June 16

Strategic Planning in Turbulent Environments

Richard Whaley

Dr Richard Whaley is a Director of Planning & Control Investments Ltd, and of the Business Trends Library, 2 Rotherwick Court, Farnborough, Hants GU14 6DD. richard@whaley.me.uk

The Long Range Planning Journal recently published a paper of the above title by Ramirez & Solstky (Ref 1). Their theme is that conventional strategic planning on the basis of what they call neo-classical economics is not realistic on what they call socio-ecological environments with its unpredictable uncertainty, environmental turbulence, jolts, disruptions, and black swans.

This environmental description is similar to the recently published HBR article which linked it to the dramatic statistic that the average age of death of US corporations has fallen from 55 years old 40 years ago to just 32 years old now (Ref 2). Clearly the business environment is causing serious problems for business survival and planning.

The HBR authors advocate learning from biological systems to make firms more robust - and appear to be resigned to the business environment becoming "far less predictable". The Business Trends Library counters this, that there is considerable mileage to improve the predictability of the business environment (Refs 3 & 4).

Futures Methods

The LRP authors do also argue for a much more important role for "futures methods like scenario planning" - but neither are defined. It all boils down to how the scenarios are obtained - if they can reveal the Surprises. These authors are assuming that the problems in the business environment can be sorted and made clearer and sufficiently more predictable by the use of scenarios and other futures methods - without explaining how. Their above phrase is not too logical. There are some 20 futures methods - it is not arguable that any one method can do what all the other methods do. All the LRP discussion is on scenario planning.

The LRP authors discuss using Causal Textures Theory with its relatively simple notation to denote whether important links are with the organisation to its environment, or internal to the organisation, or links within the environment itself. If the important links appear to be within the environment itself they suggest this may herald a turbulent environment. This assumes you understand the links in the first place - if you do you don't need this relatively simple 50-year-old theory. If you don't know or understand the links its not seen how this 50-year-old theory can help you find them. That the business environment is extremely interactive has been known for 30 years - the Business Trends Library mapped the impacts and interactions in Ref 5. The interaction diagram therein indicates you need databases which can supply interactions from all parts of the business environment to obtain information on Surprises which may affect you. The LRP authors correctly challenge Porter's focus of analysis as "the industry" as too limiting, but do not define what the new focus should be.

Stone age man would have had few such inter-environment interactions. He was affected by the Ice Ages - which were beyond his comprehension. As man progressed up the economic levels these interactions increased. Perhaps still manageable to the Romans and Industrial Revolution Man, their increasing number is the subject of the problems cited in the HBR and LRP articles.

It follows that the unknown links, surprises, unpredictable uncertainty, environmental turbulence, jolts, disruptions, and black swans must arise out of the "futures methods - like scenario planning".

A word about Surprises. These can be anything like those in the last paragraph which occur without the business realising it in time to prepare for it, make use of any opportunity, deal with any threat. The business must know what it is (not an abstract notion from Causal Textures Theory). It needs the best estimate of the chance of it occurring. It also needs to be appreciated that a lot of these may effectively be Roulette Wheel issues. The most you maybe able to do is to set up the issue, with some time estimates of chance over a range of years in the future. Otherwise its outcome will be much the same as the Roulette Wheel - you don't know if or when. There may be little point in expending resources to forecast it further. Instead you identify Weak Signals the Surprise may cause as it approaches you - and set out to monitor them if the Surprise is important to you. And adopt a strategy which is robust to all outcomes envisaged. What is important to you is to identify most of the Surprises with their Roulette Wheels or other probability profiles.

Pages 98 & 99 of the LRP article gives examples where a wealth of detail is required - where this author considers is not available from scenario planning as is often practised - but requires comprehensive use of the futures methods.

Each such entity of trend, impact, or Surprise must be correctly stated, with a reasonable probability profile. If the entity is missing, or wrongly stated, or the probability profile bears little relation to the actual out-turn then it could cause a Surprise. The risk is you could end up with more Surprises not less - which would be counter productive. A lot is being asked of futures methods, and the LRP authors need to provide advice to firms on where they can obtain such facilities - if their thesis is to be true.

