Planning with Scenarios

Business901 Podcast Transcription
Implementing Lean Marketing Systems
Scenario Thinking the Next Big Thing
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Planning with Scenarios
Guest was George Wright
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Transcription of Podcast
Joe Dager: Welcome everyone. This is Joe Dager, the host of
the Business901 podcast. With me, today is George
Wright. He is a professor of management at the
University of Durham Business School located in the
UK. George has consulted and provided management
development programs on scenario thinking with
organizations and governments. His latest work is
“Scenario Thinking: Practical Approaches to the
Future,” George, I would like to welcome you and could
you start out by updating me on what you’re doing and
then going into what scenario thinking is?
George Wright: Joe, I am an academic and, also, work as a
consultant looking into the
future. My current project
is with the United Kingdom
Department of Health,
that’s a government health
service in the UK. What
we’re trying to do is to
work out the number of
doctors and dentists and
their specialisms that will
be needed in thirty years’
time. Actually, sixteen to
thirty years, is the training
period for doctors. About
16 years to train in
specialty and, therefore, if
you think 30 years ahead,
you have to think what the requirements will be. The
UK people are getting older, becoming a bit more grey

haired and they are also becoming internet savvy. You
can imagine, perhaps that one of the things we can
predetermine about the future is that is the older
population, the bigger proportion is the older age men,
we’ll know more about what’s available in treatments
across the world. They’ll know more and want more.
Potentially they add some risk to the health service and
also uncertainties about the degree of specializations
that will be needed to care for the health in the UK
population in 30 years’ time.
Joe: How does this apply in scenario thinking? Maybe, start
with what is scenario thinking?
George: Well, a description maybe just making best guesses on
how things might be. There are all of these trends or
things like the proportion of people in the older age will
be larger in the UK, and that’s probably true in the US.
With these futures, using people for instance will live
longer. What we don’t know is a view of the health
professionals in the UK where people will live longer.
Will it be a longer period of old age with diseases of old
age or where people will live longer and have a shorter
period just before they die when they get ill? That is a
major uncertainty. If people have, many years of ill
health and those years of ill health become longer as
people live longer that’s an uncertainty. Or, whether
people will still live longer but have a shorter period of
ill health. You have to provide a plan for health service
for instance the range of futures that might be out
there. We need to be ready for what the future holds
and at the moment, of course, we’re not sure what’s
going to happen as we approach 30 years. However we
need to know the of course the training for doctors that
needs to take place now rather than later.

Joe: Scenario thinking is a method of handling uncertainty
or way of forecasting?
George: Well, it is not a way of forecasting. It is more of a way
of creating alternative futures each in which it seems
plausible. People will live longer and be ill longer, or
people will live longer and be ill for a short period of
time. Then try to work out a strategy for a health
service that will work well, no matter which of these
uncertain futures actually unfold. With scenario
planning, what we’re trying to do is create a strategy
that works well against a range of futures. One
scenario that I was involved with looked at a way that
the world trading patterns might emerge over the next
10 to 15 years. Over the next 10 to 15 years, certain
countries will trade with other countries. Those will
change and this organization was interested in the way,
trying to think about scenarios about the way world
trade would take place and that the trade that would be
part of that. Once having considered the range of
futures that might be out there, trying to work out
where the hubs of these container business, that’s with
containers on the back of ships on the back of barges
across the world where these hubs are located such as
they are robust against an arrange of futures. That’s
the idea. You are trying to create a strategy that works
well, no matter what.
Joe: When we are looking at different alternatives to the
future, we paint the picture with scenarios.
George: Yes, the scenarios are descriptions of the future often
constructed by management teams. They usually rough
out about four scenarios of the future. They are all
qualitative. Their absolutely, pictures of the way the

