The Sixth Sense: Accelerating Organizational Learning with Scenarios

ABOUT THE AUTHORS x

INTRODUCTION 1

The Quest for a Clear Vision of the Future 1

Unknown Variables, Uncertain Future 1

The Significance of Scenario Thinking 2

Developing the Sixth Sense – the Approach to Scenario Thinking 5

How this Book is Organized 6

1. PREPARING FOR THE FUTURE 11

Understanding Organizational Success 12

Success and Failure are Inevitable 12

Understanding success by understanding failure 13

Explaining the Sharpbenders Research: Why Organizations Fail 14

Maintaining Organizational Performance: Problems 19

Sustaining Competitive Advantage – the Battle of Canon and Xerox 19

Yahoo! – Competing in Fast-moving Markets 23

Building a Colourful New Future Brick by Brick – the Story of Lego 26

Success Stories 28

Providing Customer Value – the Rise of Tetra Pak 28

Entering New Markets and Maintaining Growth – Nokia Answers the Call 32

Barriers to Strategic Success 34

Lessons Learned 34

Creating Value – The Difference Between Success and Failure 36

Value is Created in a Domain of Scarcity 37

Summary: Understanding the Barriers to Scenario Planning 37

2. HOW MANAGERS THINK ABOUT THE FUTURE 41

Understanding Management Thinking 42

Routines in Management Thinking 43

Over-reliance on Routines: Success Formulas and Managerial Thinking 44

Biases in thinking 46

The Relevance of Framing Flaws 46

How a Failed Product Launch Actually Boosted Sales: the Sparkle of New Coke 47

Confirmation Bias 50

Hindsight Bias 51

The Problem of Overconfidence 52

The Limitations of Judgemental Forecasting 53

Decision Avoidance 54

Escalation of Commitment 54

Bolstering, Procrastination and Buck-Passing 57

Example of a Management Team Facing a Decision Dilemma 58

Thinking Flaws: A Synthesis 61

Overcoming Strategic Inertia: the Potential Benefits of Scenario Planning 63

A Scenario is not a Forecast of the Future 63

Scenarios Focus on Key Uncertainties and Certainties About the Future 63

Scenarios Help Identify Information to Anticipate How the Future will Unfold 64

Typical Outcomes of the Scenario Planning Process 65

Summary: Overcoming Thinking Flaws with Scenario Planning 65

Summary Checklist – the Limits to Managerial Thinking 65

3. HOW ORGANIZATIONS THINK ABOUT THE FUTURE 69

Flaws in Organizational Thinking 70

Communication Difficulties 71

Group-think in Organizations 72

Fragmentation in Organizations 73

Limitations Imposed by Identity 75

Balancing Change and Constancy 75

Overcoming the Limits of Organizational Identity: the Example of IBM 77

Organizational Lock-in 78

Understanding Organizational Lock-in 78

The Consequences of Organizational Feedback Loops and Lock-in 79

Behavioural flaws 80

Learning and Action 80

An Organizational Dilemma 81

Management and Action 82

Overcoming the Pathologies of Organizational Life 84

Using Organizational Processes 84

The Benefits of Scenario Planning Interventions 85

Summary: How Organizations Think About the Future 85

4. THE IMPACT OF CULTURE AND CULTURAL ASSUMPTIONS ON STRATEGY 89

Understanding the Impact of Cultural Issues 90

The Significance to Strategy of Globalization and Cultural Issues 91

From Mickey Mouse to The Lion King: the Tale of Disney in France 92

Defining Culture for Pragmatic Purposes 96

Recognizing Differences in Others 96

The Value of Scenarios in Assessing the Impact of Cultural Factors 97

National Cultural Differences and the Role of Scenario Thinking 98

Global Organizations and Local Service Offerings: IKEA Shelve Their Universal Approach 98

How Can We Explore Differences in National Cultures? 100

Differences in Organizational Cultures 103

A Clash of Personality: The Merger of Daimler-Benz and Chrysler 103

Organizational Culture and the External Environment 105

Differences in Professional Cultures Within Organizations 106

The Call of the Wild: How Varying Interpretations of Management Intent Divided Senior Executives in an ITC Business 106

