CHAPTER 10
‘What’s next?’ — Anticipating the future

Scenarios provide the essential creativity for strategic transformation

Conditioned by a culture of evidence-based (after-the-fact) decision making, it’s not hard to see why some people can struggle initially with creating scenarios. Time and again I’ve seen how participants can hit a wall at this stage of the strategy process. People who comfortably embraced each of the previous stages — internal interviews, environmental scanning, sorting of uncertainties and choosing driving forces — suddenly freeze at the prospect of imagining circumstances that don’t yet exist, frozen by a combination of insecurity (What if I’m wrong?), uncertainty (This could happen or that could happen), lack of creative belief (How would I know?) or the absence of supporting data (Where are the facts?).

It’s this absence of facts, the scaffolding for their everyday decision making, and the pivot to relying on intuition, creativity and logic, that usually proves most challenging to scenario builders.

Does it make sense?

This chapter describes the intuitive logics approach to creating scenarios that was developed by Royal Dutch Shell and SRI International during the 1970s.1 In lay terms, this technique applies a ‘Does it make sense?’ approach to exploring the future based on the logic of cause (drivers) and effect (outcomes) relationships.

Intuitive logics is primarily a qualitative technique, with secondary quantitative support. Such an approach, with its emphasis on participant creativity, recognises the non-linear development of the future.

Some people initially struggle with this approach; I should know, because I was one of them.

Letting go of command and control

Coming out of a business training background that was heavily focused on data and trend analysis, my initial impression of the intuitive logics approach was that it was just too ‘loose’. Where were the facts? Where was the structure? The process was so far removed from my perceptions around ‘serious information’ that it was hard to imagine anything worthwhile coming from the exercise.

My response to this perceived lack of structure was to go too far the other way. I tried to introduce a rigorous process at Foster’s that would bring discipline to our scenario building. In doing so, I served only to stifle creativity — the essence of successful scenario generation.

My innovation was a ‘Futures Grid’, a massive spreadsheet in which I attempted to cover every imaginable outcome of the future. Down the side axis were the two scenario drivers as well as up to eight other significant influencing factors identified by the participants. Along the top axis were topics and questions for participants to consider in developing their scenario relating to work, education, media, public services, even social epidemics and so on. In all, 19 dimensions across and 10 down. I was actually asking participants to consider and discuss 190 variables and their possible outcomes. And that was just the first iteration!

Initially, at least, I thought I was on a winner. I even wrote an essay on the process in the second year of my master’s studies (it received a generous C grade). In fact, this is a model of what not to do. My thinking reflected a poor understanding of both the purpose and the process of scenarios. Such a detailed and regimented approach is a creativity killer. Just as important, it kills the fun of building scenarios. It replaces collaborative creativity with arduous task-mastering.

Inherent in this approach was my ‘command and control’ mindset, a belief that if I just asked enough questions about enough variables then I would get the future right. For example, I was even asking people to consider how the future of Steiner schools could be affected in their scenarios!

I quickly realised that this intensive and rigid approach wasn’t the answer either.

Bringing everyone along

Perhaps the most underrated element of the scenarios process is workshop design and facilitation. In the design, it’s important to acknowledge that participants will have varying degrees of experience with creating scenarios and different expectations about what is to follow. At the start of every workshop I ask people to raise their hand if they’ve done scenarios before, and the response is always the same. A few people raise their hands hesitantly and then share their experiences rather vaguely: ‘We did something similar at a place I used to work’ or ‘The work we did was more like forecasts or computer simulations’. These responses go to the heart of one of the issues identified in chapter 2: scenarios remain a fuzzy concept.

The fact is, actual experience with the intuitive logics method is not that common, so almost everyone in the room will be about to enter new territory, where they’ll create strategy in a quite different way.

Adding to this challenge will be the natural uncertainty people feel with regard to planning for the longer term. It’s easy to forget how overwhelming it can be to think about what could happen over the next 5, 10 or 20 years. Most people in the room probably haven’t confirmed their plans for the coming weekend. This is where I find the words of Herman Kahn can be useful to relax people: ‘Remember, it’s only a scenario.’ We’re not trying to predict the future, we’re trying to learn from it so we can improve our decision making. This is no different from the scenario drills sporting teams practise every week at training.

For a facilitator, appreciating the lack of scenario experience and the feelings of doubt among attendees is critical. It places an emphasis on bringing everyone along at the same pace and not losing anyone along the way.

Stimulation and structure

It’s the pivot from understanding the present to envisioning the future that always proves most difficult for scenario participants. Suddenly people are no longer thinking or talking about the things they know, or the things they can see or touch (behaviours and infrastructure, for example). Instead, they’re being asked to think of things that don’t physically exist, to consider changes that might occur. Again, for most participants it’s likely to be the first time they’ve ever undertaken such an activity.

Successful scenario building relies on stimulation and structure to break down the complexity of the future: stimulation to ensure participants always have the resources (the prospective armoury) to call upon to envisage future developments; and structure to ensure logical flow, a process in which each step builds on the last and in turn provides input into subsequent activities.

As this stimulation and structure take effect, anxiety and uncertainty give way to the sound of robust discussion as participants relax into the exercise and enthusiastically embrace being part of something different — ‘I get this. I know why we’re doing this activity and I know where we’re headed’. This participant buy-in, understanding and enthusiasm are the essential foundation for successful scenario planning.

Scenarios workshop

Building scenarios is best done within diverse teams, where the variety of experience, knowledge, and opinion optimises the prospects for useful strategic insights. Participants in the Melton City Council scenarios worked within teams of five and six people. These numbers were ideal as experience has shown that having more than four people in a group is essential for a range of views, yet having more than seven can make it too easy for people to take a back seat, or to get lost in the noise, and hence leave their opinions stifled.

Diversity of opinion is important because it can prevent the kind of groupthink that develops when people of similar values and experience get together to create scenarios. When we first embarked on our scenarios journey at Foster’s, we decided to explore the long-term future of the Australian beer market. These scenarios were created entirely by internal employees, predominantly working across innovation and marketing, and aged in their twenties and thirties. One of the scenarios described an increasingly polarised world of ‘haves’ and ‘have nots’, a society of gated communities and restricted events that minimised interaction between different segments of the community. It was during this exercise that I overheard one of the more remarkable comments in my time building scenarios. In describing the scenario to me, one of the participants said, ‘This is the type of world where people get a weekly massage’, then after a pause he mused, ‘But I suppose most people already do that today, don’t they?’

The participatory team approach to scenario building works well because creating scenarios is a democratic process. After all, if there are no facts about the long-term future, then there can be no experts. So, regardless of industry experience or managerial seniority, everyone pretty much starts from the same place, and all opinions should be treated as equally valid. In fact, in my experience it’s often the more senior managers, with their paradigm expertise, who can find it hardest to imagine future alternatives.

HOW MANY SCENARIOS?

The following process describes my preferred approach to building scenarios, applying the intuitive logics technique to create four scenarios using the 2 × 2 matrix method. This method, which has proven an effective and popular form of scenario building, involves choosing two scenario drivers based on their perceived level of future uncertainty and potential to have an impact on responses to the strategic challenge. Axes are then determined for each uncertainty by creating spectrums of plausible outcomes (e.g. high/low), giving you a matrix of four different quadrants in which to build scenarios.

