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Shaping the future: success with scenarios in a volatile and complex world

Published on 19 October 2022

Shaping the future: success with scenarios in a volatile and complex world

Much has been learned over the two years of the pandemic. So, how do we now crystalise this knowledge, and apply it to the further, new challenges we are facing? We need a strategy that creates enough clarity and certainty for things to happen, with the flexibility to respond to changes (known or unknown) and the motivation to be swift on our feet (agile).

Responding to VUCA challenges

We can now see how global events generate extraordinary operational impacts, for customers, colleagues, and the wider enterprise in which we belong. In the post-pandemic world, and with all the impacts of military and ecological crises, there is much still to learn. Individual economic issues, for example in or between nations, have morphed into a more complex and volatile set of global uncertainties and ambiguities, right on the heels of the pandemic. This is the key issue we face, as planners, analysts, coaches, or leaders. We need to be prepared. To do this, we need to step up as professionals. Indeed we do see a renewed focus on the value of specialist roles in member organisations, from planning to data science or knowledge management. Never have they seemed more necessary. Here at The Forum, we’ve been evolving the Four Stages of Insight as a tool for shaping the future, and we describe this later in the article. Every kind of analyst and manager needs to become more confident with numbers as we start to move from hindsight towards foresight. From delivering operational processes and reporting or analysing the past, to planning for multiple scenarios and evolving if-then models that align to our goals.

In this article, we will also draw on a wider body of learning about how to face Volatility, Uncertainty, Complexity and Ambiguity. These challenges are often abbreviated as VUCA, a term first used by the US Army War College in the 1990s. Their success strategies for such situations were forged in the Iraq and Afghanistan wars, where Donald Rumsfeld’s famous remarks on the ‘unknown unknowns’ were a small visible sign of thinking that built on 1980s work by Professors Bennis and Nanus, who taught many senior military leaders. This was popularised in work across many management schools and publications. We will link it to scenario planning, via the strategic planning team at Shell whose work started as a response to the 1970s energy crisis, itself seeming ever more relevant today.

Two key questions to ask

Although VUCA challenges are difficult to face, we can in fact prepare ourselves and it’s good to be clear about this. Start by asking yourself two key questions, Nathan Bennett and James Lemoine suggest (Harvard Business Review 2014 Q1). It matters that we get our minds around this, so that we feel ready to face ‘whatever comes’. That is the key to an agile, rapid response.

  1. How much do you know about the situation? For instance a volatile situation may be unexpected, unstable or of unknown duration, but not necessarily hard to understand, in itself. In fact, there will often be lots of knowledge we have around it, when we stop and reflect. Similarly, when we face any uncertainty, we need be clear what we do know about and what we don’t. We are not uncertain about everything.
  2. How can you predict the result of any action you take? Often we may understand some of the drivers, and we can run scenarios in advance. Sometimes causal relationships are completely unclear, what’s called an ‘unknown unknown’ (see image). In fact, we can still prepare by deliberate experimentation because, however complex or overwhelming the situation, preparation simplifies it ‘in the moment’. If we have a mental structure for processing information, it manages feelings that might overwhelm us. You can see why the army wanted this! Predictive analysis matters but, as we will see in a moment, we need to change how we do this.

Uncertainty and being prepared

In the VUCA model, uncertainty describes what is hard to predict, such as events, activities, or the impact of these. For instance, the more ‘surprises’ we find, the more uncertain it will feel, as Waltraud Glaeser points out in her VUCA-WORLD blogs. Therefore understanding is the key to managing uncertainty. As our historical patterns, or causal relationships, become less reliable predictors of the future, we must expect more uncertainty. Equally, we can reduce uncertainty by adjusting the way we forecast, plan and report. For instance, if we have run different scenarios and presented a range of outcomes, the outcome is much less likely to feel ‘out of the blue’. Anything feels less surprising if we have talked about it in some way already, even if we thought it wouldn’t actually happen. So we can manage uncertainty by modelling the scenarios we might face, rather than trying to agree what is most likely to happen. Strong planning links together multiple combinations of key assumptions, to illustrate how we might act in these circumstances. Constant surprises grind people down. We just have to think of our own experience of the pandemic, let alone the layered impacts of war, hurricanes, floods, and economic hardship. It’s the impact of one thing on top of another that is just too much.

