Dare to stress test your strategy – What would happen if….?

The idea for this article came as I was reading the book Uncharted by Margaret Heffernan¹. If you haven’t read it, well, you must! It is polished and rich in examples. Most of all, it challenges us to realize that predictions are only useful if we understand how unreliable they are, and that accepting uncertainty is the first step to moving forward and working together to creatively shape the future we want.

We all know that the environment is uncertain and volatile. The current context is the perfect example of an unexpected reshuffling of reality. But once we agree on this, what next? Why do we almost always design a 5-year strategy plan without testing it through various potential new normals? Why is it that we still have limited appetite to test and learn, and a limited budget to try new business models? Why are we mostly using predictable trends (based on past events) and diagnostics based on the present to imagine organizations in the future?

Something obvious is missing. The problem isn’t the intent of the strategic planning but a gap in the methodology. That gap is scenarios.

Scenarios are stories of what the future might look like if certain drivers and or uncertainties materialize^2,3,4,5,6,7. It’s not the typical conservative, pessimistic, and optimistic views you add in your models by simply increasing or decreasing certain drivers by 2.5 or 10%. Scenarios consist of describing potential futures, how things would get to that point, and what impact they would have on consumer behaviours and organizations like yours.

I haven’t invented anything, I just want to raise awareness on the topic. In fact, there is plenty of literature on scenarios and how to use them in strategic planning —I easily found and read almost 700 pages on the topic over the past two months—but they aren’t used sufficiently. Why is that? Because they are frightening; they require a lot of time and effort as well as openness to possible destabilizing perspectives. Executives must be willing to challenge their truths and deconstruct their vision, at least for a moment, in order to solidify them. Shell^2,3 is a pioneer in scenario-based strategic planning and has been known for its avant-gardist scenario expertise and usage for more than 50 years^2,3. It publicly shares its know-how and scenarios. They are referred to in most articles and content on scenarios. I invite you to look into Shell further if the topic interests you. We should view Shell as a model; we should follow it and adopt its approach.

EXAMPLE: 
I’d like to use scuba diving as a concrete example to illustrate what I’m saying. I know it has nothing to do with business, but it’s one of my favourite sports.

I wouldn’t do a complex dive (e.g. a night dive or deep dive, or a dive in a cave or shipwreck) without first discussing what could potentially go wrong and what the underwater conditions might look like with my partner, the other divers in the group, and the dive master:

• What if the current is stronger than expected?
• What if the visibility changes quickly?
• What if the wildlife decides not to accept us in its environment and becomes defensive and/or aggressive?
• What if we face gear problems?
• How will we feel if more than one of the above happens at the same time?
• What actions should we be prepared to take in order to keep our composure and stay safe while enjoying our time underwater?
• What do all of the above scenarios have in common?

Only after going through all these questions will we be able to determine our dive plan, right? I did a complex dive without scenario planning once and it went wrong; I would never do that again. If we go to all this effort for a safe and fun adventure that lasts only 45 to 60 minutes, why don’t we go through a similar process for strategic planning? The consequences for not doing so are deep and wide-ranging.

Have you taken the time to imagine what potential futures lie ahead? How much have you tested your vision and strategy against them? For example, what would happen to your vision and strategy if social patterns change even more than what we’re witnessing now?

• What if material possessions become almost irrelevant for most consumers (versus a minority now)?
• What if cities become giant deserts as some predict?
• What if most workers decide to work part-time to spend more time living? Etc.

So, what now?

Well, the first step is certainly not to embark in a scenario-based planning process right away, but I strongly recommend that you invest some time to answer the following questions:

• What has to be true internally/externally (required truths) for your current vision and strategy to be successful: urban living, free market, distribution network, technologies, etc.?
• What will happen if there is a major shift in these truths?
• What could the future look like if multiple factors become true? (Think of different possible futures.)
• What do all these futures have in common?

Then, ask yourself the same question I asked in my dive plan: “What actions should I be prepared to take in order to keep my composure and stay safe?” In other words, what strategies should you implement and what actions should you take to ensure that your organization will remain sustainable in a different world?

Finally, get ready for your next strategic planning exercise. There’s more than one way to build scenarios. You must explore approaches that make sense for your context and organization. Pure scenario planning is a skill; however, its intent and guiding principles aren’t rocket science, and it’s related to many of the skills that management consultants already have in their toolbox. I have never run a scenario-based strategic plan, but I’m curious to try it if you’re willing to give it a try with me. That’s why my next article will be on a simple approach you can use to improve your next strategic plan. In the meantime, I am keen to go through a first reflection with you in a workshop!

References:

1. Margaret Heffernan – Uncharted: How to navigate the future – Avid Reader Press – 296 pages – 2020
2. Shell International BV – Scenarios: An Explorer’s Guide – 98 pages – shell.com/scenarios
3. Shell International BV – https://www.shell.com/energy-and-innovation/the-energy-future/scenarios/shell-scenarios-in-film.html
4. MIT Sloan Management Review – Paul J. H. Schoemaker – Scenario Planning: A Tool for Strategic Thinking – 18 pages – Winter 1995
5. Louis van der Merwe – Scenario-Based Strategy in Practice: A Framework – Advances in Developing Human Resources – May 2008 – https://www.researchgate.net/publication/237967000_Scenario-Based_Strategy_in_Practice_A_Framework
6. Roland Berger School of Strategy and Economics – Burkhard Schwenker and Torsten Wulf – Scenario-based Strategic Planning – Springer Gabler – 229 pages – 2013
7. McKinsey – The Use and Abuse of Scenarios – November 2009 – https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-use-and-abuse-of-scenarios