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We've been talking about growth through scaling.
And in particular, we've been focusing on the types of things a business ought
to take into consideration when it's considering and
weighing out potential growth opportunities.
So oftentimes when a business is considering scaling up its operations,
it viewed as making a bet on the future and history is sort of filled
with lots of example of companies who made particularly good or
visionary about on the future and others who gambled and lost.
So for example, Apple made a particular bet on a kind of smartphone that involved
a particular kind of interface that was very different from the Blackberry and
it turns out that that was really sort of prescient.
And a lot of the competitors of Apple have,
essentially imitated that same kind of interface and approach to smartphones.
On the other hand, plenty of firms have gambled and lost.
Think about the example of Borders Books and Music.
They focused on brick and mortar stores and
they heavily invested in music sales and compact discs and the like.
At a time when the industry was rapidly changing, both in publishing and
in music towards digital content and
those were the kinds of things that Borders underinvested in.
And so it's easy to look back and say, Borders made a bad choice.
They made a bad strategic decision, they made a bad bet on the future, but
here's the challenge.
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It's awfully risky to bet your future strategy on your
ability to predict the future.
I mean, it's awfully hard to do that, it turns out.
If we were good at predicting the future,
we would always know which companies to invest in.
I mean, we'd always know who was gonna win the World Cup even.
I mean, this is something we're not very good at.
So and look in the context of that predictions are kinda a dime a dozen,
they're all around us.
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So that makes strategy particularly difficult.
It's hard to predict exactly what the future's gonna look like and
we see this play out all the time.
So take, for example, right now, there's a lot of movement in the market
segment of personal computing devices and there's a question about what
the future of that particular market segment is gonna be?
Will we, for instance,
see more of a convergence onto one particular device that does everything?
Or will we continue to see a future where there are different kinds of devices?
There's your phone and your tablet and your laptop and they're different things.
Now different companies are making different bets on this sort of thing.
So this is the type of thing that makes strategy very difficult.
It doesn't lend itself to reducing a spreadsheet.
A spreadsheet can't tell you what the future is gonna look like.
So what to do?
The question is can we identify a framework that helps us instead of relying
on single point forecasting about a particular future?
Is there a kind of framework that might help us better anticipate a range of
possible futures and help us design our strategy in a way that's robust across all
of those possibilities and that leads us to scenario planning.
So what is scenario planning?
It's a framework that's essentially helpful in formulating a strategy.
That is robust to different future scenarios.
Given that we can't accurately always predict the future desires of
consumers, etc.
We need to be able to formulate a strategy that might
be robust across a number of different outcomes.
And in that sense, scenario planning is
essentially an alternative to making a single point forecast of the future.
Now what it does is pushes the strategist to essentially
step outside one's particular assumptions about the future and the question them.
And the thing is organization often have particular single point
predictions of the future baked in to their strategic plans and forecast.
They often times, make a particular prediction of the future and
then form their strategy around that, but scenario planning is a tool that allows
you to recognize that some predictions are uncertain.
And it might help you avoid group think as you form your strategy for
the future and specifically,
your strategy as it relates to scaling up your existing business operations.
So when do we do scenario planning?
And I'll just briefly point out that it can be helpful
at various stages of the strategy process.
It can be helpful in spurring creative ideas and
identifying potential strategies.
In other words, it can be helpful at the very beginning of a strategic process and
help generate unusual options to consider, but it also can be useful later
after you've formulated your strategy and you can use it then to sort of test for
robustness against a range of alternative futures.
So we're gonna focus a bit on scenario planning and how it can be useful
as an alternative to sort of single point forecasting of the future.
Michael LenoxSenior Associate Dean and Chief Strategy Officer
Jared HarrisSamuel L. Slover Research Chair in Business Administration