Major Trends

Surprises often occur from interaction within the environment - the most important from more places in the environment - which build up to a major trend (Ref 5). They can also come from the Business Trends Library's concept of Constant Trends (Refs 3, 4, 5). This is the source of the main example of Surprises given by both articles - the Credit Crunch. It has happened ever since there were Banks in Roman times, and is part of the Constant Trend of Banking. It is so common - 1930s, 1970s, 1980/90s - that its easy to set up a Roulette Wheel for it. Consulting the Constant Trend for Credit gives Weak Signals (or not so Weak!) that you can monitor. That this sort of thing is quoted as a Surprise indicates the low level of practice in monitoring the business environment, and the large scope for improvement.

The LRP authors are assuming that the problems with the business environment can be sorted out and made clearer by the use of futures methods "like scenario planning" - without explaining how, or where to find the scenarios. For these processes must reveal most of the Surprises.

This Author considers that Scenarios are a method of outputting the results of comprehensive futures research, tailored to specific issues (Ref 6). It is however doubtful if many cases exist where comprehensive futures research has been undertaken - instead we may state a number of levels where scenarios are produced:

  1. Popular "round the flip chart" brainstorming
    Unlikely to produce many of the Surprises, which from Ref 4 & 5 come from outside the industry concerned
  2. Consultants scenario outputs
    Marketing literature generally allude to behind the scenes teams without being able to assign a level of comprehensiveness of the futures research which feed the scenarios.
  3. Institutes
    May have built up sizeable databases - but usually not geared to business.

Metrics to comprehensiveness

This Author considers the more comprehensive the database from which the scenarios are drawn the more Surprises will be identified (Ref 4 & 5). The Authors of both HBR & LRP articles allude to this at least in part. There is a need to provide Metrics to the provision of any scenarios of how comprehensive the database is, say 0 to 10, or 0% to 100%, where 100% stands for a fully comprehensive database. In the first instant the provider of the scenarios would provide the Metric of comprehensiveness.

Further Metrics would be needed to help police the system. The time in years that the database had been at that level would be needed, and if only recent then a history say 2 years at level 8, 3 years at level 6. . . Then the provider would give the number of Surprises the database had encountered over the time it had been at those levels. Then further to policing, how may Surprises the database clients had had. These Metrics would give a wealth if information to clients on how scenarios from the database would help with the turbulent environment problem. It may be said however that a client getting a Surprise may not be the fault of the database. The client may not have adequately specified the range and purpose of the scenarios required, the operator may not have adequately selected the scenarios, or the client may not have had periodic updates.

The anthropology of this problem is relevant. The Classical civilizations around the Med put great importance on means of forecasting the future. The Romans would not do anything without consulting entrails. The great oracle sites in Greece grew rich with large temple complexes by being consulted by the rich and powerful. The Delphi Oracle had the following set up. A drugged priestess sat away from the client, often at the end of a long tube. At the other end in the temple complex sat the client (say a king contemplating an attack) and priests. The client would call out the problem he wanted a solution to. The priestess fell into a drugged trance, uttering unintelligible words. The priests wrote down her words, arranged them into coherent phrases, and delivered them to the client as a logical reply - which often had two interpretations (Ref 7).

The essence of this process is the separation of the source of the problem's solution from the client - both in distance and the mode of solution. Naturally it was believed the God Apollo was behind the solution - appealing to the Magico-Religious. Define this as the Delphi Oracle Conditions or DOC.

We can see that in our level 2 examples above, the role of the behind the scene teams is the modern DOC process. We can assume that the modern Referee or Reviewer would give little score to the Delphi process - and should give little score to the above level 2 offerings - who need to state the Metrics proposed above.

Soothsayer

Modern business man is above Anthropology? Not so - Cleverley Ref 8 has shown that the anthropological structures are there in the modern businessman. Like the ancients, he likes to believe someone, somewhere, knows what is unknown. Finding that person who knows is the basis of the great consulting houses. The role of the shaman is well-developed and big business. The role of the soothsayer, with which we are more concerned, is less developed in our society than the ancients.

