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BOOK REVIEW
Kees van der Heijden et al (2002). The Sixth Sense: Accelerating Organizational Learning
with Scenarios (Chichester: John Wiley), pp. 307.
INTRODUCTION
This anthology of essays on scenario planning is the work of Kees van der Heijden
and his colleagues at the Centre for Scenario Planning and Future Studies at the
Graduate School of Business in Strathclyde University. They include Ron Bradfield,
George Burt, George Cairns, and George Wright. All of them of teach, research, and
consult with firms on various aspects of scenario planning. This anthology brings
together what they have learnt about scenario planning at Strathclyde along with a
number of case-based examples. These examples will be of use to readers in making
sense of what is at stake in scenario planning. It will make it possible to differentiate
scenario planning from a number of business tools that bear a close resemblance to
it. The best way to read this anthology is to start with the Glossary. It will help
readers to pick up the basic vocabulary of scenario planning before they get started
on the theory and practice of scenario planning. So, for instance, it appears that
scenario planning is just another name for sensitivity analysis; but that is not really
the case. Sensitivity analysis involves tweaking just one variable while keeping the
background constant. Scenario planning however involves taking on a number of
variables simultaneously. A sensitivity analysis can tackle what will happen if the
Federal Reserve decides to increase interest rates; but only scenario planning will

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make sense of a situation where the Fed keeps interest rates zero bound for a
number of years. Likewise, sensitivity analysis can delineate the consequences of an
increase or decrease in oil prices; but only scenario planning can make sense of what
might happen if an economy runs out of oil. In other words, sensitivity analysis
should be deployed when it is business-as-usual with minor variations while
scenario planning helps us to prepare for situations with systemic consequences.
One final example might clarify the situation even more: if a mortgage underwriter
is calculating the risk that a particular borrower may default on a loan, he does do
using a sensitivity analysis. He tries to make sure that the insurance firm is
adequately capitalised to withstand the loss. If, however, the management of an
insurance firm is trying to anticipate whether there is a possibility of another
financial crisis, they should seek recourse to scenario planning. As should be
obvious from these three examples, most decision makers are acquainted with the
rudiments of sensitivity analysis. What is really required however is the need to
make it possible for them to think about scenarios where the consequences in terms
of risk management go beyond individual customers and clients; or, to put it simply,
scenario planning involves teaching decision makers to think in terms of the
intended and unintended consequences of how they manage risk for the banking,
financial, and insurance systems as a whole. That is however easier said than done
since there is a cost factor involved in worrying about things that might not happen -
finding the space, time, and resources necessary to do so however is well worth it;
that is the main finding which this anthology of essays tries to get across to its
readers. This voluminous book is not easy to summarize since each of the writers is
trying to make a case for scenario planning. What I will do in this review is to focus
on what they have in common since the educated layperson or decision maker
should be first acquainted with what the scope of scenario planning is rather than be
bothered with the subtle differences between different academic approaches to
scenario planning in the first instance.

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THINKING WITH SCENARIOS
Let me start with the title. The sixth sense is the ability, needless to say, to be able to
think with the aid of scenarios. The subtitle refers to the main benefit in being able to
do so. Deploying the sixth sense in an uncertain world will not only become a
sustainable source of competitive advantage, but it will do so through the
acceleration of organizational learning. In other words, honing the sixth sense is a
way of bringing together research on competitive strategy with theories of
organizational learning. That is especially important for knowledge-based
organizations where it is less a case of applying knowledge to client-based situations
rather than – as Peter Drucker was fond of putting it – ‘applying knowledge to
knowledge’ itself in order to generate a new way of thinking about problems,
situations, and in identifying opportunities for value addition in a knowledge-based
economy. What this anthology does is to explain how all these things can be done for
any organization that is determined to do so and which realizes the role that
scenario planning can play in that process of rethinking their value chain. This
basically means that an organization must come to terms with the fact that in a
competitive world, the structure of its value chain must be conceived of as ‘dynamic’
rather than as a static entity. Furthermore, the level of responsiveness its value chain
exhibits to emerging scenarios will determine whether or not it will stay relevant in
the years to come. The main value of scenario planning then is not that it will be able
to predict the future, but rather that it teaches firms to be responsive to a range of
possible scenarios. There is no business tool that can predict the future; it should
therefore be made clear that it is not within the province of scenario planning to do
so either. What scenario planning can really do is to reduce the response time of
decision makers to adverse shocks. One of the original purposes to which scenario
planning was put was to think about what policy makers and military commanders
must do in case of a nuclear war. The premise was not that scenario planning can
prevent nuclear war, but rather to identify scenarios where it was most likely to
happen. Once these scenarios had been identified, it was less likely that a
misunderstanding of events would lead to disaster. The establishment of a hotline
between Washington DC and Moscow was itself made possible by rehearsing