The models in this scenario analysis are called ifthen models because they work purposefully through scenarios that link to our desired goals, rather than more adhoc or individual what-if experiments. For common or likely scenarios, we should define ‘playbooks’ (see box). Do this for those that have the most serious impact too. Deliberately consider how far things need to go to be disastrous, as with financial or military risks where stress testing is common. Forewarned is forearmed.

Volatility: the new dynamics of change

Statistics tells us to expect some volatility, but in times of volatile change we can see much bigger swings. This kind of uncertainty means that the risks quickly become too high to just take it in your stride. You can’t just ‘roll with the punches’; you need to be ready to avoid unacceptable risk. There are many factors with operational impact – from extreme weather swings (on a graph of rainfall or temperature) to economic behaviour (sales, prices, profits, turnover, etc). I think of volatility in terms of tipping points, exponential speed, and the dynamics of change. When something goes wrong it isn’t just a small deviation, easy to correct. Things get out of control very rapidly, like ‘going viral’ on social media, the spread of infection in a pandemic, the impact of climate change, and so forth. Graphing data and calculating percentages or statistical deviations can help us to understand it.

Most likely, the increasing volatility we face is due to systemic factors, rather than random variation, which means we can potentially model the causal factors and start to manage the uncertainty (as above). When regular causal factors and patterns change, some re-establish, after an exceptional interruption, and others don’t. We need to consider both. In any case our confidence has been hit. And the amount of data we have is hugely greater than even 10 years ago. For all these reasons, AI analytics and machine learning are rapidly growing in use for predictive analysis and reporting. Like with other kinds of uncertainty, we want to model the impact of different scenarios to be prepared, and paint a vision of the future we want, and how we will be acting in response to the factors that are out of our control.

Ambiguity: one size doesn’t fit all

Sometimes surprise and uncertainty arise because of ambiguity, our understanding of the situation rather than the underlying dynamics in themselves. Do you ever find that people look at the same data but come to different conclusions, and they all sound right? In the military people talk about the ‘fog of war’. When people are under stress or ill we may talk about ‘brain fog’. If there are many different interpretations of a situation we can feel confused, less effective in our roles, unable to act decisively and rapidly. You can see why the military included Ambiguity! At the same time, some deliberate ambiguity can help us be open to new ideas, different people, and a wider range of choices or approaches. In practice, the issues we deal with are rarely completely clear or precisely predictable. So, when things are complex and volatile, painting a picture that is very black and white is (in the long term) more confusing and costly, because we end up having to manage so many changes that people feel ground down.

Consider this when you set up operating models, and the policies or processes that support them, and talk of guidelines rather than rules. This is very useful for working hours, shift patterns and time off, as we explored in chapter 3, or in how we approach customer problems and the digital shift, as we explored in chapter 2. The fact is that one size doesn’t fit all! In the real world, there are shades of grey and a whole palette of colour. When empowering people to make delegated decisions ask them to consider both ‘is this the right thing to do?’ and ‘is it safe to do this?’. What we need to avoid is accidental ambiguity, such as people drawing different conclusions because they are looking at different data sources or making different assumptions within a model. Good planning and analysis mean surfacing these issues and making deliberate choices about how and when we communicate. The way we collaborate and engage other stakeholders is the key to being well prepared in an ambiguous and complex world, not oversimplifying or wishing the problems away!

How to make the complex simple!