There is a question if the Soothsayer is profitable in our Society. A review of the scanning process in this Journal in the 1980s (Ref 9) listed sources of information scanned. The futures consultants scanned are not all active now - and information from these sources was not among the most valued. The Business Trends Library monitors management consultants and forecasters offerings. It seems they tend to come into the field for while and then drop out. One or two bring scenarios into their websites during economic boom - when demand for thinking ahead is higher. Of the 22 consultants or forecasters who had some activity in Trends, Business Environment, or Strategic Management over 1980 -2000:

More information is given on-line in Ref 10. Strategic Management is only represented by terms of Capability or Competences. To obtain decent Metrics proposed above, a House needs a fairly long period of offerings. This will cause problems.

One of these consultants is tapping into the Scenarios of one of the LRP authors - a neat DOC. The websites contain the following descriptions: * with scenario analysis * 2011 with Said Business School, scholars lead the world renowned programme in scenario planning * Said Business School founded in 1996, one of the youngest ... academic rigor.. From these a Reviewer would struggle to assign Metrics of Comprehensiveness, and Surprises received.

Conclusions

LRP authors say the turbulent environment problem can be helped or solved by "futures methods such as scenario planning". Academic rigor means such a claim made in an academic paper must be demonstrated by academic rigor. Such rigor is not seen in this LRP article. The LRP authors must set out how futures methods can provide the Surprises, and in particular how businesses can obtain their Scenarios. For example if businesses use the popular Level 1 in the above Table, few of the Surprises are likely to be revealed. Using Level 2 requires businesses to break through the suppliers' DOC by asking them to provide the proposed Metrics. Thus this Reply Paper provides the tools (including Ref 6) to seek out the futures methods and scenarios to reveal as many of the Surprises as possible from their turbulent business environments. If firms wish to build their own databases using futures methods, especially in the early stages, external sources will always have greater coverage and track record from which it is advisable to check your own early work. The proposed Metrics of Comprehensiveness and track record of Surprises are the key to selecting such sources. Perish the Delphi Oracle.

References

1. R. Ramirez, J. Solsky Strategic Planning in Turbulent Environments - a Social Ecology approach to Scenarios, Long Range Planning 49 No. 1, February 2016, p 90

2. M Reeves, S Levin, D Veda, The Biology of Corporate Survival, Harvard Business Review 94 Nos. 1 & 2 Jan - Feb 2016, p46;

3. R Whaley, Data Bank on the Future Business Environment, Long Range Planning 17, No. 4, August 1984, p83

4. Corporate Death at 32 years, BTL Briefing April 2016 http://www.businesstrendslibrary.co.uk/hbressay.htm

5. R Whaley, Interactions and Impacts among Business Futures, Futures 16 June 1985, p269.

6. R Whaley (Ed), Forecasting, Proceedings of the Business Futures Study Group, Strategic Planning Society, London, 1996, Scenario Writing p33 www.businesstrendslibrary.co.uk/forecast.htm

7. R Misdrahe-Capon Sanctuaries & Museums in Greece - Delphi, Orpheus Editions, Athens 1976, p6

8. G Cleverley, Managers & Magic, Longman, 1971

9.S Jain, Environmental Scanning in US Corporations, Long Range Planning 17 No. 2, April 1984, p 117

10. Further online information on consultant's scenario activity www.businesstrendslibrary.co.uk/2015scan.htm

About the author

Dr Richard Whaley is Director of the Business Trends Library. He was formerly Head of Business Research for McCorquodale & Company Ltd, responsible for opportunity seeking and Long Range Planning. While in Management Development with the International Publishing Corporation, he was involved in the introduction of Corporate Planning, and developing scenarios for Communications. After gaining a Ph.D. in Physics in 1967 he went into scientific publishing. Here he was responsible for the conception and development of the international journal Futures. Since then he has been involved with the analysis and forecasting of the business environment, and its use in business development.

He served as Chairman of the Business Environment Study Group of the Strategic Planning Society, London, and on the Society's Executive.

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