3 Reasons CIOs Need Scenario Planning

Scenario planning is the art and practice of imagining multiple futures to create a strategic context for planning and decision making.

Pioneered by Royal Dutch Shell in the '60s and '70s, the technique is now widely used by businesses and governments as an important element of strategic planning. Functional departments increasingly employ scenario planning to develop better applications or to anticipate the next big movement in consumer behavior. And scenario planning can also be valuable for chief information officers seeking better plans, more innovate services, and a context to complement the fragility of emerging offerings, like business intelligence.

Scenarios and technology planning

There is nothing more uncertain than the technology industry. Going digital is about the only phrase guaranteed to hold true. Speculation and reality about how something goes digital, and the implications of its movement from the analog world, often vary greatly even from those who invent the technology. Very famous figures in the computing world, from Bill Gates, who once quipped that “640K ought to be enough for anybody” to the late Ken Olsen, President of Digital Equipment Corporation, who was confounded as to why people would need a computer in their homes, have failed to realize the potential of technology to transform the way we work and live at certain time, even though they may have had the money and will to scramble to react later.

Scenario planning purposefully forces people out of their comfort zones into wildly divergent, yet very plausible alternative futures based on concepts and ideas that are uncertain today. Take book publishing for instance. Today we know that books are going digital, but there is much uncertainty about their future. Which business model will prevail? Which format will dominate, if any? What will happen to traditional book publishers? Will open source textbooks displace traditional college texts? Scenario planning provides a framework to consider those ideas, not in the abstract, but through tangible and visceral stories that help people imagine a range of ways those questions might be answered. It then helps them imagine how they would react to those circumstances if they turned out to be true.

CIOs have a wide range of issues that would gain insight by being examined through the lens of scenario planning. Consider the future of security and cyber warfare, what devices are likely to be targets for data and applications in the future, what happens if there is a catastrophic failure in the cloud, to name just a few of the many uncertainties facing information technology professional today.

With scenario planning, organizations may not be able to discern or predict the exact nature of a threat or an opportunity, but they will be better positioned to navigate the eventual outcome if they have considered an uncertainty from multiple perspectives rather than taking the word of one pundit, or the extrapolation of one trend line as the most probable future while discounting other perspectives.

Scenarios and Innovation

Many technology suppliers arrogantly believe they create the future. At best, they co-create it. The securing mindshare and transformation of an idea into a multi-billion dollar business often involves as much luck as it does perseverance and great execution. If we take that same technology bravado into the IT shop, we often find big projects that fail, not because they aren’t good ideas, but because they aren’t well considered in light of the uncertain world into which they are asked to blossom.

Scenario planning can help organizations turn ideas into valuable innovation by helping them imagine the obstacles, and the partnerships and enablers, that will simultaneously seek to quash an idea and to move it forward. By imaging those issues in a robust way, organizations can anticipate obstacles and have plans to avoid them when they occur. They can nurture partnerships and surf on enablers to help create enthusiasm and acceptance for a new project, be it something as simple as a point-of-sale system, or as complex as an ERP implementation.

But scenarios don’t stop by helping implement the innovations of others. Scenarios should be an integral element at the front-end of all system designs or new technology adoption project. In this case, scenario become an anthropomorphic member of the team—their multiple perspectives on the future constantly prodding and poking at the assumptions underlying ideas, and creating a context so different from daily experience that technology becomes transformed. In this way, a simple idea, like collaboration, manifests itself in different ways against the social, technological, economic, environmental and political landscape which planners subject it to. In one future, collaboration is an individual tool to help people find good partners and manage the wealth of information available more effectively, in another, it’s a political tool focused on strict adherence to roles with deep surveillance built-in, in yet another it is a tool for organizations to orchestrate and manage their human capital so it performs as well as its other assets.

Although the use of scenarios might not generate an exhaustive set of possible ways technology can or will be used, it creates a much more inclusive set of views than brainstorming. Why? Because the canvas of each scenario offers a rich backdrop of plausible alternative views what might be true in the future, and that context drives people to imagine possibilities that are unlikely to emerge if they remain shackled to simple extrapolations of the present. The scenarios act as a lever to pry open intransigence and empower people to play.

Scenarios and the Fragility of Systems

Data-centric views of IT have started to evolve as business intelligence and “big data” become the latest tools in the technology arsenal.  Unfortunately, these technologies use algorithms based on assumptions about the world. If the circumstances of the world change, then the algorithms become less useful, perhaps even dangerous. The algorithm that assessed risk on Wall Street prior to the start of the great recession continued to discount the risk of derivatives based on a rapidly deteriorating US housing market, leading financial organizations, and the US government, with hopelessly distorted views of the assets on their books.

As these algorithms become more commonplace, assessing and attempting to anticipate outcomes for everything from marketing ideas to new products, to what customers will like next holiday season, something will be required to challenge their assumptions and to create a context for feedback.

Scenarios can help technology managers by shore-up the fragility of their models by providing qualitative analysis when quantitative results become unreliable. This will require that the developers of business intelligence systems become very transparent about the edges of adequacy represented in their systems.

The December issue of Scientific American proclaims “The Machine That Would Predict the Future” and asks, “Can Big Data Show Us the Way?” On a limited basis, within tight constraints, perhaps. In an uncertain world where context and assumptions are as ever changing as the valuation of stocks or the exchange rate of currencies, relying on black boxes may be as dangerous as it is intriguing. Not only can scenarios offer a greater divergence of forecasts than an algorithm based on a limited set of assumptions and fueled only by historical data, but they can tell us what might happen if we act on bad advice from those algorithms.

Managing in an Uncertain Future

IT people, perhaps next only to engineers, are skeptical of qualitative approaches to management. In a world dominated by Six Sigma black belts and various other certifications of swift efficiency and onerous productivity, not to mention the very tractable and predictable nature of computing itself, it is hard to imagine the seemingly random nature of the futures that scenarios present. And that is the point, after all. Organizations that believe they know their future will experience only two possible outcomes: they will be lucky and right, or they will be wrong, with consequences ranging from manageable to dire. And it isn’t all about managing risk; it is also about not seeing opportunity. CIOs are responsible for effectively managing information assets and the technology that delivers them to decision makers, along with the processes that transform them into value. Scenarios can help IT organizations become more imaginative, more intellectually agile and more robust in their planning—and that can only be a good thing when navigating in a turbulent world.

This article is adapted from my November 2011 keynote at the Enterprise 2.0 Conference in Santa Clara, Calif. I suggested there were three areas where CIOs needed to embrace scenario planning. This article explores those topics in greater detail.

[Image: Flickr user steven w]

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