Over the years I have also experimented with creating both three and two scenarios and have found that these approaches can also be effective. Now, many texts warn of the dangers in producing three scenarios, with managers likely to think of them in terms of a good, bad and on-trend forecast, then showing their preference for the perceived safety of the middle ground. This was never my experience. Scenarios should never be presented or interpreted as good, bad or otherwise. All scenarios should be neutral and equally plausible.

We employed the three scenarios approach for a Foster’s project looking at the impact of an ageing population on the future of alcohol consumption. In this project, three scenarios were created around the uncertain influence of one particular driver — social values. Accordingly, scenarios were created to reflect the different influence traditionalist, materialist and post-materialist values might have on the future attitudes, lifestyles and choices of baby boomers.

Two scenarios were developed for the successful State Library of Victoria project in 2012 looking at the strategic challenge, ‘What is a public library in 2030’ (discussed in chapter 11). In this project, the choice of two scenarios had much to do with the complexity of managing the input of 80 participants. The successful outcomes of this project, evident in the transformational strategic recommendations and subsequent implementation, prove that two scenarios can be just as effective as four in generating a positive strategic impact.

My preference for four scenarios is based on past experience where, in a participatory setting, inexperienced practitioners have found it easier to develop scenarios when they have a combination of driving forces to provide the logic of their world. Two forces interacting can provide greater scope and structure for scenario builders when using the 2 x 2 matrix approach. Creating four scenarios does increase the complexity for drawing strategic conclusions; however, it also provides you with greater coverage of plausible future outcomes without going overboard (to six, eight or ten scenarios, say).

SCENARIO EQUALITY

The creativity challenge in scenario building is to develop futures that are equally plausible and equally useful for managers to respond to. In developing scenarios, it’s only natural that people will have a preference for one particular future over another. We prefer the scenario that more closely ‘matches’ our personal view of the future (the ‘right’ scenario). We prefer the scenario in which our company prospers by continuing to do what it does (the ‘good’ scenario) or the scenario in which we would like to live (the ‘utopian’ scenario).

On the other hand, you’re bound to come across participants who don’t build their scenarios with the same level of enthusiasm. In these instances, the process can become a grind as you hear comments like ‘We don’t like our world’, ‘We want to choose different drivers’ or ‘This scenario is no good for our company’. Worse still are people who simply refuse to engage with the scenario because it doesn’t match their expectations of the future (‘This is just fantasy’).

The future is likely to reflect a blend of scenarios, rather than a single one. Accordingly, each scenario should be treated as part of a set, in which one weak link can diminish their overall usefulness. Treating each scenario as a piece of the future, you want as complete a picture as possible to inform your thinking. Hence, the emphasis must be on treating the process as an exercise in creativity, in which the challenge is to develop plausible and strategically useful futures.

Workshop process

The workshop process has five phases:

  1. Reviewing the environmental scan
  2. Identifying influencing factors
  3. Sorting and prioritising influencing factors
  4. Choosing scenario drivers
  5. Building scenarios.

1. Reviewing the environmental scan

In the previous chapter I wrote that the only useful environmental scan is one that is read, considered and shared. The best way to achieve this outcome is by introducing accountability, not in a disciplinary or authoritarian sense, but through an engaging and interactive exercise that enthuses people to think, I can’t wait to share this.

I begin each scenarios workshop with a group activity in which each attendee presents their allocated pre-work, offers their personal thoughts on relevance to the strategic challenge, then invites others to share their views. As a scenario activity, this exercise is the equivalent of stretching before a big race, mentally limbering up as a way of easing participants into the future.

What follows should be a vibrant and engaging session that ensures the significant contents and implications of the environmental scan are processed by the members of each group, and that participants are stimulated to consider implications and opportunities in terms of the strategic challenge. You know an environmental scan is effective when participants find themselves referring back to its contents and implications time and again throughout the workshop.

2. Identifying influencing factors

Building scenarios begins with identifying and understanding influencing factors — those factors in the external environment that could influence future outcomes and affect responses to the strategic challenge. Because they are external to the organisation, influencing factors sit outside your direct control in either the transactional or the contextual environment (‘external cause / internal effect’3).

Calling upon their earlier pre-work (see table 10.1 for an example) and using the environmental scan as further stimulus, participants share their thoughts on which factors could influence outcomes and responses to the strategic challenge. This exercise works best when conducted in the following way:

  1. Each person reviews the list of influencing factors from their pre-work and chooses three factors they feel could have greatest influence in shaping outcomes and responses to the strategic challenge — what could really make a difference?
  2. Working around the group, each person nominates one of their chosen influencing factors and puts forward their reasoning for why it is significant. What follows should be an extended period of group discussion as members share and capture their thoughts on why each factor is significant.

Questions to consider during this stage should cover change, impact and uncertainty:

  1. What do we know about this factor? What is changing? What’s the status of this issue? What was in the environmental scan?
  2. Why is this factor significant? How could it affect us? This is where the relevance and implications to the strategic challenge should be made explicit.
  3. What does this factor rely on? How uncertain is future development? Which other forces could influence this factor?

This process continues until each person has exhausted their three chosen factors (if one has already been chosen by another person, choose an alternative).

Each group typically emerges from this stage with a list of 10–20 influencing factors and a template of material relating to each. A sample from the Melton City Council workshop appears in table 10.2, showing the type and quality of output generated during this stage.

Table 10.2 building scenarios starts with identifying factors that could influence responses to the strategic challenge, ‘What will our organisation look like as it delivers on Melton City 2036?’

What do we know about this factor? What is changing? Why is this factor significant? How could it affect us?
Influencing factor: Impact of minor political parties and Independents

The vote for major parties is declining.

There is an increasing number of micro, single issue and niche parties.

We are closer to having hung parliaments with less decisive majorities.

Distrust of politics, politicians, political systems, political machinery is rising.

Individualism is rising.

It compromises political direction/decision making/implementation of policy.

It becomes more complex in determining who we should interact with, which changes the way advocacy looks.

Political instability means we’re always on the verge of an election.

It impacts Council’s long-term planning, creating uncertainty.

Group discussion about the significant influencing factors should lead to shared understanding and greater clarity about what really matters in relation to the strategic challenge.

LABELLING INFLUENCING FACTORS

I mentioned earlier how we undertook a scenario planning project at Foster’s looking at the future of Australia’s ageing population and its potential impact on the domestic alcohol market. On day one of a three-day workshop, participants working in groups discussed and then listed those factors they felt could have greatest significance for the strategic challenge. A sample of these factors appears in figure 10.2.

image

Figure 10.2 factors influencing baby boomers and alcohol consumption

Influencing factors that are presented as vague topics, or misrepresented as inevitable trends, leave participants with a shortage of mental stimulation as they begin the scenario building process.

This example, with its vague labels, topics and actions, is typical of scenario exercises involving inexperienced participants, and the contrast with the previous output in table 10.2 from the same stage of the Melton City Council workshop is stark.

In figure 10.2 we see many examples of the types of errors commonly made by scenario novices:

  • Factors are described as actions. Actions are responses, not drivers of future context (‘protect environment through sustainable practices’, ‘government legislates against boomer excesses’).
  • Factor descriptions are vague (‘employment flexibility’, ‘single-person households’, ‘need for protection’). How can you make sense of what was intended?
  • Factors are directional. Directional language ignores future uncertainty and assumes the future development of a factor is predetermined (‘rise of post-materialism’; ‘boomers continue to drive political agenda’).

From such a vague platform, it’s little wonder that participants find the pivot to scenario building such a challenge; you’re sending people off into the future with inadequate mental stimulation and understanding.

