Management: One business plan is not enough

AS RECESSION and political instability have swept through the Western world, the management mood has changed from optimism to 'hunkering down', as it is described in the US. With future developments becoming harder to predict, most business people increasingly prefer the security of certainty - cost-control projects, concentration on the core business and other actions that have a high probability of producing tangible progress.

The experience of the late 1980s again demonstrated the inability of forecasting and strategic planning to predict turning-points. Like lemmings, governments, businesses and individuals alike were seduced into a belief that the future would be like the past. Yet evidence was already available that the average life-span of a commercial organisation is only 40 years, and, like product life-cycles, is probably shortening because of an inability to change and adapt fast enough.

So in an age of uncertainty, paradox and socio-political fragmentation, how can organisations manage to survive through and beyond these traumatic discontinuities? This is especially important given the evidence we have found at Ashridge that two-thirds of companies only change when confronted by a crisis.

My experience suggests that there is an under-exploited management technique that is only now beginning to gain the interest it deserves - scenario planning. Scenarios are not forecasts but descriptions of alternative futures and the key causal relationships that underpin each of these different visions.

Research in the mid-1980s indicated that only about 50 per cent of leading European corporations were engaged in some form of scenario planning and the majority of these were probably of a relatively simplistic budgetary and number-driven nature - most optimistic, most likely and most pessimistic scenarios.

At its most effective, though, scenario management encourages managers to identify the few important trends, incidents or issues to which their organisation is particularly vulnerable. The most famous example is Shell, which anticipated the oil crisis of the early 1970s, enabling it to respond much more effectively than its competitors when the unthinkable actually happened.

Good scenario planning also requires top management to encourage, and work with, divergent thinking. This goes against the usual approach, in which the pressure for decisiveness and clear leadership creates a tendency to opt for one definitive view of the future and an associated single-minded strategy.

Scenario planning should enable individual managers and the organisation to learn. It starts the process of change and adaptation so that the organisation can successfully move towards a more optimistic future.

In creating alternative scenarios of your business environment, say five years on, there is an initial stage at which they seem, psychologically, plausible possibilities but rather theoretical and distant. Gradually, however, over a short time, the mind begins to handle them in a more tangible way, detail is fleshed out and the possible actions and implications can be imagined.

A vital element in making scenarios more than a simple planning technique is to involve as many managers, especially top managers, as possible. They, not planners, need to develop, test, refine and consider the implications of the alternative scenarios they create. This process of interaction and dialogue, the mixing of rational analysis with intuitive thinking, the testing of implicit assumptions and the gradual unfolding of deeper and deeper insights provides powerful learning and an enhanced ability and willingness to respond positively to new situations.

Consider Marks & Spencer and IBM. Both were super-confident roaring successes in the 1980s, but while one is continuously questioning and self-critical and changes as a result, the other has remained complacent because of its perceived superior ability and its apparent dominance in the marketplace.

The techniques of segmentation revolutionised marketing in the 1960s and 1970s by enabling companies to respond to increasing diversity of consumer demand in manageable and profitable ways. In the 1990s scenario management could enable strategists to help organisations respond effectively to contradictory and paradoxical trends.

For example, a recent scenario planning exercise with a leading financial services company threw up the intriguing conclusion that the optimistic scenario for Britain's economy and society resulted in a significantly pessimistic one for the company, and vice versa.

Many of the elements that will make our futures are all around us right now. Scenario management is about identifying these elements and creating alternative patterns or scenarios that have a strong degree of internal rigour.

Does Wellcome, for instance, have a scenario that includes Hillary Clinton's ambitions in healthcare or is Swissair, primarily a business airline, envisaging a scenario where the rapid growth in teleconferencing between executives may reduce the need to fly?

The author is dean of Ashridge Management College.

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