The 2nd Apology

At the intersection of demographics, economics, politics, psychology, strategic business planning, and something I’ll call narrative arts (e.g. film, literature), sits a small but growing niche disipline (if it can even claim that title) called scenario planning.   Scenario planning, in spite of its management guru/Dilbert-like label, is only the creation and telling of plausible future scenarios (stories) in order to stimulate strategic thinking and better prepare for an uncertain future. 

Businesses and governments have for years used quantitative, economic models to forecast the future, using these models as a baseline for decisionmaking.  While clearly useful (no decision, either at the individual or corporate level, should be made without consideration of economic factors), these “forecasts” are by their very nature, wrong.  Worse still, they gave (and continue to give) an impression of numeric certainty.  Federal agencies are often required by law to create far-reaching policies based on such estimates.  The upcoming climate change debate in Washington will illustrate this phenomenon nicely. Climate and economic models will be asked to predict the nature of the world economy in the 22nd century, so that we can create policy on carbon emissions today.  They are being asked to predict the behavior of not just billions of individuals, but whole cities and nation-states – not just next year – but decades into the future.  Or in other words, we are dealing with irreducible uncertainties, ad infinitum, all with the apparent certainty of modeled discount rates, sensitivity analyses, and the projected GDP in the year 2078. 

Certainty about the future can lead to bad decisionmaking today, particularly when your numbers are wrong.  Or even more likely still, “events” intervene.*  Scenario planning seeks to fill some of the gaps, and expose the preconceived notions of decisionmakers.  Military strategists were the first to employ this type of thinking, and Shell Oil was the first to integrate it into their strategic business planning. 

Rather than focusing exclusively on economic and budgetary factors, scenarios attempt to weave together economic, demographic, technological, cultural and political data to construct plausible stories about what the world may look like in a specific time horizen.  The National Intelligence Council recently published their Global Trends 2025, a set of four “fictionalized scenarios” about what the world may look like in 2025 (hint: most scenarios highlight the rise of a couple densely populated countries in Asia).  Even though this document contains four fictional stories cooked up by the NIC, the media reports them as “predictions” and “forecasts.”  This reportage completely misunderstands the purpose of scenario planning – not to predict the future, but to prepare for it in light of our complete inability to predict the future with accuracy.

A few core scenario planning resources on the web:  Global Business Network, Scenario Planning Resources, The Art of the Long View.

* “Events dear boy, events.”
-British politician Harold MacMillan’s response to a journalist when asked what is most likely to derail the plans of government. 

JM