Influencing factors ‘should be expressed in as few words as possible, but sufficient to make them understandable to everyone’.4 It’s important to remember a few simple guidelines here:

  • Avoid labels that are too broad or vague (‘social values’, ‘population’, ‘interest rates’).
  • Where an outcome is uncertain, avoid using language that implies predetermined direction — that is, precludes movement in another direction (‘rise of far-right politics’, ‘rising cost of living’).
  • Uncertain factors should be expressed using neutral language that captures their future ambiguity. Such language acknowledges that future developments could go one way or the other, allowing for the spectrum of movement on which scenario building is based (‘extent to which social values evolve’).

    Variations on this sort of language might include:

    • –‘impact of autonomous vehicles on lifestyles and infrastructure’
    • –‘degree to which traffic congestion affects desire to live in large cities’
    • –‘level of agreement between political parties on climate change’
    • –‘changing attitudes to minor parties and independent political candidates’.
  • Directional language should be used only where the outcome is relatively predetermined and there is limited scope for future variability (‘impact of an ageing population’).

3. Sorting and prioritising influencing factors

Sorting and prioritising influencing factors can be a stumbling block for even the most experienced scenario planner. Fundamentally, the task at this stage is to bring a sense of order to the previous output by categorising each influencing factor according to perceived impact (on the strategic challenge) and perceived uncertainty (in terms of future development).

I’ve found it’s not so much that the task is difficult, but rather that the terminology used to describe the activity’s purpose and process can sometimes cause confusion for participants. Language and clarity of meaning are critical during this activity.

It can be useful to begin this step by revisiting the purpose of scenario planning; scenarios provide plausible future contexts to rehearse decision making and inform strategy development. They do not have to be distinct, but they must be significantly different so as to evoke different strategic responses from decision makers. At the heart of the scenario process is the acknowledgement that the future is uncertain and we are therefore planning for uncertainty.

The purpose of this step is to isolate those influencing factors that are most significant for the strategic challenge and also highly uncertain in terms of how they could develop. It’s this range of uncertainty that pulls your scenarios apart, providing the divergent logics of your scenario axes. The two factors agreed to be most impactful and uncertain are then chosen as the driving forces to shape your scenario developments and outcomes (see figure 10.3).

Image containing the following snippets, which are scattered all over it: "boomers continue to drive political agenda," "realisation of environmental issues, "policies that restrict or enable access to resources," "limited resources," economic disruption and uncertainty," "rise of post-materialism," "protect environment through sustainable practices," "employment flexibility," "need for protection," "government legislates against boomer excesses," "value of retirement assets," "changing workforce," "technology as a lifestyle enabler," "single-person households," and "connection through technology."

Figure 10.3 2 × 2 scenario matrix

The scenario logics in a 2 × 2 matrix are ‘pulled apart’ by the range of variability of your two scenario drivers, prompting different responses to the strategic challenge in each scenario.

IMPACT/UNCERTAINTY MATRIX

Use of an impact/uncertainty matrix to sort and prioritise influencing factors is a well-established step in the scenario building process. Essentially, this involves categorising the influencing factors according to their relative impact and uncertainty (low, medium or high) in order to isolate those factors which are high impact/high uncertainty:

  • high impact

    significance — would really make a difference to how you respond to the strategic challenge

  • high uncertainty

    variability — range of plausible future outcomes (could go one way or the other).

Each group then plot their influencing factors on individual matrices according to their relative significance and uncertainty. Since the purpose of this activity is to isolate what really matters in relation to the strategic challenge and to planning for an uncertain future, and because this is an exercise in relativity, no more than 25 per cent of factors should appear in the high impact / high uncertainty domain5 (see figure 10.4).

Image of a graph with four quadrants, with "plausible range of variability" written at the origin, and in which the x-axis represents influencing factor B and the y-axis represents influencing factor A. The right end of the x-axis is labeled with the minus sign, and its left end is labeled with the plus sign; and the top end of the y-axis is labeled with the plus sign whereas its bottom end is labeled with the minus sign. Starting from the top left quadrant and moving clockwise, the four quadrants are labeled "scenario A," along with the text "high A/high B"; "scenario B," along with the text "high A/low B"; "scenario D," along with the text "low A/low B"; and "scenario C," along with the text "low A/high B."

Figure 10.4 impact/uncertainty matrix

The impact/uncertainty matrix is a relatively simple yet extremely effective tool for ordering and prioritising your influencing factors.

ASSESSING IMPACT AND UNCERTAINTY

When assessing the impact of an influencing factor, we are interested in its relevance and significance to the strategic challenge — does this factor really make a difference to our responses to the strategic challenge? In making this assessment the question to ask is:

To what degree could this factor affect outcomes or responses to the strategic challenge?

It is important to assess the impact of an influencing factor first to establish relevance to the strategic challenge before discussing whether or not its future development is uncertain.6

As an example, let’s look at the Melton City Council scenarios and the influencing factor ‘Extent to which population changes’. Council management rated this factor as highly impactful given it will affect the type, location and demand for service delivery and infrastructure, and thereby influence the capabilities, resources and processes Council as an organisation will require. So this factor was initially plotted as shown on the matrix in figure 10.5.

Image of a 3 by 3 matrix representing relative degree of uncertainty corresponding to relative degree of impact. The cell corresponding to high degree of uncertainty and low degree of impact contains two Xs. The cell corresponding to medium degree of uncertainty and low degree of impact contains one X. The cell corresponding to low degree of uncertainty and low degree of impact contains one X. The cell corresponding to high degree of uncertainty and medium degree of impact contains three Xs. The cell corresponding to medium degree of uncertainty and medium degree of impact contains two Xs. The cell corresponding to low degree of uncertainty and medium degree of impact contains one X. The cell corresponding to high degree of uncertainty and high degree of impact contains three Xs, along with the following description: "no more than 25% of factors to appear in this domain." The cell corresponding to medium degree of uncertainty and high degree of impact contains two Xs. And the cell corresponding to low degree of uncertainty and high degree of impact contains two Xs.

Figure 10.5 assessing the relative degree of impact

The influencing factor ‘Extent to which population changes’ was assessed as high impact for its potential to influence future Council capabilities, resources and processes.

Assessing the future uncertainty of an influencing factor can be trickier, and it’s the language that sometimes confuses people. When we hear the words certain or uncertain in relation to the future we naturally think in terms of our own views on probability or likelihood (‘I‘m pretty sure this will happen’ or ‘I don’t think that will happen’). Misunderstanding of ‘uncertainty’ can sometimes lead to an overrepresentation of factors in the low uncertainty domains of the matrix.

With the impact/uncertainty matrix we are interested in uncertainty as it relates to the plausible range of future development for an influencing factor — its spectrum of potential variability (‘It could develop one way, or it could go another’). And in assessing whether or not the uncertainty is relatively low, medium or high we are interested in whether the range of plausible future outcomes is broad enough to provoke different responses to the strategic challenge — does the difference make a difference:

Is the range of plausible future variability enough to demand different strategic responses?

