Superman Does Scenario Planning (A Tool for the New Normal?)

In The Art of the Long View, Peter Schwartz describes a powerful business tool called scenario planning, designed to help leaders navigate the future without having to predict it.  

I first wrote this post during the dark days of the 2008 financial meltdown and thought it might be worth reposting in 2020, when the new normal makes the usual tools of strategy seem inadequate.

“In a scenario process," Schwartz writes, "managers invent and then consider, in depth, several varied stories of equally plausible futures. The stories are carefully researched, full of relevant detail, oriented toward real-life decisions, and designed (one hopes) to bring forward surprises and unexpected leaps of understanding.”

Scenario planning was first used by the military in WWII, but the classic case demonstrating its value was undertaken by Pierre Wack, a planner in the London offices of Royal Dutch/Shell.  In the early 1970s, Pierre and his colleagues in the Group Planning department were looking for events that might affect the price of oil—which had long been a steady, dependable commodity. That’s when they proposed a set of scenarios, each one a plausible story of the future, but radically different in their outcomes.

I’ll spare you the details except to say, between OPEC and the Yom Kippur War, the energy crisis that followed caught the oil industry off-guard--with the exception of Shell. From one of the weaker of the “Seven Sisters” oil giants, Shell became one of the two largest and, arguably, most profitable.

Schwartz tells us, “The purpose of scenarios is to help yourself change your view of reality—to match it up more closely with reality as it is, and reality as it is going to be. The end result, however, is not an accurate picture of tomorrow, but better decisions about the future.”

Superman Does Scenario Planning

Here's a quick example of how scenario planning works, designed for a superhero.

Suppose you are Superman.  Your workday is filled with urgent, very urgent, near-death, and mankind-saving activities.  Over coffee one morning you wonder if, maybe five years from now, you will be able to retire. As you ponder, there are two things that seem especially troubling and difficult to predict.

Reframing the Question

An excellent article in the recent HBR by Thomas Wedell-Wedellsborg  (“How Good Is Your Company At Problem Solving?”) surfaced a problem that faces some of the most aggressive,  get-it-done entrepreneurs: They don't spend enough time framing the question before they rush in to solve it.

Here' how it works:  You own an office building.  Your tenants are complaining that the elevator is too slow. 

How do you solve the problem?

One perfectly good way is to upgrade the elevator or install a new one, making the elevator faster.

Another—and this is genius—it to put mirrors up around the elevator, which causes people to stare at themselves, an infinitely interesting activity.  People stop complaining.  The elevator is no faster, but the problem has been reframed from “How do we speed up the elevator?” to “How do we make the wait more pleasant?”

Why History Students Should Love Big Data

It's Spring 1976, Wilson Hall, Brown University.  Professor William McLoughlin has just informed his 85 students in “American Social and Intellectual History” that they are to write their first paper. All he has given us is the title: “The Age of Jefferson and Adams.” We groan. Then he adds: “Keep it to three pages or less. Double-spaced.” We smile. Three pages? How hard can that be?

“If you make the margins too narrow,” McLoughlin adds, “I’ll mark you down a grade.”

Needless to say, nobody got an A on that paper. There may have been a B or two, the good professor informed us.  Not me. It was all I could do to contain my flowery opening paragraph to a single page. Some of us recovered slightly on paper two, in which we committed “The Age of Lincoln and Calhoun” to three, double-spaced pages. Some retreated to organic chemistry and other more reasonable challenges.

Little did I know, but I had just been introduced to Big Data—though it would take another generation to earn that name. Take an endless, insurmountable, seemingly disconnected pile of information, separate the grain from the chaff (or, as my engineering friends might say, signal from noise), and tell a concise, compelling story about what it all means. 

Do Your Job

If you’ve ever launched a business, you’ve been faced with the task of writing a Vision statement and a Mission statement.  One does one thing, the other does another, and I can never keep the two straight in my head.  But I do know that having a clear idea of what the business should look like a few years down the road--what I call the “end state,” which I can keep straight--is awfully important to running a successful enterprise.

Now, if you’ve ever run a business, and published a Vision and Mission statement to the team, you have undoubtedly run into this situation: Some consultant will meet your team, perhaps at an offsite training, and report back to you that, regretably, nobody but nobody knows the Mission and Vision of your company.

You can gnash your teeth and beat your breast, knowing that you have been diligent in spreading the gospel.  Maybe, however, there’s something else going on.

I’m a New England Patriots fan, and every Monday Coach Bill Belichick is interviewed on the radio about Sunday’s game.  Belichick is, without a doubt, the worst interview in sports.  He reveals nothing.  When the Patriots play badly he says, “We didn’t make enough plays to win.”  When they play well he says, “We made enough plays to win.”  If you are looking for some kind of erudite exposition of the game, you’ve come to the wrong interview.

But Belichick says something so often it’s almost humorous: “We just need people to do their job.”  It's a kind of mantra for him.  When his players are interviewed they will often deflect a question by saying “Coach just needs me to do my job.”

