Sixth Sense

Kees van der Heijden (Scotland) is Director of the Centre for Scenario Planning and Future Studies, the Graduate School of Business at the University of Strathclyde, U.K. The Centre for Scenario Planning and Future Studies Members of the Centre for Scenario Planning and Future Studies of the University of Strathclyde Graduate School of Business (USGSB) have been involved in scenario and futures work over a significant period of time, both in a consultant and an educational capacity. This combination has resulted in the development of expertise in scenario planning and future studies that is difficult to match. The Centrea s expertise is demonstrated in the range of scenario planning and future studies assignments that have been undertaken for major organizations, as well as in the production of leading edge research and publication about scenario planning and future studies, and decision--making. This combination differentiates the Centre from other organizations in the field. The Centre has developed an international reputation for the design and delivery of purposeful scenario planning assignments. These have involved private sector organizations from a wide range of industry groupings on an international basis, and public sector organizations from local to national governments. The internal scenario teams drawn from all these organizations has included key decision and policy makers, resulting in top--level commitment to participation and active adaptive learning from the outcomes.

"…the Sixth Sense helps managers to overcome "the future will resemble the past" thinking and to harness multiple perspectives through scenario thinking…" (Dunstable Gazette, 30 October 2002) "…the book will provide a valuable guide to what is happening…" (The Business Economist, Vol.34, No.2, 2003)