Returning to the influencing factor ‘Extent to which population changes’, we are interested in the plausible range of change when we assess its uncertainty. For instance, if the potential range of variability is agreed to be relatively insignificant, then we can say there is relative low uncertainty around this factor (see figure 10.6):

Image of a 3 by 3 matrix. Above it is written "influencing factor: extent to which population changes. To its left is the text "relative degree of uncertainty," with the word "low" written at the same level as the bottom-most row of cells, the word "medium" written at the same level as the middle row of cells, and the word "high" written at the same level as the topmost row of cells. At the bottom of the image is the text "relative degree of impact," with the word "low" written below the leftmost column of cells, the word "medium" written below the middle column of cells, and the word "high" below the rightmost column of cells. An "X" is marked on the lower edge of the cell that is at the rightmost column in the bottom-most row, that is, corresponding to low degree of uncertainty and high degree of impact.

Figure 10.6 assessing the relative degree of uncertainty — low uncertainty

If the range of plausible variability is not enough to warrant different responses to the strategic challenge, then we can plan for this influencing factor with relative certainty.

Extent to which population changes − relative certainty

Plausible range of variability +130 000 residents ↔ +150 000 residents

In this example, the agreed range of plausible variability (20 000 residents) is not enough to warrant a different response to the strategic challenge, so we can plan around this factor with relative certainty.

DETERMINING UNCERTAINTY

To understand the range of plausible outcomes or future uncertainty, it is useful to consider what each factor relies on:

  • What could influence future outcomes for this factor?
  • How variable is the potential influence of these other factors?

By considering the plausible influences on each factor, the range of future variability should naturally extend. ‘If this happened, and this happened, or this happened, I can see how our influencing factor could develop in a different direction.’

Regarding the ‘Extent to which population changes’, the following factors could influence future outcomes:

  • rate of immigration
  • appeal of Melbourne as a liveable city
  • housing affordability compared with other regions/states
  • safety perceptions of Melton
  • preference for higher-density vs lower-density living
  • appeal of regional living vs urban living.

Accordingly, a case could be made for a strategically significant variance in future population change:

Extent to which population changes − relative uncertainty

Plausible range of variability +60 000 residents ↔ +150 000 residents

In this case, the range of plausible change (90 000 residents) is enough to warrant a different strategic response, so we can assess this factor as highly uncertain, which it ultimately was (see figure 10.7).

Image of a 3 by 3 matrix. Above it is written "influencing factor: extent to which population changes. To its left is the text "relative degree of uncertainty," with the word "low" written at the same level as the bottom-most row of cells, the word "medium" written at the same level as the middle row of cells, and the word "high" written at the same level as the topmost row of cells. At the bottom of the image is the text "relative degree of impact," with the word "low" written below the leftmost column of cells, the word "medium" written below the middle column of cells, and the word "high" below the rightmost column of cells. An "X" is marked on the lower edge of the cell that is at the rightmost column in the bottom-most row, that is, corresponding to low degree of uncertainty and high degree of impact. A segmented arrow points upward from it to another X, which lies in the same cell.

Figure 10.7 assessing the relative degree of uncertainty — high uncertainty

Where the range of plausible variability is agreed to be strategically significant, we assess the influencing factor as highly uncertain.

TRANSITIONING FROM INFLUENCING FACTORS TO DRIVING FORCES

The impact/uncertainty matrix plays the critical linking role between your influencing factors and your scenarios. The work of Ian Wilson improves the usefulness of this tool by introducing terms that explicitly link domains on the matrix to scenario development and strategic planning.7 From a scenario development perspective, we are interested in influencing factors that appear in the shaded areas of the matrix that follows (see figure 10.8).

Image of a 3 by 3 matrix. Above it is written "influencing factor: extent to which population changes. To its left is the text "relative degree of uncertainty," with the word "low" written at the same level as the bottom-most row of cells, the word "medium" written at the same level as the middle row of cells, and the word "high" written at the same level as the topmost row of cells. At the bottom of the image is the text "relative degree of impact," with the word "low" written below the leftmost column of cells, the word "medium" written below the middle column of cells, and the word "high" below the rightmost column of cells. An "X" is marked on the lower edge of the cell that is at the rightmost column in the bottom-most row, that is, corresponding to low degree of uncertainty and high degree of impact. A segmented arrow points upward from it to another X, which lies two cells above, in the cell corresponding to high degree of uncertainty and high degree of impact.

Figure 10.8 linking the impact/uncertainty matrix to scenario development

Domain names make the link between the impact/uncertainty matrix and scenario building explicit.

Critical scenario drivers are those influencing factors considered high impact and highly uncertain. The combination of these drivers provides the overarching logic and direction that weaves through your scenarios.

Influencing factors that are considered important scenario drivers are not discarded in the scenario process. In fact, they appear in all scenarios where they are relevant, and their uncertain future outcomes are resolved according to the logic of each scenario. For example, the uncertain influencing factor ‘Extent to which population changes’ could logically see growth of 60 000 residents in one scenario, yet see growth of 150 000 residents according to the equally plausible logic of another scenario.

Critical planning issues are considered to be highly impactful and to have a low potential for future variability. These are factors for which managers can plan with confidence (‘This is happening — we need to be planning for this now!’). As an example, consider the influencing factor ‘Impact of an ageing population’. In 2018 we can confidently plan for an ageing population because we know within a small degree of variation just how many 70-plus-year-olds there will be in 2028 — their number is already in the pipeline coming through.8 Critical planning issues should be addressed in all scenarios, once again according to the overarching logic of each scenario.

Scenarios effectively describe plausible future events and outcomes representing the combined influence of these critical scenario drivers, important scenario drivers and critical planning issues, as summarised in figure 10.9 (overleaf).

Image of a 3 by 3 matrix representing relative degree of uncertainty corresponding to relative degree of impact." The following are the contents of the cell corresponding to high degree of uncertainty and low degree of impact: "monitor; reassess impact." The following are the contents of the cell corresponding to medium degree of uncertainty and low degree of impact: "monitor." The following are the contents of the cell corresponding to low degree of uncertainty and low degree of impact: "monitor." The following are the contents of the cell corresponding to high degree of uncertainty and medium degree of impact: "important scenario drivers." The following are the contents of the cell corresponding to medium degree of uncertainty and medium degree of impact: "important planning issues." The following are the contents of the cell corresponding to low degree of uncertainty and medium degree of impact: "important planning issues." The following are the contents of the cell corresponding to high degree of uncertainty and high degree of impact: "critical scenario drivers." The following are the contents of the cell corresponding to medium degree of uncertainty and high degree of impact: "important scenario drivers." The following are the contents of the cell corresponding to low degree of uncertainty and high degree of impact: "critical planning issues."

Figure 10.9 scenario building blocks

The role of each influencing factor in the scenario building process is made obvious in this impact/uncertainty matrix.

4. Choosing scenario drivers

Like the motive in a murder mystery, your critical scenario drivers provide the overarching logic and direction that weaves through each scenario. They are the key variables in the entire exercise. So it’s no surprise that selecting your two scenario drivers can be the most contentious step in the scenario process. The subjectivity of the exercise naturally means participants will have different views on which variables are most important and most uncertain. And this is fine.

I mentioned earlier my scenarios project exploring the question ‘What is a public library in 2030?’ (This case study is discussed in depth in chapter 11.) One of the critical scenario drivers chosen in this exercise was the increasing irrelevance and distrust of traditional gatekeepers. Now, keep in mind that this was in June 2012; the rise of Donald Trump and the successful Brexit campaign were still years away. Personally, I doubted the value of this driver, struggling to see how it could play a significant role in shaping the future of public libraries. How wrong was I? The subsequent scenario showed how growing distrust of traditional gatekeepers could be linked to an increasing desire for community belonging and an expanded role for public libraries in facilitating this sense of belonging.

