The ability to handle both worlds, Business and Management, as separate logics, and staging the interaction between the two is the key to success.


Mikael Paltschik
Senior Advisor
050 344 6953
mikael.paltschik(at)capful.fi