We live in uncertain times. The recession is over -- but profits aren't back. Big companies are dominant -- but they seem vulnerable to scandal and drift. If strategy is all about the future, and you can't even get a clean read on the present, then how can you make informed choices about what comes next? With so much uncertainty, strategy is futile. Right?
Wrong. The present may be murky; the future may be up for grabs. But strategy that separates what's inevitable from what's unknowable is the essence of the game.
Thirty years ago, Pierre Wack, a French oil executive with a personal affinity for Indian mystics, realized that strategy as it had been practiced -- straight-line extrapolations from the past, forecasts captured in three-ring binders -- did little to frame the choices that would define the future. The true role of strategy was to describe a future worth creating -- and then to reap the competitive advantages of preparing for it and making it happen. Strategy, in other words, was about telling stories.
Under Wack's influence, Royal Dutch/Shell learned the art of strategy as storytelling -- creating scenarios about the future. Scenarios are carefully crafted tales that link certainties and uncertainties about the future to the decisions that must be made today. Scenario planning -- or "scenario thinking," as Wack called it -- has made Shell an industry leader.
Scenario planning has spread from Shell to other corporate giants. Companies have learned how to frame the future by describing bookend scenarios, stories that offer vastly different trajectories and starkly opposing outcomes. But as the pace of change has accelerated, that textbook approach to scenarios has come to seem as antiquated as the old three-ring binders.
How do you frame choices when everything is up for grabs? Shell's answer: Go back to Wack. At the offices of Royal Dutch/ Shell in London, the scenario team has given birth to TINA -- There is no alternative -- a strategy conceit that meets uncertainty halfway by driving a stake into the ground. TINA says, Here's what we know about the future. Now let's go meet it.
In the summer of 1970, a delegation from the Club of Rome, a group of professionals, scientists, and politicians, paid a visit to the System Dynamics Group at MIT's Sloan School of Management. The Club had a request: Help us predict the future of the world. World3, the MIT computer model, digested 120 variables before calculating that within 20 years the planet would run out of oil.
The findings were published in an unlikely best-seller, The Limits to Growth (Universe Pub, 1972). But a funny thing happened on the way to the future: The prediction turned out to be wrong, largely because in 1973, the oil industry suffered a different catastrophe -- one that computer modeling could never have foreseen, but one that Pierre Wack was thinking about.
While World3 was crunching numbers, Wack was presenting a series of stories about possible futures to senior Shell executives. In one scenario, an accident in Saudi Arabia led to the severing of an oil pipeline, which in turn decreased supply. That created a market reaction that increased oil prices, allowing OPEC nations to pump less oil and make more money.
The tale spooked the executives enough to make them reexamine their assumptions about oil price and supply. Was OPEC preparing to increase oil prices? What would be the implications if they did? As a consequence, when OPEC announced its first oil embargo, Shell handled the challenges better and faster than the competition. Within two years, Shell moved from being the world's eighth biggest oil company to being the second biggest. Scenario planning had earned its stripes.
Shell Centre, on London's South Bank, may be the city's dullest building, which made Wack's presence there from 1971 to 1981 all the more charming. Wack had been strongly influenced by the mystic philosopher George Gurdjieff, who had imported a form of Sufism -- a mystical branch of Islam -- into the West. Gurdjieff's teachings involved rigorous spiritual exercises, including practice in "seeing" as clairvoyants do. The art to martial arts, according to Gurdjieff, was the ability to "see" exactly where and when to strike for maximum effect.
As he drew up his first scenarios for Shell, Wack was convinced that the future could be known with the right blend of deep perception and intellectual rigor. With colleagues Ted Newland and Napier Collyns, Wack embarked on immensely detailed research that was designed to isolate the certainties, the forces at work in the world that he saw as unstoppable. He called them "tendances lourdes" -- the driving forces around which he and his team could weave the myriad of uncertainties.
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