future might be. They are casually linked components
in the scenarios. For instance, we are not planning
scenario for Martians landing from outer space with ray
guns and shooting us. The scenario tends to be many
more logical steps from now into the future may be 10,
15, 20, 30 years. Hence, the scenarios are portal pen
pictures of the future that are plausible to the people
who constructed them. People say, “I can see this
series of events starting to happen.” You can go out in
that way like dominos swarming in one direction or you
can go out in a different way. If they are all plausible
futures, than they are futures we need to be concerned
with, without occurring major investments. Scenario
thinking is an approach that first started out with
capture intensive industries like the airlines, the oil
industry where major investment has to be made now.
It has to work well against a range of futures. That’s
the scenario approach, getting these robust decisions
that work well no matter what.
Joe: When done correctly you’re actually building a path,
and you can see the path developing and heading
towards maybe a certain scenario.
George: If you’ve done this scenario thinking and thought about
a different range of futures that you say with a path
leading to each of our futures. You become sensitive to
the early indicators that a particular future is starting to
unfold. So for instance if you, say just spotted a new
car, say a BMW with three series might be, and you
thought of about buying that car, you would be
sensitive to different styles of that car on the road,
different levels of kits and different wheels, different
types of paint work etc. Let’s just say with that
scenario you want to construct scenario and thought

about it. You’re sensitive to the early, I called, trigger
event in the scenarios starting to happen. So if you
thought about the scenario you become sort of ready
early to anticipate a future that maybe favorable or
unfavorable say to your business.
Joe: Is scenario thinking just for high-level strategic thinking
or can these principles be scaled down for other types
of decision making?
George: It can be useful in small, medium size enterprises. I
would say the input for all of these came from a large
organization with big capital intensive investments that
were to be made or not made. So, they were more
sensitive I’d say to thinking about the future early on
maybe 10-20 years ago when these all started. It’s also
like a big super tanker, once you start to have the
supertanker in motion heading in a direction, it is very
difficult to change directions. In the airline or the oil
business it’s similar that once you make an investment,
it’s very difficult to downscale it in the future. Most of
the input comes from large scale organizations. That’s
where the activity was, for instance, in the Shell
organization, in the early seventies. It started there in
a big way. The methods and techniques are applicable
to small organizations. Of course, smaller organizations
may be more agile and more able to change what they
do. Whereas, larger organization would get stuck, they
get stuck in success formulas. They become more
mechanized in what they do. It’s very, very difficult to
change a large organization and once the organization.
The fortune Global 500 companies, only 50% last
longer than 15 years. Larger organizations once they
are large, often fail because they can’t understand the
way the world has changed and they haven’t.

Joe: In your book, you talk about two different types of
ways to work with scenarios. Could you provide a brief
overview of what the basic method is?
George: The basic method is a step-by-step method for what
I’ve just said. If we look at what we think is uncertain
about a future and the uncertainties that would have an
impact on the issue of concerned. This is often the
viability of the organization and also what’s more
certain about the future say things like demographics
are fairly sure what’s going to happen is the future. The
scenario method uses a team of people to think about
what’s uncertain about future or what’s more
predetermined or in the pipeline about future. The
method takes these uncertainties and predetermined
elements and constructs these end pictures of casual
unfolding futures. So, these are a step by step method
for actually achieving the futures, these plausible
futures and what this is being done. The next step is to
evaluate current strategies of the organization or
potential future strategies and see how well, they do,
to see how robust they are against these ranges
plausible futures. That’s the basic method; it’s called
the intuitive logic method, that’s the technical term for
it.
Joe: So the other type is the augmented method and how
does that differ from the basic and maybe when would
I use the one over the other.
George: The augmented method which is also called backwards
logic. This is the technical term for a method of
constructing extreme scenarios. The backwards logic
method looks at what’s backwards from a range of
more extreme futures. So, with that method, what we

do is look at extreme but still plausible changes in an
organization’s objectives. Say maybe profitability or
market share or think about what would cause those
changes. We’re working back from extreme changes,
and we’re looking at potential causes of those changes.
That’s called backward logic, working backwards from a
range of futures at the extreme and working backwards
to the current point in time. The backwards logic
method tends to produce much more extreme
scenarios, different scenarios and the basic in theology
logic’s methods I described earlier and often, it’s a way
of getting an organization to think of it more broadly
than it normally would. An organization's often with
backwards logic method can, actually galvanized an
organization to prepare against a range of extreme
negative or extreme positive future.
Joe: Should I use both or will one dictate, depending upon
what I am looking for in this planning? Is there a way
to determine which one I should use?
George: The backwards logic method is a new method. People
are arguing, in fact, it is a better method than the basic
intuitive logic method that came from Shell. The basic
method I talked about which is less extreme came from
Shell Organization, I'd say in 1970s. The backwards
logic methods with these more extreme scenarios is,
argues with more threatening ways that are confronting
managers with the range of alternative future. It is
plausible on changes on achievements or non-
achievements as the organization's objectives.
Depending on what the organizations wants to take
head on; a negative future and a positive future and
start to think about them and think about the impact of
the organization, or whether the organization perhaps