The final VUCA factor is complexity. Simplification is a useful tool for managing this, so that we can consistently apply our energies where they will be most effective. That’s the goal to aim for. This doesn’t mean you ignore important multi-layered dynamics, when it comes to the demand we face, the resource we can supply or the outcomes we may drive. But complexity absorbs time and drives cost, so always ask, is this enough? Agile methods, for example, are iterative and aim to start with a ‘minimum viable product’. In the same way, simplification is not a oneoff task, but a process of explaining and engaging, in order that there is a common focus. Ask yourself, what matters most at this moment in time? The experienced professional will chart a way forward that allows stakeholders to explore layers of complexity, over a period of time, and create tools to support this, whether dashboards, models, frameworks, or guidelines for instance. Analysts of all kinds have a huge role to play in making the complex feel simple in this digital world. The meaning of your communication is the response you get. So, it’s too complex if people find your information overwhelming to process, or the impact of missing and incorrect information is hard to bottom out. If you are not clear, don’t share it yet, but get it simple first. At The Forum, we talk about painting a picture of the future or telling stories with numbers (one of the most popular of our learning module series) and we explore this in chapter 1.

The reality, for many members, is that the sheer volume of data often makes things harder to understand. Here, trust is the key to simplification. Visibility of operational drivers transforms life for operational teams and leaders, but they need to trust the data you show them. This is vital as you start to simplify dashboards and alerts. If we share too much information at once, it clutters our understanding. It becomes noise. By contrast, automated analysis can identify triggers and alert us based on agreed principles. This is a powerful simplification tool.

Our role as improvement champions

Let’s move on to examples of what all this can mean for customer operations. Starting at the personal level, we need a huge amount of resilience as professionals. Christopher Reeve, famous as Superman, had this to say. “A Hero is an ordinary individual who finds the strength to persevere and endure in spite of overwhelming obstacles”. Think of it like constantly overcoming obstacles, says Jasmeet Narang, Director of Operations at Santander UK, not just 1 or 2, but 5 or 10 or more. How do you keep going? “You need to sustain your energy, keep tackling the hurdles that come your way …. this is a belief that has to come from within.”

Improvement is never ‘one and done’. It is a process of continually applying learning. Notice that the ideas themselves don’t need to be new. It’s the challenges that change and sometimes you can adapt what you learned long ago, to do something new and (previously) unexpected. In this sense change can be exhilarating, like an epic adventure. At the same time, as most of us found from the pandemic, too much of it is overwhelmingly weary. To be resilient in an ever-changing world, we need to find ways to break it down. Hence the success of approaches like ‘agile’ with sprints and scrums, that focus a group on one issue for a short time. More broadly, we need to create the environment for thinking and move the authority to where the information is.

Resource optimisation

There are great examples in resource planning too. Before the pandemic, we would hear some senior leaders say, “I can’t prepare a strategic plan because things change so much”. There’s always a reason for not doing something in an uncertain world! Not surprisingly, we don’t hear that now, because we are in fact taking ownership of the issues that were previously too difficult. We have to! So, with members in our monthly virtual Leadership Forum groups over the pandemic, we have built a framework for evaluating new operating models, as more operations are embracing home/hybrid working and accelerating the digital shift. We have also updated our advice on how to create a future-proof flexibility tool kit (see chapter 3 of this guide). It may seem bold to think that you can future-proof anything in a VUCA world, but what you don’t try you don’t get. And in fact the success strategies for VUCA that we discussed earlier can help us to think about triggers and actions for flexibility in a new way. So, we may not predict weather or war, let alone the next pandemic, but we do need to model how events like this could impact us. We need to consider the actions we could take and, in this way, to bring more within our circle of influence, with clear resource contingency plans.

At The Forum, we call these operational playbooks. If we build these into our scenarios and operating models, as part of the planning process, this will help us react quickly and decisively, ‘whatever happens’. Move away from seeing these playbooks as just tactical planning tools. Instead, build playbooks at each stage of the planning cycle, and be rigorous in how this links to our handover from each stage to the next.

The four stages of insight

Confidence with numbers is another vital skill for anyone in a VUCA world, not necessarily understanding every technique but having the confidence to know what matters. In this world of alternative facts we need, as professionals, to be a trusted, go-to, source of truth. Over the pandemic at The Forum, we have evolved the four stages of insight (see diagram) as a key learning tool for every kind of analyst, whether in planning, insight, customer experience or management. During the last two years we have evolved this model with members, building on work by Gartner on technologies like analytics – and AI where capacity is doubling every three months. The danger as analysts is that we treat the future as outside our control, not our job. Much of our time is still spent looking back (hindsight) rather than using what we know to shape the future (foresight). So, what do we need to do to change this in our teams? Well, the sooner we have capabilities ready, the faster we can act. So here are two suggestions.

