I was listening to a recent podcast from the usually excellent BBC podcast "More or Less" about super-forecasters projecting the impact and implications of coronavirus. Ultimately it took the same approach as many other people in trying to forecast when and how we’ll ‘return to normal’ (sic) or what the ‘post coronavirus’ economy will be like by extrapolating the trends we can see in front of us. While I understand the interest, it made me reflect that between all the good thinking and data analysis – this just isn’t the right approach. We shouldn’t be basing our discussions (and even less our decisions and investments) on simply extrapolating from yesterday’s data to a single projected future.

Complex uncertainty

While analysing data and extrapolating trends is certainly valuable for managing a business in the short term during ‘business as unusual’, that’s not how I’d characterise the time we’re in just now. For all the data we pore over in the news the reality is we still don’t know some of the most fundamental things, for example:

  • What is the primary route of viral infection? Is it person-to-person contact only or is it mainly passed on by touching objects such as doorknobs etc? How are the animals around us affected? At the time of writing there seems to be new evidence emerging about cats transmitting the virus to each other. These factors will each have a dramatic effect on many areas of life in the future – and of course the way we conduct business.
  • How many people have already been infected? The ‘hidden’ nature of the virus in the first few days of infection before people become symptomatic, combined with the large number that is likely to have it as a result of the low testing rates in most countries makes this a particular challenge. To date there have been plenty of inconsistencies in global reporting, never mind the high rate of errors – both false positives and negatives in today’s tests that will further confuse even the best of estimates.
  • Does infection lead to long-lasting immunity? This is pretty critical, if we don’t build immunity then we will still be at risk as a population until an effective vaccine has been developed and used to immunise the majority of the population. Isolation, or at least extreme social distancing, may become a way of life for much longer than any of the current models are predicting. And even if we create immunity, what happens as the virus mutates?
  • How will people react? As investment managers say, “past performance is no guarantee of future returns”. If and when we exit this crisis, we will have been changed: financially, psychologically and behaviourally. Already senior officials are talking about a "more volatile and agitated society" after the end of lockdown. Our attitudes to risk and other people may have changed – layered on top of all the uncertainties of the immediate crisis and our recovery from it are the unknowable unknowns about how people, businesses and governments will react.

The nature of disruption means that even small changes in these seemingly simple factors can have dramatic effects on the future. Not only are there many plausible alternative futures (i.e. scenarios) which may play out over the next few years, but the implications these will have on individuals, companies and societies may be radically different.

Enter scenario planning

When innovating in this sort of extreme uncertainty, a tool I’d suggest organisations use to help make decisions, manage risk and drive innovation is scenarios (also called scenario planning) – but perhaps with a twist. Scenario planning is typically used by organisations looking at investments which will play out over decades where the uncertainty is inherent in the timescale. Examples include the military, natural resource exploration, public infrastructure and aerospace. 

Today we have a slightly different situation – huge uncertainty compressed into a much shorter period of time. For many people, even tomorrow holds tremendous uncertainty for them. And while the scenarios you need to consider will be different for each industry, and perhaps for each company. If you’re not already using scenarios it is a mindset and a framework which I suggest you start to adopt today.

For the sake of brevity, I won’t talk here about how to run a scenario planning process. There are several well-documented approaches and I’d be happy to share our own scenario process primer if you email me on hello@igniteexponential.com. Instead I just want to comment a little on why I think it is such an important tool in today’s disrupted environment.

Scenario planning differs from conventional market analysis or trend scouting because:

  • We’re not blinded by the journey. By projecting forward and characterising scenarios we become less distracted by the sequence of events that get us there. An example is the media’s current obsession with “exit strategies”, the manner of the transition from lockdown and isolation to a future ‘normal’. The exit strategy is important, but many different types of exit might lead to the same scenario and vice versa. So for business planning and innovation, I’d argue it’s more important to focus on the destination than the path.
  • We don’t try to just extrapolate today’s trends. We all have a bias to value the short term changes we see around us more strongly and yet we find most trends become meaninglessly generic when change is happening so quickly. How many annual sales plans are in tatters just a few months into the year? Instead, based on a diverse range of inputs we can create a set of plausible alternative futures (i.e. scenarios) which will have different and critical impacts on your future business.
  • You explore unrelated changes well beyond your category. Not only will this help to spot potential implications for your own ecosystem, but it can also be a rich source of insight and inspiration. As it's often said, “the future is already here, it’s just not evenly distributed.”

And the most important one for me: 

  • We are not attempting to choose between scenarios to craft a response. Rather we’re looking to systematically explore the implications of each scenario for consumers, customers, suppliers and for your business. This gives us the opportunity to make a set of consistent strategic choices which are (hopefully) robust whatever happens. You are less likely to be blindsided by unwelcome surprises and the process can identify white-space opportunities that remain otherwise unfilled. And as events unfold when you do need to change tack, the framework you’ve created will help you to act with confidence and agility as you adapt.

And finally…

One of the reasons that I think scenario planning is so important here is that much of the social media discussion about the impacts of this coronavirus disruption has turned to what people want. But whether about home working, future healthcare, the impacts on sustainability, politics and many other things – this future is not only uncertain but also out of our (immediate) control.

I’ve found that tools like scenario planning are helpful for understanding our biases, challenging our assumptions, considering alternative possibilities and systematically exploring their implications – and as a result, we will have a more robust framework for making decisions about the future. And by innovating from this sort of framework I believe it gives us the best chance of creating the future we want.  

I hope it will help you to create yours. Take care.

If you’ve been using scenarios or similar tools to help manage your business and innovate for the future at this uncertain time I’d love to hear your comments – or just get in touch.