Subsequent events have not only confirmed how foresightful this choice was, but also demonstrated to me how important flexibility of perspective is at this stage of the scenario process. After all, we’re talking about the future, and the future is uncertain; only 20/20 hindsight can be a true judge of what really matters. This is a point worth reiterating to participants.

By this stage of the workshop, participants should have a clear understanding of the process and appreciate that no matter which critical scenario drivers are chosen, no important influencing factor gets left behind. Still, it’s important to have a process to navigate successfully around what can sometimes become an uneasy impasse.

The first step is to bring participants back to the strategic challenge, reminding them that they are assessing each potential driver on two criteria:

  • impact. Would this factor really make a difference to how we respond to the strategic challenge?
  • uncertainty. Is the potential for future variability enough to warrant different responses to the strategic challenge?

The two factors that are then chosen as the most impactful and the most uncertain become the critical scenario drivers.

The second step is to continue the democratic theme of the workshop. The stage of choosing scenario drivers is the first time in the workshop that individual teams come together as one to review their work, so it’s important to establish a level of shared understanding. Thus, each group presents their critical scenario drivers to the broader workshop, making the case for why they consider these factors to be most impactful and most uncertain in relation to the strategic challenge.

With each team likely to present two or three scenario drivers from their impact/uncertainty matrix, there can be as many as eight or twelve factors to choose from. So it can be useful to cluster any similar drivers, and to give the new grouping an overarching label. This move should reduce the number of potential drivers to a more manageable number.

Following these presentations, an open-forum discussion should take place in which everyone is invited to contribute their views or to seek further clarity on any of the drivers presented. What follows should be a robust and lengthy discussion. For the facilitator, patience is key at this stage; it’s important to allocate the necessary time to allow everyone to have their say.

At the conclusion of this discussion, each attendee is allocated two votes to choose the drivers they feel are most impactful and most uncertain. The factors with the highest number of votes then become the critical scenario drivers, with one caveat: the two drivers must be able to logically coexist. That is, in all four scenario quadrants, the impact of one driver can’t preclude that of the other driver.

Melton City Council’s leadership team generated a total of 36 factors that they felt could influence outcomes and responses to their strategic challenge, eight of which had been assessed by the respective scenario teams as high impact and highly uncertain:

  • extent to which demand for infrastructure and service delivery changes
  • level of economic performance
  • degree of state government control over local government
  • rate of population growth
  • extent to which service delivery models change
  • impact of the successor to social media on social cohesion
  • degree to which council’s workforce changes
  • extent to which population changes.

It was during the open discussion on these critical scenario drivers that the focus on workshop stimulation and structure, and the investment in bringing everyone along, hit pay dirt. Following the respective team presentations, the leadership group enthusiastically but respectfully engaged in the process of debating the pros and cons of each critical scenario driver put forward. An hour later the group remained determined to achieve a resolution before calling it a day, fully aware of the importance of what they were trying to achieve in the context of developing scenarios. Their persistence was the ultimate symbol of process engagement and understanding.

Eventually, votes were cast and the two factors considered most important and most uncertain were:

  • level of economic performance
  • degree of state government control over local government.

These factors provided the following spectrums of variability to form our scenarios axes:

Level of economic performance

low-performing economy ↔ high-performing economy

Level of local government autonomy

low local government autonomy ↔ high local government autonomy

We now had the framework for what would ultimately yield four scenarios for 2036: Silicon Valley, Switzerland, MacGyver and Skyhooks (see figure 10.10, overleaf).

Image of a 3 by 3 matrix representing relative degree of uncertainty corresponding to relative degree of impact." The following are the contents of the cell corresponding to high degree of uncertainty and medium degree of impact: "important scenario drivers: appear in relevant scenarios; resolve uncertain future outcomes within the logic of each scenario." The following are the contents of the cell corresponding to high degree of uncertainty and high degree of impact: "critical scenario drivers: provide the over-arching logic and direction that weaves through each scenario." The following are the contents of the cell corresponding to medium degree of uncertainty and high degree of impact: "important scenario drivers: appear in relevant scenarios; resolve uncertain future outcomes within the logic of each scenario." The following are the contents of the cell corresponding to low degree of uncertainty and high degree of impact: "critical planning issues: appear in all scenarios; addressed through the logic of each scenario."

Figure 10.10 Melton City Council scenarios framework

Melton City Council’s leadership team selected ‘Level of economic performance’ and ‘Degree of state government control over local government’ as their two critical scenario drivers.

In the final step of the workshop process, ‘Building scenarios’, I describe in detail how these futures were created, using the MacGyver scenario to illustrate the evolving composition of a scenario.

MELTON CITY COUNCIL SCENARIOS FOR 2036

Here is a summary of the four MCC scenarios.

Silicon Valley

Critical scenario drivers:

  • high economic performance
  • high local government autonomy

Synopsis:

This scenario represents Australia’s successful transition to a creative, innovative and entrepreneurial twenty-first-century economy. It’s a high-tech scenario featuring dynamic start-up ecosystems that promote collaborative entrepreneurialism and facilitate high social density lifestyles. It’s a scenario defined by two significant cultural transformations:

  • Transforming to embrace an innovation culture; becoming a society in which education, creativity, diversity, agility and learning are celebrated, rather than one that sneers at ‘inner-city latte sippers’
  • Transforming to develop an entrepreneurial culture, a willingness to ‘have a go’, to collaborate and to ‘play’ with ideas.

If this scenario were a region it would be Silicon Valley; a dynamic hub bustling with large high-tech corporations and hundreds of start-up companies.

Switzerland

Critical scenario drivers:

  • high economic performance
  • low local government autonomy

Synopsis:

This scenario is about the transfer of agency:  

  • from government directive to personal agency (‘I want what I want’) 
  • from representative democracy to participatory agency (‘I want to have a say’) 
  • from short-term focus to future generational agency (‘I want to act sustainably’).

It describes the continuing transfer of autonomy from government providers to individuals. In doing so, it articulates how technology can be used to enable participatory democratic behaviours that produce a paradigm shift in the way community services and infrastructure are administered.

This scenario describes a wealthy, participatory democracy that is environmentally conscious, has public policies promoting greater income equality, and has a population that values personal choice and self-expression.

MacGyver

Critical scenario drivers:

  • low economic performance
  • high local government autonomy

Synopsis:

This scenario is defined by community resourcefulness, self-sufficiency and ingenuity. It’s a response to lower economic growth, which forces people and communities to look inwards for opportunities and to become more resourceful.

Facing external constraints, people look to each other to develop innovative and efficient communal solutions to extract the value from the services and infrastructure they want. Emerging from this scenario is a natural optimism and willingness to work together towards sustainable, communal solutions.

This scenario is about making the most of what you have. It is defined by resourcefulness, agility, innovation and a knack for unconventional problem solving.

Skyhooks

Critical scenario drivers:

  • low economic performance
  • low local government autonomy

Synopsis:

This scenario is about the ‘forgotten people’. It describes the effects of an economic downturn on those people most vulnerable to the world’s changing economic dynamics. It depicts a future in which Australia occupies a less than competitive position in the world, having failed to address its key economic vulnerabilities, namely preparing the economy for a twenty-first-century landscape dominated by globalisation and technological changes.