doesn't want to be, just take that sort of threat head
on. The backwards logic method is more or a second
step method for an organization that is already, worked
with scenarios because they can be a lot more
threatening than scenarios I mentioned.
Joe: When we're doing this, we're always developing on
multiple scenarios. We are not ever saying this is the
future; we are putting multiple paths out there so we
can recognize what is happening as we move towards
it?
George: If you look at the best guesses that people make for
instance at the end of 2007 in Business Week. They did
a survey of all the economist in the USA and their
predictions to the plight of the economy in the USA in
2008. Thirty two professional forecasters, economists
were making this forecast only two predicted the
recession. The best guesses about the future even from
professionals who we’d expect to good at this can be
wrong. The scenarios then except that people tend to
be often over confident about the way the future might
unfold, especially in the longer term. So that’s really
what it’s about. It’s trying to overcome overconfidence
and in managers to expect that the future will resemble
the past, when in fact, sometimes it doesn’t.
Joe: Why would I want to go through this whole process, if
it’s so likely that I’m going to be right or wrong
anyway.
George: Well, I think the key is, it’s a way of enhancing or
facilitating a strategic conversation as it’s called within
the top management team. So if you’re a top
management team, you would bring in some of the

work in scenario over a maybe a two or three day
period, you start thinking about what the uncertainties
and what you see is predetermined about the future,
you create a range of futures and you evaluate current
investments and potential investments against the
futures and you get a conversation going about the
future. Often in the organizations, there really isn’t a
conversation. This is your best guess future and people
don’t often talk about it are being in strategy meeting
in organizations where there has been a coffee break.
As soon as the coffee break happens even though the
whole day is about strategic thinking maybe, people
are in their mobile phones, checking if production lines
are running. People are more concerned in the day to
day, than, you know the future. Scenario thinking is a
way of getting an organization, especially the top team
to think more about the way the future might be. So
trying to prepare for the future and evaluate the
organizations preparedness for the future.
Joe: I think about the black swan theory. That is something
that you can never plan for or, is it?
George: Well, in the anti-fragile approach, and this is an
approach we are now also developing as a compliment
really to scenarios, anything could happen. Everything
is sort of in deterministic. Of course that’s a
contradiction in some ways to a scenario thinking which
is thinking focus on cause. The anti-fragile approach is
interesting. We are just starting to think about it in my
group for the moment. The idea is that you can position
an organization such that the downside is nil. There is
not very much down side. But, the upside is potentially
very large. Use the analogy of someone that has 100%
funds invested. You could invest 90% in safe funds and

10% in funds that could do really well. If things go
badly you’re only losing the 10%. The idea is that you
position the organization such that the downside is nil
and the upside is unbounded no matter what the future
might hold.
Let me give you an academic example for instance
then. Just imagine an academic, who is a young
academic, whose, been working in the university. That
academic has a chance for a year to go work
somewhere else, a much better university. Where there
are very prestigious professors and very strong search
going on. Potentially, there are sort of networks that
could be very useful for that junior professor. In terms
of the positioning then, the downside is a year of
inconvenience, a year away maybe from the
hometown. But the upside is potentially very
enormous, in terms of working with these more senior
types. These people are more imminent on the
academics field. So, by making that decision, the
downside is clear. It is a year of inconvenience but the
upside is tremendously high.
Without trying to predict what may happen in the
future years, this sabbatical of a year away from the
base university, you can see that the position is a good
one. That’s the essence of the anti-fragile approach.
You can put yourself in positions that if things go bad,
then it goes that bad. But if things go well, they could
go really well.
Joe: I can bring my executive team in and we can have this
big strategic thinking session. We can bring a facilitator
in and take us through all this. It seems to me it would
be very difficult to bring customers into this fold to