Moving Beyond Cultural Preconceptions and Stereotypes 108

Understanding Cultures Across Boundaries 108

Language, Meaning and Overcoming Ambiguity 109

Increasing Diversity in a World of Similarity 109

The Starting Point for Cultural Appraisal 110

Developing Multiple Perspectives 110

The Application of Scenario Thinking to Cultural Understanding 111

Applying the Defining Factors of Organizational Culture to Your Organization 111

Developing a Scenario Culture 112

Key Questions 114

5. SHAPING THE FUTURE: THE EMERGENCE OF MODERN SCENARIO TECHNIQUES 117

Scenario Planning: the Human Dimension 118

Bringing the Future into the Present: The Story of Margareta Lonnberg 118

Memories of the Future: Scenarios Filter What We Perceive 119

Scenarios: A Cornerstone of Human Thought 120

Scenario Thinking and War Games 121

Uncertainty and Crisis 121

War Game Preparations 122

A Natural Scenario Planner: Field Marshal Lord Alanbrooke 123

Crisis Management Training 124

The Era of Possibility: the Makeable Post-war World 124

The Age of Forecasting and Systems Engineering 124

The US Perspective 125

The Rand Corporation: the Emergence of Scenario Techniques 126

The Impact of Herman Kahn and the Hudson Institute 127

The French Perspective 128

Challenging Established Thinking: the Development of Scenarios in the 1970s 129

The Club of Rome 129

Royal Dutch/Shell and the Problem of Predictability 131

The Development of Scenarios and Strategy During the 1980s 134

Factors Affecting the Use of Scenario Techniques in Business 135

Scenarios Become Popular 135

Scenario Planning and Other Strategic Approaches 136

The 1990s: Scenario Planning and Organizational Learning 138

The Age of Complexity, the Limits of Certainty – and the Rise of Scenario Planning 138

Organizational Learning 139

The World of Identity, Experience and Change 140

Summary: the Benefits of Scenario Planning 142

Enhanced Perception 142

Integration of Corporate Planning 142

Making People Think 143

A Structure for Dealing with Complexity 143

A Communications Tool 143

A Management Tool 144

Summary Checklist – Building an Understanding of Scenario Thinking in Your Organization 144

6. DEVELOPING THE SKILLS FOR LONG-TERM SURVIVAL AND SUCCESS: PRINCIPLES OF THE SCENARIO PROCESS 147

The Need for a Scenario Process 148

Scenarios and Scenario-based Organizational Learning 150

Rationalistic Decision-making 150

Cause and Effect Thinking 153

Systems Thinking 154

Mental Models and their Limitations 158

The Strategic Conversation 161

How Scenarios Tackle the Problems of Organizational Thinking 162

Surfacing Mental Models 163

Eliciting the Agenda 164

Activating and Integrating Intuitive Knowledge 166

Analysing Driving Forces 169

Scenario Telling 170

Organizational Learning 171

The Process of Organizational Learning 172

Scenario Planning as a Way Towards Adaptive Organizational Learning 174

Memories of the Future – Creating the Jolt 175

From Scenarios to Adaptive Behaviour 178

Making it Happen 180

Summary: Developing the Skills of Survival 184

7. SCENARIO PLANNING IN THE ORGANIZATIONAL CONTEXT 187

Introducing the Scenario Method 188

Scenarios for the Future of e-Government and the Impact of Information and Communications Technologies (ICT) 190

Background 190

The Story of the ‘People’s Kailyard’ 191

Stage 1: Structuring the Scenario Process 192

Identifying Knowledge Gaps 192

Building the Scenario Team 193

Timing for the Scenario Project 194

Stage 2: Exploring the Scenario Context 195

Interviewing Key Players and Widening the Conversation 195

Setting the Scenario Agenda 199

Setting the Scenario Agenda: the Northshire Example 200

The Role of the Remarkable Person 201

Stage 3: Developing the Scenarios 202

Determining the Driving Forces and Testing the Outcomes 202

Clustering the Driving Forces: the Northshire Example 204

Dealing with Impact and Uncertainty 206

Scoping the Scenarios 209

Setting the ‘Limits of Possibility’ for Alternative Futures: the Northshire Example 210

Fleshing out the Storylines 213

Beyond the Kailyard 215

Stage 4: Stakeholder Analysis 216

Stage 5: Systems Thinking 219

Stage 6: Impacting Organizational Thinking and Action 220

Looking for the Organizational Jolt 220

Identifying the Early Indicators 220

Action Planning from the Future to the Present: the Northshire Example 221

Summary: Effective Scenario Planning 223

Summary Checklist – Implementing a Scenario Planning Process 224

8. SCENARIO PLANNING: TAKING CHARGE OF THE FUTURE 229

The Energetic Problem Solver 230

Observation – the Cornerstone of Strategic Success 231

Purposeful Scenario Work 232

Project 1: Making Sense of a Puzzling Situation 234

The Analytical Approach 234

The Limitations of Analysis 235

Purposeful Analysis and How Scenarios Steer Attention 236

Combining Intuition with Rational Analysis: the Iterative Scenario Approach 236

Facing the Important Questions 238

Project 2: Developing Strategy 239

Defining Strategy 239

The Stakeholder Game 239

Strategic Aims 240

The Business Idea 242

Friction Forces and Barriers to Entry 244

Developing Distinctiveness 246

The Role of the Business Idea in Strategy 247

Business Ideas and Scenarios 250

The Strategic Journey 252

Project 3: Improving Organizational Anticipation 255

Multiple World Views – The Limits of the Rationalistic Approach 255

The Mont Fleur Story 258

The Role of Scenarios in Strategic Conversation 260

Creating the Scenario-based Strategic Conversation 264

Project 4: Building an Adaptive Learning Organization 266

Action and Experiential Learning 266

The Strategic Journey of Project 2 Revisited 266

What is Adaptive Organizational Learning? 268

Building a Scenario Culture 270

Team Empowerment 272

The Across-team Strategic Conversation 273

SUMMARY 276

Rethinking the Future – the Value of Scenarios in Developing Competitive Advantage 276

Developing The Sixth Sense 277

GLOSSARY 279

REFERENCES 293

INDEX 299