Finding itself structurally ill-equipped, Australia stumbles its way through the next two decades, and the City of Melton feels the negative effects of an economic downturn. Previous linear population growth is reduced to pockets of stalled development and local government revenue is down, limiting the ability of Council to control its own destiny with regard to spending. The status and influence of Council is diminished as state governments adopt an autocratic ‘central command’ approach to drive local government efficiencies.

In many respects, Australia is once again ‘Living in the 1970s’, stuttering along with an ill-fitting economy, high unemployment, disruptive union influence and decaying public infrastructure.

5. Building scenarios

Building scenarios is an exercise in creativity in which participants are challenged to develop a set of equally plausible futures that are strategically useful to management. The scenarios do not have to be individually distinct, but they do have to be diverse enough to generate different responses to the strategic challenge. The task for participants is to provide the detail within their scenarios that makes these differences explicit.

To achieve this goal, I’ve found the following seven-step process to be effective:

  1. Develop a shared understanding of the scenario drivers.
  2. Outline the scenario’s top-line features.
  3. Define the scenario’s push and pull factors.
  4. Describe the essence of the scenario.
  5. Populate the scenario.
  6. Backcast the scenario.
  7. Write the scenario.

The first step is undertaken as a plenary group with the purpose of ensuring clarity around each of the scenario drivers and defining extreme, yet plausible, outcomes for each. The next three steps form a set whose purpose is to deepen each group’s understanding and feel for their scenario before they begin the actual process of bringing it to life. This platform should ensure a smooth transition to fleshing out the scenario in step 5, providing the detail that enables managerial judgement in relation to the strategic challenge. Step 6 connects the future back to today via a backcasting process, which describes a plausible pathway of how the end-scenario came to be. The events and outcomes outlined in this process provide the framework for ongoing organisational scanning. Finally, the scenarios are written up as short stories of the future.

I will illustrate this process by using actual output from the MacGyver scenario team in the Melton City Council project in order to demonstrate the anatomy of scenario building in a workshop setting. Throughout these steps I offer my own comments and interpretation of the raw output to give an insight into the thinking and analysis that contributed to the eventual scenario plot.

STEP 1: DEVELOP A SHARED UNDERSTANDING OF THE SCENARIO DRIVERS

The critical drivers that form the scenario axes provide the framework in which the scenarios are developed. It is therefore essential to ensure from the outset a shared understanding of what is meant by each driver, lest you begin building scenarios with group members holding different interpretations in their minds. Failure to develop this understanding can eventually unravel the process through a combination of confusion and inconsistency.

Participants in the Melton City Council workshop began their scenario building by addressing the following questions as a plenary group:

  • What do we mean by a high level / low level of local government autonomy?
  • What do we mean by a high-performing/low-performing economy?

Since these axes effectively pull your scenarios apart, it is important to encourage thinking that lies at the plausible extremes for each dimension, thus optimising the broad differences between the scenarios and laying the groundwork for different managerial considerations and strategic responses. Thinking in terms of plausible extremes also ensures that your scenarios cover the broad ‘envelope of uncertainty’ for the strategic challenge.9 This coverage is both logical and critical when you relate it to the use of scenario planning by emergency services. These organisations don’t prepare for slight deviations from the norm for which they can easily adapt; they plan for extremes — scenarios that will seriously challenge or break their existing processes and capabilities. It’s the same with scenarios in business: their purpose is to prepare the organisation for when it matters most.

In encouraging stretch in participants’ thinking, I often ask attendees to bring to the workshop an image that represents an activity, policy or phrase from the past that was once considered acceptable but today appears ridiculous. Historical images of doctors promoting cigarettes always lighten the mood, and this is a relaxed way of commencing day two. There is a method in the madness, though: if we view many aspects of past behaviour as ridiculous, then we can assume that people in the future will view many aspects of our current behaviour as equally ridiculous. Therefore, looking forward, we must accept that many aspects of the future may appear ridiculous from the context of today. The learning for participants is that they should include plausible stretch and novelty in their scenarios.

The responses to this first step appear in tables 10.3 and 10.4 (overleaf).

Table 10.3 what do we mean by level of economic performance?

High-performing economy Low-performing economy
High level of investment — private and public Dormant development — low capital investment
Low unemployment Higher unemployment, particularly among youth and minorities
Strong wages growth and high disposable income Low wages growth
High population growth / immigration Slower population growth
Increased diversity of services available Mortgage stress and defaults
Strong housing growth Small business failures affecting Main Street
High standard of living and expectations Slowed planning rate — patchy, uncoordinated
Industry and employment diversity Widening wealth distribution gap
Greater investment in innovation, technology, science and education Increased demand for social services (family violence and mental health services)

Table 10.4 what do we mean by level of local government autonomy?

High level of local government autonomy Low level of local government autonomy
No state government cap on council rates Little influence on policy, service delivery, land use, planning, fiscal management
Increased volatility of Council decisions — potential broader range of services delivered Local government becomes another government department
Less prescription by Local Government Act (being told what to do), more guidelines Less responsive and engaged with local community
More entrepreneurial organisation Financial constraints determined by state government
Greater influence over issues such as roads, schools, public transport Services directed by federal and state governments
Increased local decision making / data collection Less capacity to respond to external environment (e.g. climate change, economy)
Total control over rates / fees and charges / expenditure New impositions placed on local government (e.g. shared services)
Service delivery models determined by Council No councillors

STEP 2: OUTLINE THE SCENARIO’S TOP-LINE FEATURES

Breaking back into their smaller workshop teams, participants began the process of building their individual scenarios by defining the broad features of their future based on the combination of their scenario drivers. This combination is key: it is the frame of reference through which participants develop their scenarios.

This step is designed to ensure shared understanding among group members of the type of scenario about to be created, while outlining the broad aspects that will provide scaffolding for the eventual scenario plot.

MacGyver scenario output

The MacGyver scenario was developed within the framework of a low-performing economy and high level of local government autonomy. Responses from the scenario team appear below:

Top-line scenario features:

  • innovation/community-led industries
  • change in volunteerism
  • local focus — we determine what we deliver
  • higher accountability to local community than to state minister
  • less government grants
  • higher community expectations of Council delivery
  • greater control over resource allocation — what we do and how we do it
  • high unemployment rate
  • increased demand for social and welfare services
  • more agile organisation due to higher rate of change.

Comment — interpretation

From a scenario analysis perspective, early themes to emerge from this step include:

  • the shift in Council accountability from state government to local community
  • the community’s expectation that local government representation (e.g. services) will be more specific to the wants of the community (local focus)
  • the need to be agile in response to more dynamic community demands (agile organisation)
  • the community’s optimism and ingenuity in overcoming economic challenges (innovation/community-led industries)
  • the willingness of the community to work together (change in volunteerism)
  • the need to be a leaner and more entrepreneurial organisation in order to be more financially autonomous (less government grants).

STEP 3: DEFINE THE SCENARIO’S PUSH AND PULL FACTORS

In this step you address why this scenario would develop. Identifying the push and pull factors that could lead to your scenario outcomes grounds the scenario in the uncertainty of today’s embryonic and emerging drivers. The connection back to today establishes plausibility at the base of the scenario, providing a credible platform from which to launch your scenario narrative (see figure 10.11). Once again, an effective environmental scan should provide the necessary stimulus for participants to determine their scenario push and pull factors.

