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  • 12.19.11

Three Reasons CIOs need Scenario Planning

As the future seemingly becomes ever more uncertain, functions within organizations, not just the organizations themselves, need tools like scenario planning to help them think about a wide range of issues. In information technology, scenarios can help create better technology plans, drive innovation and provide context to fragile system.

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

 

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 1960s 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.

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CIOs have a wide range of issue 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
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.

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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.

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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.

About the author

Daniel W. Rasmus, the author of Listening to the Future, is a strategist who helps clients put their future in context.

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