How thinking about the future can help businesses improve their resiliency, even in times of uncertainty
The future is unpredictable. Even if we were not struggling through a pandemic that hasn’t been seen in living memory, we cannot predict what will happen tomorrow. There are many potential futures that could unfold, and we could make assumptions based on past experience and probabilities. However, when we have not lived through something before, relying on your gut feeling is not enough. In the HBR webinar: Learning from the Future, J. Peter Scoblic discusses the problems of relying on past events to understand the future: instead, he suggests we must turn towards an imagined future.
Scoblic references work done in the 1920’s by Frank Knight to understand the difference between risk and uncertainty. For risk, potential outcomes are known and we can frequently assign them probabilities. But with uncertainty this is not the case. Because of our inability to rely on the past, uncertainty presents a set of possible futures to which we can only assign subjective probabilities, which forces us to rely on judgement.
The challenge that comes with judgement is that humans will try to place reliance on patterns when none exist. We find an experience that is like one of these possible futures, and specifically look for evidence, from memory, to support it.
When we cannot make analogies to past experience, we need to construct ‘multiple analogies by turning to imagination…[aiding] judgement and strategy.’
‘Imagination emerges as an invaluable strategic resource in times of uncertainty’ (Scoblic)
A highly effective way to navigate future uncertainty is through scenario planning: developing storylines ‘to better sense, shape and adapt to the emerging future.' These storylines are used to improve how people ‘perceive and respond to risk’, raising risk awareness by framing it in ‘an event-oriented rather than a probabilistic manner’ (Theodore G. Shepherd – Storylines: An Alternative Approach to Representing Uncertainty in Physical Aspects of Climate Change). Forming these multiple storylines helps to reduce confirmation bias and uncertainties, encouraging better judgement.
To start scenario planning you first need to look at the driving forces of change that will determine the state of the future. Driving forces:
- Have a high impact on future operating environments.
- Have a high degree of uncertainty.
- Have wide potential variance.
- Be independent and uncorrelated.
These can be found in the contextual environment - things we interact with but have no control over - not the transactional environment, which we define as things we can affect and change. Ultimately, scenario planning ‘breaks our imagined habit of assuming that the past and the present are a good guide for the future,’ (Willis Towers Watsons: Helene Galy – The Summer Reader’s Guide to Scenario Planning). Scenarios become artificial ‘case histories’ and ‘historical anecdotes’ that make up for the lack of past experiences (J. Peter Scoblic).
‘Scenario planning uses alternative narratives about the future, many with improbable and radical twists, to develop future-proof strategies’ (Galy)
Using scenarios helps to save time in decision making. After identifying the key driving factors that will affect the future, you can imagine storylines and workshop strategies to help your business overcome future challenges. It is then important to implement. Monitor your results, create a continuous cycle of strategic renewal. This will help make sense of uncertain futures, allowing businesses to take more effective action more quickly when the situation changes, even if what they are specifically faced with is not exactly what was ‘imagined’.
The research conducted by Ranjay Gulati, Nitin Nohria and Franz Wohlgezogenm, reported in Roaring Out of Recession, found that ‘progressive companies…deploy the optimal combination of defence and offence,’ evidenced by the higher levels of profit these companies reported post-recession. If at times of downturn or uncertainty, your company focuses purely on its assets, it will prevent you from looking for more imaginative ways to drive growth once the recession ends.
Progressive leaders encourage their organisations to discover what works and create a series of initiatives that will help improve a business’s efficiency. This is where scenario planning can help, imagining storylines and developing strategies that won’t just ‘combat a downturn; [but] can lay the foundation for continued success once the downturn ends.'
Scenario planning will help your business prepare for future events that we may not have experienced before, ultimately building risk awareness and resilience. Contact hgkc to find out more about how we help our clients use their imagination to build a more resilient business today.