Image of a graph with four quadrants, with "2036" written at the origin. In the top left quadrant of the graph lies a box labeled "silicon valley," corresponding to which the x-axis is labeled "high level of local government autonomy" and the y-axis is labeled "high-performing economy." In the top right quadrant lies a box labeled "Switzerland," corresponding to which the x-axis is labeled "low level of local government autonomy" and the y-axis is labeled "high-performing economy." In the bottom left quadrant lies a box labeled "MacGyver," corresponding to which the x-axis is labeled "high level of local government autonomy" and the y-axis is labeled "low-performing economy." In the bottom right quadrant lies a box labeled "Skyhooks," corresponding to which the x-axis is labeled "low level of local government autonomy" and the y-axis is labeled "low-performing economy."

Figure 10.11 defining scenario push and pull factors

Defining scenario push and pull factors grounds the storylines in the uncertainty of today’s embryonic and emerging drivers, establishing the platform for plausible scenario narratives.

MacGyver scenario output

Why would a low-performing economy / high level of local government autonomy scenario develop?

  • Community resistance to being ‘dictated to’ by a big central government
  • Government policy that provides for autonomy
  • Downturn in world markets
  • Failure to address key economic vulnerabilities
  • Economic warfare
  • Bursting of housing ‘bubble’
  • Interest rate rises, inflation
  • Impact of ageing, non-working population
  • State government economy underpinned by land tax, stamp duty and GST distribution — if they change, it could affect Victoria’s economy.

Comment — interpretation

The trend of communities wanting greater emphasis on local issues from their elected representatives became a strong scenario theme and provided the pull factor for greater local government autonomy (community resistance to big-government ‘dictating’). This storyline was inspired by the Brexit campaign and the pushback by UK residents against Brussels and the European Union.

Economic warfare was interpreted as a trade war caused by economic protectionism that damages Australian exports and ultimately causes a slowdown in economic performance. These economic factors provided the push factors for increased local government autonomy.

Subsequent pressure on state government revenues emerged as a driver of cost-shifting, as local governments took on more and more responsibility (state government economy underpinned by land tax, stamp duty etc.).

STEP 4: DESCRIBE THE ESSENCE OF THE SCENARIO

With the scenario essence, you’re asking participants to give a sense of their scenario’s look and feel. Is it a dystopian scenario? A technological scenario? A scenario of widening social and economic disparities? In my experience, this exercise has proven invaluable in bringing the less tangible elements of the scenario to the surface. Sure, there are lots of physical and measurable changes in your scenario, but what are people feeling? And how might these feelings then lead to subsequent developments within your scenario? It’s an understanding of the intangible look and feel of a scenario that often leads to richer storylines and the surfacing of deeper insights.

Following this step, participants should have an intrinsic feel for the logic of their scenario, prepared to flesh out their storylines with a clear understanding of why the scenario evolved, what it looks like, how different stakeholders are feeling and how they might behave in such circumstances.

MacGyver scenario output

What does this scenario look and feel like?

  • Economically bleak (boarded-up shopfronts etc.)
  • Grassroots innovation
  • Lots of opportunities to ‘make a difference’
  • More scrutiny and visibility of government actions
  • Likely run-down in assets
  • Disengagement from state government
  • Stagnating development areas
  • Council becomes more entrepreneurial
  • Council looks for potential for agility
  • Community wants more Council leadership
  • Common interests drive communal behaviour and open-mindedness
  • World of opportunity for community and Council
  • Higher appetite for risk in trying new things / innovation.

Comment — interpretation

This starts to feel like a scenario where the community accepts their challenges with optimism and a ‘can do’ attitude (lots of opportunities to ‘make a difference’; world of opportunity; grassroots innovation).

The output here also gives a sense of resourcefulness (likely run-down in assets; Council looks for potential for agility), entrepreneurialism, ingenuity (higher appetite for risk in trying new things) and collaboration (common interests drive communal behaviour).

The opportunity in this scenario is for Council to play a leadership role within the community in the key areas of optimism, resourcefulness, entrepreneurialism, ingenuity and collaboration (community wants more Council leadership).

STEP 5: POPULATE THE SCENARIO

Fleshing out your scenario starts by defining the broad domains you want to describe that are relevant to the strategic challenge. These domains can include the economy, technology, government, consumers and, of course, relevant stakeholders.

In building the Melton City Council scenarios, the focus was on the following scenario components and stakeholders:

  • social
  • technology
  • economy
  • environment
  • politics
  • Melton community
  • local government
  • state government.

It’s then useful to work through a series of questions (not too many) to guide and prompt participants in bringing each of these domains to life. Your objective here is to provide just enough structure to facilitate a relevant strategic conversation around each of the components. I’m not going to list all of the questions from this workshop. However, I will mention that in designing your questions, it’s important to focus on the areas you want participants to address explicitly — what details are needed to enable managerial judgement? This includes all critical planning issues and relevant important scenario drivers from the impact/uncertainty matrix — remember, no important influencing factor gets left behind.

The following are examples of questions relating to the social domain:

  • What are the priorities or concerns of people in your scenario?
  • Which significant lifestyle behaviours are different in your scenario vs today?
  • What new infrastructure exists to support 2036 lifestyles?
  • What are the challenges for people in this scenario? How are these challenges overcome?

Again, these questions are only a guide to get people started and to provide some structure to the scenario building process. In fact, what you find with the intuitive logics approach is that participants soon realise the interconnectedness of their scenario — that changes in one domain, say the economy, have multiple impacts across other domains. So rather than following the scenario questions in a linear fashion, a natural flow begins to develop whereby participants build their scenarios in a non-linear, organic way, focusing simultaneously on cause-and-effect relationships across all domains (If this happens, then I can see how this and this could also happen). Soon enough, a logical and coherent scenario should begin to emerge.

STEP 6: BACKCAST THE SCENARIO

Backcasting is a process that connects your scenarios back to the present, outlining a plausible pathway of events and outcomes that could contribute to the development of each end-state — a history of the future, if you like. Once again, this is an exercise in plausible creativity. The purpose is to outline a logical and plausible sequence of events and outcomes that demonstrate, ‘Look, this could happen’.

In some respects backcasting is the most challenging aspect of the scenarios process. Convincing management that extreme scenarios could affect their operations is not so difficult; much more challenging is describing a plausible pathway that shows how these scenarios could develop. This plausibility is the benchmark if scenarios are to be accepted as legitimate. It is central to driving action.

Backcasting imperatives

There are a couple of imperatives for effective backcasting:

  1. The pathway should link the significant themes in your end-scenario back to the push and pull factors identified in step 3.
  2. The pathway should be plausible and logical. Does it make sense from a cause-and-effect perspective? Is the chronological order of events logical?

Abiding by these stipulations, participants should consider any number of factors across the iSTEEP categories that could have contributed to their scenario development. As long as it makes sense, nothing is out of bounds.

Consider recent developments in the Australian dairy industry and how they affected the critical uncertainty of milk prices for farmers.10 In April 2016 Murray Goulburn, Australia’s largest milk processor, suddenly announced that it was retrospectively dropping the milk price it would pay dairy farmers by more than 10 per cent. The move shocked suppliers, who were given no warning that such a change was about to take place. Farmers who had made substantial investments based on the old price now found themselves owing back-pay to Murray Goulburn, as well as trying to service their loans on the lower milk price. What is interesting from a scenario planning perspective is how this outcome came about.

Most milk produced in the southern parts of Australia is processed into cheese and milk powders for export. Hence, the global dairy market is the key driver of the price paid to farmers. Each financial year Murray Goulburn would set milk prices and if there was a positive fluctuation in price during the year, the processor would lift prices and retrospectively back pay farmers the difference. So far, so good.

