“How can we formulate strategy in the face of uncertainty?,” asks Learning from the Future, a recent Harvard Business Review article by Peter Scoblic, in its opening sentence. Answering this question has never felt more urgent as leaders prepare for the future. “Even before the Covid-19 crisis, rapid technological change, growing economic interdependence, and mounting political instability had conspired to make the future increasingly murky.” Uncertainty was already all-encompassing.
“And then the pandemic hit.”
When the present resembles the past, we can calculate the probability of future outcomes by analyzing past historical data. That’s how insurance companies accurately predict the life expectancy of different people based on age, gender, general health, behavioral traits like smoking and drinking, etc. But the situation is very different when the present doesn’t resemble the past. “Uncertainty stems from our inability to compare the present to anything we’ve previously experienced. When situations lack analogies to the past, we have trouble envisioning how they will play out in the future.”
Military strategists first developed scenario planning in the 1950s to help them envision the impact of a nuclear war between the US and the Soviet Union, - something that was clearly way beyond anyone’s experience. The object of scenario planning is to assemble all known facts, trends, and other information and use them to create a number of alternative stories rich in detail, typically three or four, about plausible future outcomes along with the development paths and key events that led to such outcomes. Altogether, the scenarios should span the scope of possible futures, although the actual future will likely include events from each scenario.
Scenario planning has continued to be used by military and government strategists. For example, every four years since 1997, the US National Intelligence Council has been publishing a Global Trends report, an unclassified assessment of the key trends and uncertainties that might shape the world over the following twenty years to help senior US leaders think and plan for the longer term. The reports illustrate how the future might play out by developing a few different scenarios, each embodying the key issues and decisions that will likely shape the global landscape twenty years into the future.
In the business world, scenario planning has become a valuable tool for strategic thinking over the mid- to long-term planning horizon. Alternative technology, market and political environments can be described in a few discrete scenarios, while organizing the richness and range of possibilities into narratives that are easier to grasp and act on than large volumes of data.
The high degree of uncertainty surrounding the Covid-19 pandemic is one of its most frustrating qualities. How long will the pandemic last? When will normal life return? What will the post-pandemic new normal look like for economies, societies and our personal lives? Not only don’t we have definitive answers, we don’t even know how to best frame these critical questions. This is not at all surprising, since the last time the world saw anything like our current situation was over a century ago, when the Spanish flu infected around 500 million people, - a third of the world’s population at the time, - and killed an estimated 50 million around the world.
The executive search and consulting firm Heidrick & Struggles recently developed Covid-19 and the Future of Work, four scenarios that explored the post-pandemic world of work in 2023. Based on an analysis of more than 70 key forces and a survey of over 40 business leaders, Heidrick researchers identified more than 30 key trends shaping the post-pandemic future of work. They then combined their findings to formulate four plausible scenarios built around two key uncertainties: economic recovery, - will there be a near-term economic rebound?; and social trust - will society become more cautious of physical interactions? Let me summarize their four scenarios, which range from optimistic to dystopian.
Tech powered humanity - high economic rebound, high social trust. “The virus is controlled, and the economy roars back, with people craving physical interactions and collaboration to balance out their heavy adoption of virtual work during the crisis.” People combine virtual and physical interactions into their work and personal lives; public and private sector institutions accelerate their embrace of technologies and automation; companies drive economic growth by becoming more innovative and efficient; strong focus on science and technology; global markets open up, helping less developed countries.
Digital enclaves - high economic rebound, low social trust. “The virus is mostly controlled, and the economy has bounced back but continues to be somewhat unpredictable as different regions and industries recover unevenly.” Volatility remains high; people prefer virtual interactions and small groups; digital divide grows, with aversions to high-risk jobs; more jobs become remote, giving companies greater flexibility in sourcing talent; people have a newfound appreciation for personal health; local interests override national and global interests; decreased flow of people and goods across borders cause companies to regionalize operations and supply chains.
In this together - low economic rebound, high social trust. “Social distancing measures last for 12 months, creating enormous economic damage… Families and communities pull together to weather the storm.” Prolonged impact of pandemic leads to a long, deep recession; governments take stakes and bailout many industries; increasing digital economy requires digital skills at all levels to survive; significant focus on closing digital divide, social good and transparency; public-private partnerships drive innovation efforts around science and technology.
Growing divide - low economic rebound, low social trust. “Governments are eventually able to control the spread of the virus, but a prolonged recession and social distancing lead to significant, lasting unemployment and a severe mental health crisis.” Fear of virus coming back; protectionist policies backfire; industries consolidate; organizations adopt tracking solutions to monitor remote employees; digital divide grows substantially; people lose faith in public and private institutions; increase tribalism, polarization, crime and malicious behavior.
How can companies leverage scenario planning to help them think and make decisions about their specific post-pandemic future? In his HBR article, Peter Scoblic offers a few key guidelines:
Invite the right people to participate. “Bring together participants who have significantly different organizational roles, points of view, and personal experiences.”
Identify assumptions, drivers, and uncertainties. “Explicitly articulate the assumptions in your current strategy and what future you expect will result from its implementation… and focus on determining which assumptions it would be helpful to revisit.”
Imagine plausible, but dramatically different, futures. “Imagine what the future will look like in five, 10, or even 20 years - without simply extrapolating from trends in the present. This takes a high degree of creativity and also requires the judgment to distinguish a scenario that… pushes the envelope of plausibility from one that tears it - an inherently subjective task.”
Inhabit those futures. “Scenario planning is most effective when it’s an immersive experience.”
Isolate strategies that will be useful across multiple possible futures. “Form teams to inhabit each of your far-future worlds, and give them this challenge: What should we be doing now that would enable us to operate better in that particular future?”
Implement those strategies. “This may sound obvious, but it is the place where most companies fall down. Using scenario planning to devise strategies isn’t resource-intensive, but implementing them requires commitment.”
Ingrain the process. “In the long run you’ll reap the greatest value from scenario exercises by establishing an iterative cycle - that is, a process that continually orients your organization toward the future while keeping an eye on the present, and vice versa.”
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