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scenarios in which acts of miscommunication might lead to a nuclear war during the
Cold War era. Thinking with scenarios then is way of honing the sixth sense; it helps
decision makers to constantly be on the lookout for what can go wrong in any given
situation by rehearsing with plausible scenarios before they actually have to take
crucial decisions. The applications and usefulness of scenario planning for the armed
forces and the military have always been well-known and widely appreciated. What
this anthology is trying to do is to make a case for incorporating such forms of
thinking in the world of business as well.
THINKING ABOUT THE FUTURE
There are eight chapters in this book. The topics covered include the need to prepare
for the future by taking the role played by uncertainty seriously. The main
contention here is that uncertainty cannot be eliminated; it is therefore important to
teach decision makers to factor in uncertainty into how they think about the future.
But, before approaching the problem of uncertainty in the socio-economic or political
environment, decision makers must understand their own business models and
value chain. They must be able to explain why they think the way they do and
whether or not those forms of thinking will equip them for the challenges of the
future. The relevant case examples here are those of Canon and Xerox, Yahoo! and
Lego. These case studies attempt to identify the pre-conditions for success and
failure in these companies and what lessons can be learnt by readers from these
examples. These lessons are then thought-through in the context of scenario
planning. To what extent could these companies have thought-through their future
challenges by anticipating them in the form of scenarios? In order to teach decision
makers how to think about the future, it is important to start by coming to terms
with how they actually think. What are the assumptions that govern their thought
patterns? To what extent are these assumptions compatible with the forms of
analysis that can be termed ‘scenario planning’? What must exponents of this
approach do to overcome the resistance to scenario planning? In order to answer these
questions, it is important – as behavioural economists are fond of arguing – to
identify the different biases that constitute how decision makers go about making

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decisions in everyday life. It is also important to manage expectations about what
scenario planning can and cannot do as a cognitive tool and remove the anxieties
that come with using a tool for the first time. Once that is done, it is possible to
overcome the thinking flaws that necessitate scenario planning as a way of preparing
for the future. In addition to explaining how individuals think, it is also important
to identify how organizations think about their own future. That is because what
they do in the present or how they make sense of the past is related to how they
think about the future. In other words, organizations must be aware of self-fulfilling
prophecies and how getting some emotional distance about the future with the aid
of scenario planning can increase their scope for action in the future. This is an
important prerequisite for overcoming organizational limitations that they may not
be consciously aware of, but which emerge in the course of a workshop on scenario
planning.
DEALING WITH COMPLEXITY
Another important topic that is covered is the cultural dimensions of strategy and
the relationship between strategic thinking and scenario planning. In order to further
the strategic objectives of an organization, it is important to be able to surface its
culture. In other words, we must be clear about what an organization can take for
granted about its way of doing things, conducting business, and in relating to its
customers. These relations relate to the cultural dimensions; the whole question of
whether a given strategy is right or wrong for a company is not an abstract question;
it is more a problem of whether it is culturally ‘appropriate.’ An important
prerequisite to teaching scenario planning then is to ask whether a company is
culturally prepared to consider certain aspects of the future and how it plans to
respond to emerging scenarios that cannot be fully anticipated in any scenario
planning workshop. That is why the authors include an elaborate account of the
history of scenario planning, the role that it played in organizations like the Rand
Corporation, Royal Dutch Shell, and the differences between the American, British,
and French approaches to scenario planning, and in the use of war games by the
armed forces as a tool of strategy and decision making. The main point here is that

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scenario planning is effective only if the organization is culturally prepared for it.
The similarities and differences between scenario planning and strategic tools must
be made known to decision makers much before they will be asked to deploy the
insights generated through scenario planning workshops. The benefits of such
exercises must also be widely diffused through the organization in terms of
‘enhanced perception’ of the factors that will determine how an organization will
perform in the future within a range of scenarios. Only then will it become possible
for scenario planning to become integrated within mainline organizational planning
rather than just remain the subject matter of workshops. The takeaway that is
envisaged in these workshops is that scenario planning must become ‘a structure for
dealing with complexity’ as such. The communications policy of the organization
must ensure that this is the message that goes out to all employees and decision
makers. It is only when scenario planning becomes a part of the ‘strategic
conversation’ that the company will be able to deal effectively with complexity and
meet the future without undue anxiety. This approach assumes that those who teach
scenario planning will be able to integrate strategic goals with forms of
organizational learning. That should increase the organization’s ability to adapt
more effectively and ensure that its employees have the survival skills needed to do
so as well.
ANTICIPATING THE FUTURE
And, finally, the basic skills involved in doing a stakeholder analysis while teaching
scenario planning, and in being able to anticipate the future, are explained. It is
important to keep in mind that the goal of doing all this is to ensure that it will lead
to a competitive advantage. Scenario planning then is fully compatible with strategic
thinking. It is a way of sharing the strategic goals of the organization with decision
makers and employees so that they are able to envisage, explain, and anticipate what
they will do across a range of scenarios rather than in a particular situation – as is
usually the case. The main argument here is that scenario planning reduces the
levels of inertia that constitute a company or an organization by keeping the decision
makers and employees on their toes. In order to do so, it pushes a model of learning

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that is not only adaptive but relentless. Organizational learning must not turn
inward since that will make it less adaptive to changes in the environment. Instead it
must envisage much more change in the environment than is actually the case. Only
then will organizations be able to hone their sixth sense by using scenarios. Reading
this anthology of essays on scenario planning then is a good way of getting started.
The Glossary and References provided in the book will help the reader to get deeper
into the topic if he decides to do so and help him in anticipating the future through
the use of scenarios and scenario planning.
SHIVA KUMAR SRINIVASAN