Thinking about the Future with Scenarios
The last several posts have been about uncertainty - the situation where we lack complete knowledge. In reality, not all uncertainty is equally uncertain.
Uncertainty can be divided into levels, depending on the nature of the future outcomes (1). On one end of the spectrum, we could encounter a “certain enough future” in which forecasts and projections are generally in the ballpark and point to a dominant strategy. Increasing in uncertainty, we may face futures where there are a handful of mutually exclusive and collectively exhaustive possibilities, or a range of futures which can only be identified by an upper and lower bound. Finally, there might be “true ambiguity”, where uncertainties are unknown and unknowable (1).
So what can we do when we can’t know the future with certainty? Using the tools of risk analysis and decision analysis, we often need to quantify the likelihood or probability of certain things happening. But what happens when we don’t have enough certainty to reliably assign likelihoods to future events? That is where scenarios come in.
Scenarios can be defined as “incomplete descriptions of how the future might unfold, with emphasis placed on the development of an internally-consistent chain of causal reasoning that allows the decision maker to gain understanding of the problem at hand and generate unusual insights into possible courses of action.” (2)
Scenarios should be qualitative and believable narratives, like short stories or plots. They might include uncertain factors such as social, technological, economic, environmental, political, etc., relevant to a specific strategic issue. When a handful of scenarios are developed, they can be used to facilitate creative thinking about the impacts of uncertain factors on decisions of interest (3).
Scenarios can be used to think about sources of risk and opportunity that might have an impact on a specific project or on the organization’s strategy. By thinking about scenarios that can throw a wrench in your plans, and what impact those scenarios might have, you can be better prepared to devise proactive strategies to plan for and mitigate those impacts. Additionally, knowing what might go wrong can help you better watch out for warning signs of an impending disaster.
Importantly, another use for scenarios is to explore how various initiatives, projects, or activities fare across a spectrum of emergent and future conditions. In particular, not only will projects perform differently in different futures, but key stakeholder preferences will also change. Some of my own Ph.D. research looked at how scenarios cause project managers to shift their emphasis between cost, schedule, and quality goals. Along with scenario-specific changes in project performance, the prioritization of project activities across diverse scenarios can change. The scenarios which are the most and least disruptive to a baseline project plan can be identified, and this information can be used to develop risk mitigation plans accordingly.
In summary, scenarios can be a powerful tool for planning. By thinking about what could possibly happen in the future, you can set the right plans in motion today.
At Collier Research Systems, we offer services that can help support decision making under uncertainty, including helping you think through various scenarios. To learn more, visit www.collierresearchsystems.com.
(1) Courtney, H. 2003. “Decision-driven scenarios for assessing four levels of uncertainty.” Strategy & Leadership, 31(1): 14-22.
(2) Durbach, I.N., Stewart, T.J. 2012. “Modeling uncertainty in multi-criteria decision analysis.” European Journal of Operational Research, 223(1): 1-14.
(3) Ogilvy, J., Schwartz, P. 2004. Plotting Your Scenarios. GBN Global Business Network, Emeryville, CA.