Lately it feels like reality is overtaking even our most radical scenarios. Which makes us wonder if the current moment calls for more challenging future worlds. This is the first of a two-part series on the concept, value and process of creating extreme scenarios.
It seems everyone feels overwhelmed by the ferocious pace of change shaping and often disrupting our current reality. Individuals, families, communities and organizations of all shapes and sizes are experiencing not just extreme and unfamiliar change (Covid-19, unprecedented political division in peacetime, and now AI, to state the most obvious) but a more profound loss of control. Never in recent memory has the way forward seemed more cloudy, confusing and even menacing.
The understandable temptation is to “hunker down”. To postpone big decisions and commitments. Wait for the storm to pass, and for things to somehow settle down.
As scenario planners, we know things never really do “settle down.” Reflecting back over a quarter century of scenario engagements we’re reminded of the inevitability of change. It is not predictable. It is often destabilizing, and it usually originates from the most unexpected domains. In a sense the uncertainty we’re living through is a more pervasive and intense version of what forward looking strategic planners have always wrestled with.
Managing strategic surprise
Prediction is a losing endeavor when it comes to strategic planning. We’ve written about this often, most recently here. At the heart of our philosophy is the conviction that beyond the very near term the only way to plan prudently is to assume the future will be different in fundamental ways that challenge the organization’s operating model and then create detailed, convincing stories – scenarios – that describe these alternative operating environments and how they could arise. Critically, these scenarios need to be relevant and intellectually accessible to the user. But they should also be provocative, to prompt fresh thinking around nonconventional risks and unexpected opportunities.
It’s beyond the scope of this essay to describe the steps involved in going from scenarios to strategies and plans. What’s essential, though, is the effect – the shift in perspectives and mental models that takes place when decision makers collectively explore fundamentally different operating environments. There’s no promise of perfect prescience. But what does emerge is an enhanced ability to deal with disruption and “strategic surprise.” The very practice of rehearsing multiple scenario futures makes scenario planners mentally prepared for any number of disruptive events or conditions, including those not even considered in the scenario exercise.
This perspective shift for executives participating in scenario planning is critical. Many say they never view the news the same way again. Collectively this shift can instill a needed culture change in an organization.
What is an extreme scenario?
FSG’s approach to scenario planning has always favored the use of “extreme” scenarios when building strategies. We call this an “alternative futures” approach to scenario planning, in contrast to, say, single event-based scenarios or probabilistic scenarios. (See a previous blog describing the different types of scenarios.) The imperative in alternative futures scenario planning is to push beyond “known unknowns” and engage the largest practicable set of scenario variables (drivers) that can define or affect future operating conditions. In collaboration with our clients, we build scenarios that intentionally challenge existing assumptions not only about what the future holds, but also about the viability of the organization’s operating model.
In scenario planning practice, we prompt this forward perspective by encouraging our clients to create scenarios that extend significantly further out in time than their normal planning cycle. If the planning horizon is zero-to-five years out, for example, the applicable scenarios will be set ten years out or even longer. This engenders fresh thinking and intellectual liberation from the “tyranny of the present.” Intuitively planners are more accepting of substantially different future worlds if they’re not restricted to planning horizons associated with current organizational plans and activities.
While our goal is never single-point prediction, sometimes the alternative futures approach has proved amazingly prescient, and has generated valuable foresight. In a 2003 scenario for the US Coast Guard we crafted a scenario (“Code Quebec”) in which 10 million people were killed worldwide by a corona virus originating in China. Covid-19 was still 16 years away. For a pet food company more than a decade ago we explored drought, flooding and other extreme climate change impacts on product ingredient availability and costs. More recently we’ve built US health care scenarios for 2040 that consider delivery systems ranging from fully privatized and minimally regulated to wholly government owned and run.
Pushing the envelope on scenario plausibility
One of the enduring requirements for FSG scenarios is that they are plausible – that you can imagine the present somehow evolving to those scenario end-states. As a check on ourselves when writing scenarios, we sketch chronologies with invented political, economic, regulatory, technological and other events to test our own scenario logic. The scenarios also need to be internally coherent. These rules have served our clients well and enhanced the rigor and quality of our craft.
But it’s worth wondering today if alternative futures scenarios need to be more extreme – and whether we need to deliberately push out the boundary lines of plausibility to get out ahead of the furious pace of change. This is always an important negotiation between FSG scenario consultants and our clients who increasingly feel immobilized by relentless disruption and thus reluctant to take on even more challenging scenario planning environments.
And yet the payoff for aggressively confronting extreme futures is potentially great: more expansive and resilient strategies, greater organizational agility and a workforce that is leaned into the future.
Preparedness for the future and all it holds is never guaranteed. Inevitably there will be disruption and shocks that even the most disciplined and prescient planners will fail to anticipate. But the commitment to alternative future scenarios is the best defense against being upended by strategic surprise.
To paraphrase Louis Pasteur’s insightful words: Chance favors the prepared mind.
One of the least plausible scenarios at a time of extrema crisis is a return to normalcy. A crisis by definition is a time when people’s hair is on fire. In constructing scenarios one of the first steps was to discover where the client saw itself at the moment they called in the consultants. Our job was then to push their thinking beyond the rut that they were stuck in. The scenarios were extreme, good or bad or most often mixed, relative to their thinking not extreme on some absolute scale. Social and political cohesion would be an extreme scenario today so would a healthy economy in which AI was an incidental side note.
Thanks, Robert. Great observations and comments. When the source of the crisis is external to the organization we’ve always found it our job to push back against the notion that the future will remain in a permanent state of acute threat. It won’t be the old normal, but it will plausibly reach a state of manageable equilibrium at some point and that needs to be part of the scenario mix. On the other hand if it’s the client’s hair that’s on fire…then we discourage them from embarking on the scenario journey. The present is hard and distracting enough.
