Foreword
Louis van der Merwe
IT COMES AS NO SURPRISE that in our world of discontinuities and volatility, the use of scenarios as part of strategic planning processes has taken off. According to the Bain & Company annual survey of the most-used management tools, scenario work has risen considerably. Scenario use has risen from 40 percent of those surveyed in 1999 to 70 percent in 2006 (Economist, 2006). The Economist goes on to say, “As a result of its scenario planning, the New York Board of Trade decided in the 1990s to build a second trading floor outside the World Trade Centre, a decision that kept it going after September 11th, 2001.”
As the environment becomes more volatile, one wrong assumption about future conditions or markets could put you out of business or set your organization back years. Leaders of organizations and governments need to skillfully use state-of-the-art tools and methods in order to steer their organizations away from dangers and to identify new opportunities. Appreciating how a specific method works and its underpinning theory is important for practitioners and leaders alike.
Lewin’s (1951) famous quote “There is nothing so practical as a good theory” (p. 169) is probably overused. However, it is particularly relevant for scenario planners, because the practical utility of theory has not yet been emphasized.
This book is aimed at the evolving community of practitioner-scholars involved in scenario work across the globe. Chermack’s theory building, together with that of scholars such as Richard Swanson, Susan Lynham, and others, is based on traditional scientific inquiry (Swanson & Holton, 2005), naturalistic inquiry (Denzin & Lincoln 2000), as well as action research (Reason & Bradbury, 2001). Chermack has based this work on his own experience as a practitioner and researcher as well as what he has learned from the deep tradition of scenario practitioners. This book provides the emerging scenario builder with a practical and theoretical foundation on which to build a competent practice.
For the first time, the theoretical foundations of scenario planning have been put forth.
Providing the theoretical foundations for the scenario method for the first time through this book is important and essential for advancing practices. An example for thinking about scenario use can be illustrated by recalling what happened when you last purchased a car. What did you notice when you drove your car out onto the streets? You probably noticed how many people were driving the same car! It may have appeared as though there were many more cars like yours than you had noticed before, when in fact there is only one more of the same car on the road—yours! Becoming aware of your selective observation (which is a skill that develops when scenario work is done well) enables you as a decision maker to notice relevant dynamics more quickly than someone who has not explored the what-ifs.
A rigorous theory base stabilizes scenario practice and lays the foundations for establishing best practice. Chermack’s work provides an excellent start to articulating this body of theory. Theory can be defined as “a scholarly description of what works best and why.” This book provides that basis and will guide practitioners and leadership toward best practice. While it provides practical how-to’s, it argues strongly for the theory underpinning this practice, as well as useful metrics for measuring the impact of scenario work.
Chermack’s writing takes the reader onto the cutting edge of strategy making—namely, strategy making as strategic conversation. Here you will get the big picture of scenario-based strategy in a framework that allows you great freedom to bring in your own experiences as tools. Alternatively, if you are new to scenario planning, a high level of detail is shared. For example, a calibrated instrument for measuring the quality of strategic conversation is provided, as well as recommended tools for measuring other aspects of dynamic organizations. Chermack has contributed an emphasis on performance. It may be assumed that scenarios add value, but it is in the best interests of the art of scenario planning to create a tradition of documenting the actual results.
The discipline of scenario planning needs to establish a track record of its contributions. Assessing scenario work is overdue, and, like the establishment of underlying theory, doing so will stabilize scenario practice and boost quality. Chermack has described an elegant approach to assessment that provides the practitioner with many different tools for pinning down scenario impact. The invitation is for scholar-practitioners to add to this body of knowledge, through their action research, reflection, and inquiry. A comprehensive, theory-based practice that emphasizes assessment will create a professional cadre of competent practitioners for scenario work.
We have learned from MIT’s Peter Senge and the community of practitioners building learning organizations that learning faster than competitors is the ultimate competitive advantage. Scenario-based strategy is in essence a learning and unlearning methodology. Pioneers such as the late Don Michael (1973) in his book Learning to Plan and Planning to Learn and Arie de Geus (1988) in his popular Harvard Business Review article “Planning as Learning,” first drew attention to the fundamental role of learning in organizations as the basis for competitive advantage.
While developing the scenario method in Royal/Dutch Shell, Group Planning, Pierre Wack aimed scenario work at shifting the assumptions in the minds of decision makers. This process enabled them to notice emergent dynamics in the environment, before competitors, as they had visited and studied them during the scenario-building process. This capacity of aligned assumptions with the capability to self-correct early provided Royal/Dutch Shell with a significant competitive advantage when oil prices were volatile in the 1970s. The assumptions on which they had based their decisions were influenced by the scenario development process and therefore held a wider view of their world.
Because scenarios can be powerful tools, they have been used in widely differing application areas. Herman Kahn used them to shift attention onto the impending dangers of a nuclear holocaust, and Royal/Dutch Shell leaders used scenarios for decision-making. In South Africa, scenarios were used to push people toward “the high road” and away from “the low road” of racial conflict and economic destruction. Engaging the emerging South African national leadership in a conversation about the future scenarios they might be confronted with resulted in avoiding populist policies that compromised the future of the economy. The list of application areas grows.
Initially, scenario practice was learned via an apprenticeship model. If you were fortunate enough to be a member of the Royal/Dutch Shell Group Planning, you could learn from the masters, such as Pierre Wack, Ted Newland, Arie de Geus, Kees van der Heijden, and Peter Schwartz. The first public courses for learning the craft of scenario development emerged in the early 1990s. Early teaching was based on simulating a typical scenario project providing practice and coaching in the essentials of the various phases of developing a set of scenarios.
The recently established Scenario Planning Institute at Colorado State University is destined to provide a home for scholar-practitioners and capacity building for scenario-based strategy. It promises to become a center for high-quality scenario work, training of skilled scenario practitioners, and the dissemination of performance-based scenario planning.
I wish you all the success with the scenarios you develop. May you grow with other practitioners in the field and use this book and scenarios to make the world a better place.
Louis van der Merwe
Centre for Innovative Leadership June 2010