• ABOUT THE AUTHORS xINTRODUCTION 1The Quest for a Clear Vision of the Future 1Unknown Variables, Uncertain Future 1The Significance of Scenario Thinking 2Developing the Sixth Sense – the Approach to Scenario Thinking 5How this Book is Organized 61. PREPARING FOR THE FUTURE 11Understanding Organizational Success 12Success and Failure are Inevitable 12Understanding success by understanding failure 13Explaining the Sharpbenders Research: Why Organizations Fail 14Maintaining Organizational Performance: Problems 19Sustaining Competitive Advantage – the Battle of Canon and Xerox 19Yahoo! – Competing in Fast-moving Markets 23Building a Colourful New Future Brick by Brick – the Story of Lego 26Success Stories 28Providing Customer Value – the Rise of Tetra Pak 28Entering New Markets and Maintaining Growth – Nokia Answers the Call 32Barriers to Strategic Success 34Lessons Learned 34Creating Value – The Difference Between Success and Failure 36Value is Created in a Domain of Scarcity 37Summary: Understanding the Barriers to Scenario Planning 372. HOW MANAGERS THINK ABOUT THE FUTURE 41Understanding Management Thinking 42Routines in Management Thinking 43Over-reliance on Routines: Success Formulas and Managerial Thinking 44Biases in thinking 46The Relevance of Framing Flaws 46How a Failed Product Launch Actually Boosted Sales: the Sparkle of New Coke 47Confirmation Bias 50Hindsight Bias 51The Problem of Overconfidence 52The Limitations of Judgemental Forecasting 53Decision Avoidance 54Escalation of Commitment 54Bolstering, Procrastination and Buck-Passing 57Example of a Management Team Facing a Decision Dilemma 58Thinking Flaws: A Synthesis 61Overcoming Strategic Inertia: the Potential Benefits of Scenario Planning 63A Scenario is not a Forecast of the Future 63Scenarios Focus on Key Uncertainties and Certainties About the Future 63Scenarios Help Identify Information to Anticipate How the Future will Unfold 64Typical Outcomes of the Scenario Planning Process 65Summary: Overcoming Thinking Flaws with Scenario Planning 65Summary Checklist – the Limits to Managerial Thinking 653. HOW ORGANIZATIONS THINK ABOUT THE FUTURE 69Flaws in Organizational Thinking 70Communication Difficulties 71Group-think in Organizations 72Fragmentation in Organizations 73Limitations Imposed by Identity 75Balancing Change and Constancy 75Overcoming the Limits of Organizational Identity: the Example of IBM 77Organizational Lock-in 78Understanding Organizational Lock-in 78The Consequences of Organizational Feedback Loops and Lock-in 79Behavioural flaws 80Learning and Action 80An Organizational Dilemma 81Management and Action 82Overcoming the Pathologies of Organizational Life 84Using Organizational Processes 84The Benefits of Scenario Planning Interventions 85Summary: How Organizations Think About the Future 854. THE IMPACT OF CULTURE AND CULTURAL ASSUMPTIONS ON STRATEGY 89Understanding the Impact of Cultural Issues 90The Significance to Strategy of Globalization and Cultural Issues 91From Mickey Mouse to The Lion King: the Tale of Disney in France 92Defining Culture for Pragmatic Purposes 96Recognizing Differences in Others 96The Value of Scenarios in Assessing the Impact of Cultural Factors 97National Cultural Differences and the Role of Scenario Thinking 98Global Organizations and Local Service Offerings: IKEA Shelve Their Universal Approach 98How Can We Explore Differences in National Cultures? 100Differences in Organizational Cultures 103A Clash of Personality: The Merger of Daimler-Benz and Chrysler 103Organizational Culture and the External Environment 105Differences in Professional Cultures Within Organizations 106The Call of the Wild: How Varying Interpretations of Management Intent Divided Senior Executives in an ITC Business 106Moving Beyond Cultural Preconceptions and Stereotypes 108Understanding Cultures Across Boundaries 108Language, Meaning and Overcoming Ambiguity 109Increasing Diversity in a World of Similarity 109The Starting Point for Cultural Appraisal 110Developing Multiple Perspectives 110The Application of Scenario Thinking to Cultural Understanding 111Applying the Defining Factors of Organizational Culture to Your Organization 111Developing a Scenario Culture 112Key Questions 1145. SHAPING THE FUTURE: THE EMERGENCE OF MODERN SCENARIO TECHNIQUES 117Scenario Planning: the Human Dimension 118Bringing the Future into the Present: The Story of Margareta Lonnberg 118Memories of the Future: Scenarios Filter What We Perceive 119Scenarios: A Cornerstone of Human Thought 120Scenario Thinking and War Games 121Uncertainty and Crisis 121War Game Preparations 122A Natural Scenario Planner: Field Marshal Lord Alanbrooke 123Crisis Management Training 124The Era of Possibility: the Makeable Post-war World 124The Age of Forecasting and Systems Engineering 124The US Perspective 125The Rand Corporation: the Emergence of Scenario Techniques 126The Impact of Herman Kahn and the Hudson Institute 127The French Perspective 128Challenging Established Thinking: the Development of Scenarios in the 1970s 129The Club of Rome 129Royal Dutch/Shell and the Problem of Predictability 131The Development of Scenarios and Strategy During the 1980s 134Factors Affecting the Use of Scenario Techniques in Business 135Scenarios Become Popular 135Scenario Planning and Other Strategic Approaches 136The 1990s: Scenario Planning and Organizational Learning 138The Age of Complexity, the Limits of Certainty – and the Rise of Scenario Planning 138Organizational Learning 139The World of Identity, Experience and Change 140Summary: the Benefits of Scenario Planning 142Enhanced Perception 142Integration of Corporate Planning 142Making People Think 143A Structure for Dealing with Complexity 143A Communications Tool 143A Management Tool 144Summary Checklist – Building an Understanding of Scenario Thinking in Your Organization 1446. DEVELOPING THE SKILLS FOR LONG-TERM SURVIVAL AND SUCCESS: PRINCIPLES OF THE SCENARIO PROCESS 147The Need for a Scenario Process 148Scenarios and Scenario-based Organizational Learning 150Rationalistic Decision-making 150Cause and Effect Thinking 153Systems Thinking 154Mental Models and their Limitations 158The Strategic Conversation 161How Scenarios Tackle the Problems of Organizational Thinking 162Surfacing Mental Models 163Eliciting the Agenda 164Activating and Integrating Intuitive Knowledge 166Analysing Driving Forces 169Scenario Telling 170Organizational Learning 171The Process of Organizational Learning 172Scenario Planning as a Way Towards Adaptive Organizational Learning 174Memories of the Future – Creating the Jolt 175From Scenarios to Adaptive Behaviour 178Making it Happen 180Summary: Developing the Skills of Survival 1847. SCENARIO PLANNING IN THE ORGANIZATIONAL CONTEXT 187Introducing the Scenario Method 188Scenarios for the Future of e-Government and the Impact of Information and Communications Technologies (ICT) 190Background 190The Story of the ‘People’s Kailyard’ 191Stage 1: Structuring the Scenario Process 192Identifying Knowledge Gaps 192Building the Scenario Team 193Timing for the Scenario Project 194Stage 2: Exploring the Scenario Context 195Interviewing Key Players and Widening the Conversation 195Setting the Scenario Agenda 199Setting the Scenario Agenda: the Northshire Example 200The Role of the Remarkable Person 201Stage 3: Developing the Scenarios 202Determining the Driving Forces and Testing the Outcomes 202Clustering the Driving Forces: the Northshire Example 204Dealing with Impact and Uncertainty 206Scoping the Scenarios 209Setting the ‘Limits of Possibility’ for Alternative Futures: the Northshire Example 210Fleshing out the Storylines 213Beyond the Kailyard 215Stage 4: Stakeholder Analysis 216Stage 5: Systems Thinking 219Stage 6: Impacting Organizational Thinking and Action 220Looking for the Organizational Jolt 220Identifying the Early Indicators 220Action Planning from the Future to the Present: the Northshire Example 221Summary: Effective Scenario Planning 223Summary Checklist – Implementing a Scenario Planning Process 2248. SCENARIO PLANNING: TAKING CHARGE OF THE FUTURE 229The Energetic Problem Solver 230Observation – the Cornerstone of Strategic Success 231Purposeful Scenario Work 232Project 1: Making Sense of a Puzzling Situation 234The Analytical Approach 234The Limitations of Analysis 235Purposeful Analysis and How Scenarios Steer Attention 236Combining Intuition with Rational Analysis: the Iterative Scenario Approach 236Facing the Important Questions 238Project 2: Developing Strategy 239Defining Strategy 239The Stakeholder Game 239Strategic Aims 240The Business Idea 242Friction Forces and Barriers to Entry 244Developing Distinctiveness 246The Role of the Business Idea in Strategy 247Business Ideas and Scenarios 250The Strategic Journey 252Project 3: Improving Organizational Anticipation 255Multiple World Views – The Limits of the Rationalistic Approach 255The Mont Fleur Story 258The Role of Scenarios in Strategic Conversation 260Creating the Scenario-based Strategic Conversation 264Project 4: Building an Adaptive Learning Organization 266Action and Experiential Learning 266The Strategic Journey of Project 2 Revisited 266What is Adaptive Organizational Learning? 268Building a Scenario Culture 270Team Empowerment 272The Across-team Strategic Conversation 273SUMMARY 276Rethinking the Future – the Value of Scenarios in Developing Competitive Advantage 276Developing The Sixth Sense 277GLOSSARY 279REFERENCES 293INDEX 299