  1. Harness an ever-increasing range of data sources to help us paint a picture of the future. Often we limit our thinking to internal data sources, and we don’t think enough about voice, text, or video (certainly compared to how this data is being used in social media or the security industry, for instance).
  2. Stop “thinking of every problem as a new problem”, as it was well put by Richard Moore, at Anglian Water. The 2019 case study about the Insight Network he leads there is an interesting example of building up capabilities across the business, without reliance on a centralising structure. Above all this creates an environment in which new analysts can learn, grow, and be developed.

Strategic reframing & scenario planning

What worked yesterday won’t work tomorrow and, in a VUCA world, there are too many forces at work for a single prediction of the future to be realistic. Instead we want to work with a range of scenarios. For instance, at The Forum, we encourage planners to think of forecasts as a range of possibilities, not a single number, and the Planning Cycle explicitly started with strategic planning, for the first time when we released it in our 2019 Benchmarking and Accreditation Standards. The pandemic has since taught us much and this year we are aiming to release the next version, for this part of the cycle, to include ideas around managing multiple scenarios through the whole planning cycle. We will be looking at the power of playbooks and if-then models, to help us shape our expectations of the future.

Looking more widely, the Scenario Planning approach from the Business School at Oxford University is a method of strategy formation that defines itself by not predicting so much as exploring different possible futures, and we recommend their book Strategic Reframing (see box). In writing about it, Adam Gordon says: “Scenarios are integrated narratives of how the future may unfold, with always two or more in a set. This avoids the brittleness of a singularly predicted future, which the unpredictable world will surely make nonsense of”. It’s important to open up different ways of seeing any situation, with different ‘framings’ of uncertainty. This makes us, as leaders, more aware of the historic, ‘legacy frame of reference’ we may have unconsciously been using to make sense of the world. It is only when we open up our thinking, in this way, that we will be ready to look at alternative approaches that are more fit-for-purpose. “By rehearsing actions with these alternative frames, new and better options for action can be identified”, he says. It’s a bit like the mental rehearsal we might do on a personal level before a major presentation or event.

It’s not just the number of scenarios that matter but the process we create that encourages new ideas, so that we can explore and be prepared, ‘whatever comes’. In our 2021 Best Practice Guide, we looked at other such approaches, like the Delphi method, or ways to identify underlying bias in automated AI systems (eg with counter examples). Notice also that the authors of Strategic Reframing came from the Shell team renowned for their work in responding to the volatility and uncertainty that followed the 1970s Oil Crisis (Planning for Uncharted Waters, Harvard Business Review 1985). Energy prices are notoriously volatile. There is a favourite saying of mine that “unless we learn the lessons of history, it will repeat itself”.

Everyone can make a big difference

I want to end with a reminder that all these success strategies have one important thing in common. They all require great engagement, so that as many different people as possible are involved in generating new ideas and opening up our thinking. Charles Handy, the Irish economic and social philosopher, talks about heroic managers of the past, who aimed to know it all and solve every problem. This makes me think of an old-school sales or operations manager in danger of missing target! By contrast, great leaders today ask how problems can be solved in a way that develops the capability of others to handle it. That is what we are looking to do with these new approaches, based on scenario analysis and planning.

Professor Katie Truss at the University of Sussex puts it like this: “engagement places flexibility, change, and continuous improvement at the heart of what it means to be an employee and an employer in a twenty-first century workplace”. That’s how we can be ready ‘whatever comes’. Ivan Smith, appointed this year to our panel of honorary Professional Fellows at The Forum, explains it thus: “You only truly collaborate when you have just as clear an understanding of the other’s aims as your own”. Do get in touch if we can help you in facing up to the challenges of ambiguity and uncertainty in a complex and volatile world. You are not on your own.

Author: Paul Smedley

This article was first published in the 2022 Best Practice Guide - You Moment of Truth: Confident to Succeed

To download a full digital copy of the Best Practice Guide, click here

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