Just do your job.  That’s what one of the smartest, winningest coaches in the history of football tells his players: Just do your job.  Is there a game strategy?  Of course.  Belichek knows it, as do his coaches.  I assume he discusses it with his team during the week.  But he doesn’t ask his players to memorize the strategy, or be able to recite it.  That’s his job.  When he creates the game plan each week, that’s his job.  And, when his wide receiver runs five steps, cuts left and looks over his inside shoulder for the ball, that’s his wide receiver’s job.

Just do your job.  That’s how the Patriots win.

There’s a reason your team doesn’t know the Vision and Mission by heart: It doesn’t help them do their job.  I promise, if it did, they would know it cold.  It’s not that they don’t want to know it, of course, or be reminded, or recognize that they’re contributing to it.  They just don’t need it memorized to do their job.

In the mid-1980s I was managing cable TV properties in Illinois.  These were the go-go days of cable when we were opening up new neighborhoods and people were chasing the cable TV truck down the street hoping to schedule an installation.  One day I got into it with one of our key suppliers--their fault, no doubt--and they withheld shipment of some important material we needed for installs.  We went from dozens of happy new customers a day to none, and the phones began ringing off the hook.

Finally, on a Friday, I solved the problem and, in a show of support (or punishment, depending on your perspective), asked our management team to be in the warehouse bright and early on Saturday morning to help assemble product for the installers and get them on the road quickly for special weekend installs.

There we were, putting together installation packets, when Jeff, the Warehouse Manager came over.  “Thanks,” he said, “for helping out.”  I beamed.  What a great GM I was.  “But,” he added, “if you did your job, you wouldn’t have to do mine.”

That message stuck, big time.  (It’s 28 years later and I still remember.)

All of which is to say, if you are running a business, your job is Mission and Vision and End State.  Figure it out.  Make sure the team is working toward it.  Go ahead and sell it internally from time to time.  Do your job.

But your Customer Service Manager is supposed to make customers deliriously happy.  Let him do his job.  Your VP-Sales is supposed to sell tons of stuff.  Let her do her job. 

Mission and Vision have their place, but Bill Belichick is right.  One critical secret to success is simple: Just do your job.

Strategic Insight in Three Circles

Sometimes the simplest tools are the most powerful.  In this month’s Harvard Business Review, Joel Urbany and James Davis of Notre Dame’s Mendoza College of Business suggest that critical strategic insights can be gained from populating a template involving just three circles.

Although most executives can recite the truism that a company must build a distinct competitive advantage in order to grow and be profitable over the long term, many have only the fuzziest idea what that really means. . .We often encounter these executives in our consulting work and in our classrooms. We tell them to draw three circles. Those circles, placed in the proper relationship to one another, provide a good visual representation of what strategy—both internal and external—means. 

Here’s how it works.

1. Draw a circle and fill it with the things that customers value and why—that is, Customers’ Needs. Depending on the complexity and breadth of your offering, you may need to focus on a specific customer segment. Note that this exercise, when done in a group, may reveal brand new or emerging opportunities for value creation. Urbany and Davis explain, “The first circle thus represents the consensus view of everything the most important customers or customer segments want or need.”

2. Now draw a second circle. You’ll fill this one with how customers perceive Company Offerings. This one could be especially tricky in a group exercise, because (short of good, hard analysis), there may be plenty of opinions about how customers perceive your product and brand.

3. Now “slide” the two circles together so that your specific set of offerings overlap with customers' needs. Let’s hope that the overlap “feels” good and solid, so that there’s a high comfort level that you are providing some significant benefit or set of benefits that the customer requires. Urbany and Davis tell us, “Even in very mature industries customers don’t articulate all their wants or problems in conversations with companies. ..Customers’ unexpressed problems can often become a source of relationship building and growth opportunity.”

At this point, you can probably see a number of areas where further investigation may be required—even though you think about this stuff everyday.

4. Now it’s time for the last circle, which represents how customers perceive the offerings of your competitors. This third circle slides up to overlap the first two in a variety of interesting ways, as follows:

Each area within the circles is strategically important, but A, B, and C are critical to building competitive advantage. You should ask questions about each.

For A: How big and sustainable are our advantages? Are they based on distinctive capabilities? (Urbany and Davis note: “But the biggest surprise is often that area A, envisioned as huge by the company, turns out to be minuscule in the eyes of the customer.”)

For B: Are we delivering effectively in the area of parity?

For C: How can we counter our competitors’ advantages?

You should form hypotheses about the company’s competitive advantages and test them by asking customers. The process can yield surprising insights, such as how much opportunity for growth exists in the white space (E).

Another insight might be what value the company or its competitors create that customers don’t need (D, F, or G). This plays, by the way, to Christensen’s Innovator’s Dilemma: Where have you pushed the technology or offering so far that folks stopped seeing value in it?

Perhaps the greatest insight will be how much opinion and conjecture there are behind your "analysis," instead of data-based knowledge. That alone—knowing what you don’t know—may be one of the most useful outcomes of the exercise.