think about 5, 10, 20 years in the future with me to
help me out. Is it really plausible to include them in this
type of thinking?
George: Yes. The key about of getting a team together to think
about the future, it doesn’t have to be from a single
organization. It can be from you know multiple
organizations or as it’s called multiagency. We evolve a
range of different people with very different
perspectives on the way the future might be.
Customers can be perhaps useful but maybe not when
we are thinking 40 years. Let me just give you an
example. Say if you’re in the lawn mower business,
you’ve got machines that cut grass and that’s the thing
we do, that’s your industry. We can make them more
efficient and develop new models of grass cutting
machinery. We can imagine talking with customers
about that business and they would have various views
about what they like; machines that are easy to
maintain, machines that could withstand the rainy
weather that don’t rust and don’t degrade, etcetera.
That will give you one perspective. But for scenario
thinking, you tend to think about what will happen?
What will the current customers, what will they be
doing? What would they desire, what would they
probably use be in 30 years’ time? Maybe that all
people living in condominium or flats. People putting
more deckings outside their homes. Maybe technology
has changing such as grass doesn’t grow. It just stays
green and stays short for instance. Let’s say the more
you think about you know the technological drivers of
the future, the social drivers, the more you can
understand whether it’s good at this point. It’s still in
the lawn mower or the grass cutting business.

Customers provide one perspective, but there are many
other perspectives when you’re thinking more long
term about the future.
Joe: You have some great resources on the web and where
can people find the book and those resources?
George: The best management book I think is the book
“Scenario Thinking” by myself, George Wright, and my
co-author in Australia, George Cairns and that’s
published by publisher called Palgrave. It’s available on
Amazon etcetera and also in Kindle and this book came
out in 2011. There is another book called The “Sixth
Sense” which is published by Wiley and I’m a co-author
on it, and another co-author is Kees van der Heijden, a
Dutchman that used to be the head of internal planning
and/or consultancy at Shell organization. So, these are
I think, two, quite good books that are written for
managers on what scenarios thinking is and also how
to do it.
Joe: What’s the difference between the two books?
George: The Sixth Sense book is from 2002, that’s much more
of the Shell method. 2011 book that’s the Scenario
Thinking is 2011, and it’s got this backwards logic
approach to it. It’s got a more up-to-date, and the
augmenting methods of building scenarios.
Joe: I do want to mention that it’s not this theory 20,000
foot level book. It’s a practical step by step guide. I
thought you did an excellent job.
George: Well, thank you. That was the intention to
communicate the academic and consultancy type
knowledge in a form that’s accessible and more people

could do this.
Joe: What is the alternative to scenario thinking? Are there
other methods out there that can be used?
George: Well, a major method, I think in making decisions in
the face of uncertainties are decision analyses where
people make judgments and probabilities of future
events and look at the pay offs and the roll back based
on expected value for instance. So in US, especially
decision analysis is quite a big thing. Decision Analysis
sets goals, numerical probabilities and net present
value etcetera. It is acceptable to some, but senior
managers, especially in Europe they are more
qualitative, and scenario thinking is a different way. It’s
more than trying to maximize decisions or manage
decisions. You’re trying to alternatively create a robust
decision. That works well across a range of different
plausible futures.
Joe: What is the best way for someone to contact you?
George: The easiest way is just to email me. The email address
is in the back cover of the book, “Scenario Thinking.”
I’m available on george.n.wright@outlook.com
Joe: I would like to thank you very much George. I would
like to thank you, and this podcast will be available on
the Business901 blog site and also the Business901
ITunes store. So, thanks again.
George: Thank you Joe.

Joseph T. Dager
Business901
Phone: 260-918-0438
Skype: Biz901
Fax: 260-818-2022
Email: jtdager@business901.com
Website: http://www.business901.com
Twitter: @business901
Joe Dager is president of Business901, a firm specializing in
bringing the continuous improvement process to the sales and
marketing arena. He takes his process thinking of over thirty
years in marketing within a wide variety of industries and applies
it through Lean Marketing and Lean Service Design.
Visit the Lean Marketing Lab: Being part of this community will
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Planning with Scenarios

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