Strategy is ultimately an expression of collective mental models[i]. To create a strategy that is more than ‘mere incrementalism’ we must therefore create new mental models. Most major strategic shifts reflect a fundamental shift in the framing of the strategic context.
But how do you build new mental models? Marcel Proust once wrote “the real voyage of discovery consists not in seeking new landscapes, but in having new eyes”. And Amy Tan[ii] described how she saw her mother in a fresh light:
“you have to be displaced from what’s comfortable and routine, and then you get to see things with fresh eyes”.
This must be one of the most important goals of any strategic conversation. However, the idea that people can just decide to ‘think differently’ is delusional. So how do we set up a strategic conversation to create fresh possibilities?
One ‘structural’ mechanism to create fresh thinking is scenario planning. Unfettered, our instinct is to create a narrative that reflects our interpretation of events and suggests a natural arc to the future. Scenario planning is designed to expose us to alternate plausible[iii] futures. We come to ‘experience’ these alternate futures through the scenario narrative: it is through storytelling that we make sense of events. It is this ‘experience’ that shifts our mental models[iv].
We recently hosted scenario planning forums in Perth and Brisbane for more than 30 senior leaders. The participants explored the impact of the shifting political trendlines[v] on the international business environment. The groups used a simplified deductive process to arrive at the classic 2x2 scenario matrix.
Participant feedback highlighted three key themes:
- The power of diversity … participants came from different sectors, different functional backgrounds, different genders. This is part of the power of scenarios. The technical description is that we are ‘scaffolding’ the knowledge of participants.
- The power of storytelling … at the Brisbane forum groups developed a simple timeline which described how a particular scenario unfolded[vi]. Participants highlighted the importance of the storytelling is in the process. It allows the executive to ‘experience’ the future.
- The power of deep, reflective conversation … few companies build into their strategy process sufficient time for these conversations. Participants recognised how easy it is to slip into 'preferred futures'. Generative conversations usually occur around broad and exciting topics, with the agenda loose and relatively unformed.
Scenario thinking has been around a long time, but is still underutilised despite the common lament that the world is ‘more VUCA[vii] than ever before’. A former MD of a large, global company reflected ‘post retirement’ that as an executive the clock speed is so fast, he had little time for reflection.
Here are three possible triggers for the use of scenarios:
- Ahead of major capital investment decisions. Big capital investments typically require long periods to repay the cost of the capital. It is one thing to conduct sensitivity analysis on the investment models, but scenario thinking is a qualitatively different modelling process.
- When you are facing potentially transformative shifts in the industry structure. For example, what is the future of transport systems? What might health care look like in the next 20 years? Each of these sectors will transform, and from here it is impossible to know how these shifts will unfold.
- When you want to build deeper strategic intelligence amongst your leadership team. Strategic intelligence includes the ability to connect and pattern trends from across multiple domains.
The goal of scenario planning is not to produce neat stories, but to engage leaders in envisaging a future which is qualitatively different from the ‘approved future’. What is the evidence scenarios can change minds? A recent study found:
- Scenarios do not reduce our tendency toward over-confidence
- Exposure to a single scenario caused more than half the executives to change their minds
- Exposure to multiple scenarios led to executives to give preference to options with greater flexibility.
We will be running the next in our series in Perth and our first in Melbourne over the next 6-8 weeks. We plan to explore the future of organisations. Stay tuned.
[i] Mintzberg famously argued that strategy is often emergent, pushing back against the overly prescriptive planning approach much loved three decades ago. But even ‘emergent’ strategy must ‘build’ a shared collective mindset to take on the power of strategy
[ii] Author of The Joy Luck Club
[iii] There is a whole other conversation around what constitutes a ‘plausible future’. Ultimately it has to be plausible in the eyes of the leadership group. Without that, it is impossible to bridge from the scenarios to their mental models.
[iv] Mental models are a product of our cumulative experience, knowledge and values
[v] These included: the crisis of democracy; the future of trade agreements; the socio-cultural divide and more
[vi] Time didn’t permit us to explore all four scenarios
[vii] VUCA: volatile; uncertain; complex; ambiguous