This week, a delegation from Oxford Saïd Business School is visiting the Danish Design Centre to explore scenarios for the future of work. In our “Boxing Future Health”-programme, participants will go through four scenarios for healthcare and discuss the transformation of the sector. Dr. Rafael Ramirez, one of the world’s leading experts in scenario planning, explains why scenarios are such a powerful tool.
Scenario planning has become increasingly popular in recent years. Why?
It’s a conjunction of factors – major organizations began using it, and people have become disenchanted with conventional forecasting, which is treating the world as though it was yesterday. I’m flying British Airways to Copenhagen. I assume they know how much fuel they need, and how tired their pilot will be after a number of working hours, because they have a track record based on big amounts of data. But there are parts of our future where yesterday’s data are no longer helpful. Say, planning for a future after Brexit. In scenario planning, we talk about TUNA – Turbulence, Unpredictable uncertainty, Novelty and Ambiguity. Any one of those conditions will make traditional forecasting unhelpful.
I’m a CEO with a strategy for my company. It has a mission, vision, action points, KPIs etc. I’m focused on my bottom line and attracting the right people. My strategy is tangible and I know how to implement it. Why would I need scenario planning?
Because your strategy assumes that there is a home for it during the implementation. You need scenario planning, when you’re not confident that the future is right for your strategy. Take Roll’s Royce that designs, manufactures, and distributes power systems for aviation and other industries. In 2014, the oil prices dropped significantly, and the cost of replacing engines was not really worth it when the fuel prices were so low. Which meant nobody wanted to invest in marine engines. These are factors you can’t plan for.
You need scenario planning, when you’re not confident that the future is right for your strategy
If you want to make an Olympic team, you know what to do; train. But if you are planning the Olympics, you don’t always know the given context and whether your strategy will fit in. You need a plan that’s robust enough to cope with unforeseen changes. And that’s where scenario planning comes into play.
You have me convinced. How should I initiate this process and whom should I involve?
First of all, you need to realize that there’s a lot of bad scenario planning around. You need to be able to distinguish good practices from bad practices – look at failures and successes, talk to a number of people that have been on that journey. Send 2-3 people to a scenario planning program, and carefully consider how to adopt the principles, and whether or not you need to hire a consultant to complete the process.
Good scenario planning starts backwards with looking at the user and purpose. When scenario planning fails, it is often because it is not clear who should use the output and deliverables – is it for the CEO, the chairman of the board, risk manager etc. And how will it help the company. There must be a user, use and a clear purpose. Don’t confuse predictions with scenarios. The future is very different from the long-term. In scenario planning, we are working with the future for the present.
Good scenario planning starts backwards with looking at the user and purpose
The French distinguish between “le futur” – the future – and “l’avenir” – what will come. You need to imagine possible futures to inform your activity today. The best scenarios have both good and bad things in them. It’s not heaven or hell. You need to assess both new opportunities and new risks. And first and foremost, you need to make sure that your expectations are realistic. If you invest 100 hours in scenario planning, make sure that two thirds of those hours go into figuring out whom the results are for, how the scenarios will make a difference and what the success criteria are.