Last year, home-rental company Airbnb received a lot of press for all the right reasons. Sure, something went horribly wrong - the worst fear of any person who has ever rented an apartment through the short-term rental disruption website. An open-to-the-public orgy was hosted in a New York apartment rented out for the night, and the owner returned home to find the place strewn with bottles and condoms, as well as having suffered severe property damage.
News site Gawker reported: "Airbnb's response to Tenman (the owner) was quick, almost absurdly so. Within 24 hours...Airbnb had sent a locksmith to change his locks, made plans to put him up in a hotel for a week, and wired him $423 817."
Instead of being taken apart by the public and the media, Airbnb received praise for its incisive actions and rapid response, and allayed the fears of many existing and potential renters who wondered what might happen if the worst came to pass. Airbnb attributes its fast and appropriate actions to scenario planning - having given proper consideration to all the possible outcomes of letting strange people stay in other strange people's houses, and having a ready response for any outcome.
Some of the other scenarios Airbnb has got covered are prostitution and suicide, but fortunately there hasn't been a high-profile blow out in either of those categories to report on. Yet.
There's no question that businesses these days have to think like this. They can't have a single, linear strategy and then react to changes or problems as they occur. People and organisations are simply not quick-footed enough to think faster than the mass consciousness of the world around them. Because of this, scenario planning, which is not a new strategic tool, is becoming increasingly essential in business, and especially in information technology and social media.
Alternative futures
"In a nutshell, scenario planning is a business technique that allows you to have a way of dealing with uncertainty in the future," says Koffi Kouakou, an Africa analyst and senior lecturer in scenario planning at the University of the Witwatersrand. "You do that by constructing alternative futures and writing them up in the form of a story about the future, explaining how that future might unfold for your business, country, enterprise, community or the world."
He clarifies that these are not predictions - even though some, like the Airbnb example, have been exceptionally accurate. "The result of a scenario planning exercise is that you want to create three or four scenarios."
You do that by constructing alternative futures and writing them up in the form of a story about the future, explaining how that future might unfold for your business, country, enterprise, community or the world.
Koffi Kouakou
These multiple scenarios used to be expressed as best and worst case, but Kouakou says the future isn't a stark choice between a binary expression. Instead, you need to be able to build a map of the uncertainties of the future, so that you can eliminate the risks by having a planned appropriate response in place.
Essentially, instead of having a strategy in place that deals with a 'most likely' set of variables, scenario planning allows organisations (or politicians) to have a strategy in place for a number of possible outcomes. Those outcomes are detailed in the future 'stories' written up by the scenario planners.
Top-selling business author and globally renowned scenario planning expert Clem Sunter is the name commonly associated with this strategic tool in South Africa. Along with fellow scenario strategist Chantell Ilbury, he authored the bestselling Fox Trilogy, likening the scenario-planning process to the constantly aware and adaptable mind of a fox.
"The reason I've been using scenario planning since the early '80s is that the future is unpredictable," he says. "We can't know what's happening in a year's time or five years' time. We have to look at it in a series of stories that capture the possibilities."
He says that these stories are informed by certain trends that tick away in the background. He calls these trends clockwork flags - those that are definitely taking place and will have an impact that can be responded to - and cloudy flags - those that are happening, but their impact is uncertain.
So, for instance, a clockwork flag would be the ageing population in places like Japan and Europe. This is happening, and doesn't require scenario planning. On the other hand, climate change is a cloudy flag: we know it's happening, but we don't yet know what the outcomes will be.
"The influence of religion is another cloudy flag," Sunter says. "Who can say what's going to happen in Yemen or Syria?
But we do know that the religion flag is flying high."
The internet example
It's these cloudy flags that scenario planning 'stories' are written around. Scenario planners watch out for the flags that have a potential impact on business, the economy or the political situation, and then build their scenarios around the best and worst-case impact of these flags.
Sunter explains this in a model that emulatesthe responsive mind of a fox:
1. Using scenario planning to establish the relevant factors about the future beyond your control, with the addition of flags and subjective probabilities for each scenario;
2. Based on the probability and impact of these scenarios, formulating the best strategic and tactical responses within your control to the challenges contained in them; and,
3. Generating sufficient emotional commitment and willpower to implement the decisions you have made.
Sunter points out that the internet is a game changer, and is already having effects which it's not necessary to play scenarios for, such as declining print media circulation and the increase in online shopping.
"On the other side, there are uncertainties and risks like, for example, cybercrime. We don't know where that's going to go at the moment, but technology companies regard cybercrime as the number-one threat. They can't be precise about the impact, and that's why you have to flag scenarios around cybercrime rather than saying there's more shopping or reduced circulation."
Potential impact
He says that you can't just randomly play scenarios because that's simply daydreaming; you have to be aware of what the options are. "Look at the flags and their potential impact on your company, and then decide what you're going to do about it."
He does this by keeping tabs on various internet sites, news media and social media. "We don't have a vast research team, we just say 'this is an interesting flag, let's look at each piece of news every day around flags like Mr Putin, the Middle East, Nigeria', and those flags make you selective about the news you're absorbing every day."
Scenario planners will then write up the stories of the potential impact these flags could have on industry segments or specific companies, working in relation to one another, upon which clients can base their variable strategy for the future.
Scenario planning has the potential to make businesses very reactive in a fast-paced world. When you consider that it's not possible to know the future, linear strategies don't really make a lot of sense. Although it's a lot more effort to compile an appropriate response to various different potential scenarios, the effort pays back its weight in gold when one of those disruptive scenarios comes to pass.
As Sunter's mentor and the father of scenario planning Pierre Wack said: "It is better to be vaguely right than precisely wrong."
This article was first published in Brainstorm magazine. Click here to read the complete article at the Brainstorm website.
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