To follow up a bit on Robert’s comments – his emphasis on the client is well put. The scenarios we produce have never been “generically extreme.” The elements we “push hard on” are customized to the needs of the client. We are not science fiction writers. Our job has been to offer the client a tool to explore the strategic issues critical to them. Placing them in multiple scenarios that seriously challenge the future viability of their specific business/mission assumptions works well. It does require, however, that we have been creative in crafting future conditions that are extreme enough to shake them out of “the present” and offer them an opportunity to think systematically about alternatives. Customization for the client matters.
Much obliged for this. As I read I was reminded of the basic methods design items: Max-Min-Con. Maximize variance in the dependent variable(s), minimize error source variance, and control exogenous variance. You’ve spun these notions into a thoughtful, communal exercise in a (somewhat) “controlled” prospective factors analysis involving specific organizational histories. Bravo.
Spot on. I don’t think we have ever considered the MaxMinCon principle, and might instinctively have backed away from the idea, but the scenario planning process we use does indeed correspond.
Thanks for this thoughtful piece. One thing worth adding is that plausibility itself is anchored in the present: what feels “plausible” usually reflects what decision makers find credible today. Looking back at what seemed implausible ten years ago (a global pandemic with mass lockdowns, mainstream generative AI) suggests our plausibility filters may be too tight. Extremity also doesn’t have to mean a radical end-state. It can mean speed, with changes we expected over fifteen years arriving in two or three, or it can come from several moderate shocks colliding at once rather than a single dramatic event.
On the practical side, one way to address client fatigue might be to keep core scenarios within a reasonable range and then stress-test them with injected extreme shocks, much as central banks do with financial stress tests. Pairing extreme scenarios with clear early-warning indicators can also make them easier to defend and more actionable. And it seems important to include extreme upside scenarios too: strategic surprise isn’t only about threats, and organizations can be just as unprepared for a sudden opportunity.
Rodolfo, thank you for your comprehensive comments. All great points! I’ll reply to just the one about speed — real-world changes happening sooner than the scenario time scale. So true, and inevitable. You’ll recall with PANCANAL scenario planning in the late 1990s — among other things, the seemingly way out there warnings about climate change. And then in less than a year after project completion drought forced the Canal to impose drastic draft restrictions. You said at the time, “I feel like I’m living your damn scenarios!” Thanks again for sharing your thoughts.
Can we hire this guy, Peter? I think he understands this stuff better than some of us.
Thinking about it, I don’t recall any scenario that we have written for clients that ended up seeming too “far out,” extremity-wise. Rodolfo’s warning about remembering it’s not always about threats is well-taken. Although I would add that we have tried to make even the “best-case” scenarios contain dangerous elements, and even the “worst-case” scenarios contain opportunities.
Thanks, Patrick. We could subtitle all our so-called best case scenarios “be careful what you wish for” because in the actual scenario workshop setting all the real-world challenges of, for example, free trade and open markets, suddenly loom large. And at the same time FSG scenarios that on the surface appeared most challenging often produced some of the most innovative and enduring strategies. Adversity has that effect in scenario planning.
Last January a former Bank of England security analyst, Helen McCaw, sent a proposal to the Bank’s governor, Andrew Bailey, urging him to explore a scenario in which extraterrestrials arrive on Earth.
Whether hostile or friendly, she argued, an encounter with life from outside our galaxy could produce “ontological shock” that would break the foundations of the global banking system.
McCaw’s point was not to predict the arrival of little green men anytime soon. She wanted to get the Bank to consider a world in which the collapse of financial institutions is general and the value of financial assets goes to zero. It would be a world of bank runs, payment failures and supply-chain breaks. What would that mean for the Bank of England?
And what if our visitors have technology that obviates are own? Would the value of precious metals, essential to us in 2026, go to zero?
McCaw’s scenario got a lot of laughs from people who overlooked its potential usefulness in getting the Bank of England to think through a world in which all its operating assumptions are challenged.
The point of extreme scenarios is not to test their likelihood. It is to compel clients to step back from their most cherished convictions. I don’t know of a better tool for doing that.
Excellent example, Kevin, of what “extreme scenarios” are intended to provoke — as you say, to compel planners to “step back from their most cherished convictions.” And I would add to attenuate the influence of the so-called experts who know it all, seen it all. There are no experts on the future.
I would echo Kevin and the assertion early on in the piece that “the very practice of rehearsing multiple scenario futures makes participants mentally prepared for any number of disruptive events or conditions, including those not even considered in the scenario exercise.”
I vividly recall a client telling me that she was unfazed by Covid – “because, you know, we did scenario planning with you”. The scenario exercise she was referring to had no mention of global pandemics, but had stretched her imagination, warmed mental muscles and made the organization more supple and adaptable as a result.
Well, Rodolfo, you certainly managed to kick over an ant hill – nicely argued! Your thoughts on plausibility made me realize that I have used the term to mean two simultaneous things: (1) the end state is not too wacky to be used (when working for NASA, we used to joke that we would never break more than one law of thermodynamics), and (2) that we can establish a logic chain of events that go from today to the end state. I think both are useful, but I need to be more careful about clarifying what I mean.
On interjecting extreme events: we actually do that on occasion. We call them Wild Cards – the same distressing event (or awesome opportunity) is injected into all the scenarios. (To Kevin’s point above: We do not write one Little Green Beings” scenario, but, instead, add Little Green Beings to all 4/5 scenarios.) It is a powerful strategic thinking and planning tool, but it is a bit tricky to get right.
Great discussion. As several comments above hint, the current situation calls for new understandings of “extreme” and “plausible.”