In February/March 2014, the Crimean peninsula was annexed from Ukraine by Russia, sparking outcry from the West and the subsequent imposition of trade and travel bans. In July 2014, tensions rose further after Malaysia Airlines flight MH17 was shot down over eastern Ukraine and suspicion fell on pro-Russia rebels. As a result, the United States, the European Union, Australia and other countries imposed even tougher economic sanctions on Russia.

Russia responded with its own ban on Western imports, including dairy products. European dairy products previously destined for Russia were now being exported to markets where Australia was a major supplier.

Compounding matters, in March 2015 the European Union withdrew its dairy production quota, which had been used to cap rising milk production since the early 1980s. Milk production subsequently increased and prices fell. Then, to complete the perfect storm, in early 2016 it was revealed that China had excess supplies of milk powder, which placed even greater pressure on Australian exports.

Murray Goulburn eventually succumbed to the combined impact of these global forces and in April 2016 announced a retrospective cut in farmer milk prices.

Now, how’s that for a complex and intriguing scenario?

The point is, there are countless ways that a scenario can develop. It doesn’t really matter how your scenario outcomes evolve, as long as the pathway is plausible and logical — does it make sense from a cause-and-effect perspective?

The results of the environmental scan are particularly useful during this exercise, because this is where your understanding of how the system works today — what it relies on, what it is susceptible to and where the potential fault lines are — can be critical to generating a plausible narrative.

Backcasting delivers several benefits

  • Plausibility. Backcasting provides the essential test of logic and plausibility for each scenario: Given what has to occur to enable our scenarios to eventuate, how feasible are these events and outcomes within the scenario horizon? For example, public opinion takes time to change and is influenced by unfolding events; political decisions take time to legislate; and infrastructure takes time and resources to build. If this chain of events is not plausible within your scenario horizon, then you might need to explore a new series of events leading to the same outcome, or your end-scenario might need to be reviewed.
  • Sensitivity. Backcasting delivers ongoing environmental sensitivity by providing a framework for future scanning. In this respect, backcasting provides a context for scanning by outlining the future signposts that have significance for the strategic challenge — you now know what to look for. The use and value of these signposts is discussed in detail in chapter 13.
  • Understanding. Backcasting deepens your understanding of the scenario. As you work through the process, you become immersed in the unfolding scenario, taking on the roles of various actors, their motivations and likely actions. This deeper understanding leads to greater clarity about what could happen in the future and why.

Backcasting process

  1. Identify the significant themes or features of your end-scenario. These are the themes or developments with significance for the strategic challenge — the differences that make a difference. Each group should agree on up to four significant features and label these clearly.
  2. Outline bridging events. What’s required to bridge the difference between your scenario features and today?

For each of the significant themes or features, list the factors or events that could enable these to develop. What could or must occur? Why would these events occur? Capture these factors on individual Post-it notes. Use the iSTEEP categories as a guide to ensure a spread of relevant factors:

  • Industry. Which industry developments could have led to these features?
  • Social. What social pressures could assist the development of your scenario themes?
  • Technological. What technology is required? How is it being used?
  • Economic. What infrastructure is necessary? When would this infrastructure be built?
  • Environmental. What environmental events could have led to these outcomes?
  • Political. What regulations or government policies need to be implemented?

Once this list appears complete, place the events in the chronological order in which they might occur by moving the Post-it notes around according to the logic of cause and effect. As you go through this process, new events are likely to continue to emerge. Finally, review the flow of your storyline. Does it seem plausible? (see figure 10.12)

Image of a graph with four quadrants, with "2018" written at the origin. On the left side of the origin, the x-axis is labeled "high level of local government autonomy," and on the right side of the graph, the x-axis is labeled "low level of local government autonomy." On the top, the y-axis is labeled "high-performing economy," and at the bottom, it is labeled "low-performing economy." Four segmented arrows lead out from the origin, one into each quadrant.

Figure 10.12 scenario backcast

The scenario backcast links the significant themes in your end-scenario back to today’s push and pull factors via a plausible and logical pathway.

These backcasting events and their outcomes are now the key to organisational sensitivity, providing the relevant signals for ongoing environmental scanning. The art and act of undertaking this scanning is described further in chapter 13.

STEP 7: WRITE THE SCENARIO

Writing scenarios is an immersive and reflective process that facilitates the generation of fresh insights. It’s a process that enables the scenario writer to step inside different worlds and to develop an in-depth feel for their drivers, characteristics and distinctions. Such immersion can be the most rewarding part of the process, drawing on the dual skills of analysis and creativity to uncover and express new insights in a manner that aids managerial judgement.

In this respect, scenario writing and scenario analysis are seriously intertwined. As you can see from the sample output I’ve provided throughout this chapter, the time constraints of a workshop mean scenario insights don’t necessarily drop into your lap in the form of a cohesive storyline. Instead, depending on your workshop format, they tend to be captured in abbreviated or bullet point form, challenging the writer to discover the sometimes hidden themes that weave through the story.

Active listening during the workshop is the requisite behaviour to rise to this challenge: What were the group conversations? What were the contexts in which these conversations took place? What were people’s emotions when they spoke on certain issues? The scenario writer has to be in a position to use this recall to complement the actual workshop output. The skill is then to use your creativity to re-express this output in a manner consistent with your scenario storyline while staying true to the essence of the group’s intent.

As your scenario takes shape, you soon find yourself immersed in a future world. And with this immersion, a clear simplicity emerges, so you begin to rely less on the actual workshop output and instead use your natural feel for the scenario to broaden and develop its storylines. Betty Sue Flowers, the former scenario writer at Shell, articulating this effect in her article ‘The art and strategy of scenario writing’, writes:

In the course of distilling one of the 1992 scenarios, which described the resistance to globalization, I was left with the image of ‘barricades’ — the title of the scenario itself. ‘Barricades’ — the title and the image of resistance — was like a seed from which you could grow the entire story.11

As a consequence of this immersion and ‘distilling’, further insights on scenario implications and opportunities continue to surface (see figure 10.13).

Image containing five columns. Under the first column, with the head "today," are two arrows pointing rightward to the second column, with the one on top labeled "push factors" and the one below that labeled "pull factors." Under the second column, with the head "near term," third column, with the head "medium term," and the fourth column, with the head "far term," are five blank boxes each, placed vertically. Under "near term," the topmost box has an arrow pointing from it to the topmost box under the next column, "medium term." The second box from top has an arrow pointing from it to the second box under "medium term." The third box from the top has an arrow pointing from it to the fourth box, and the fifth box has an arrow pointing from it to the fifth box under "medium term." Under "medium term," the topmost box has an arrow pointing from it to the second box from top. The third box from the top has an arrow pointing from it to the second box under the next column, "far term." The fourth box has an arrow pointed at it, leading from the fifth box. Under the fourth column, with the head "far term," the topmost box has an arrow pointing from it to the topmost box under the next column, "scenario horizon year," with this box being labeled "scenario development number 1." The second box from top has an arrow pointing from it to the second box under "scenario horizon year," labeled "scenario development number 2." The third box has two arrows pointing from it to the fourth and fifth boxes; the fourth box has an arrow leading from it to the third box under "scenario horizon year," labeled "scenario development number 3," and the fifth box has an arrow pointing from it to the fourth box under "scenario horizon year," labeled "scenario development number 4."

Figure 10.13 scenario writing and analysis

Scenario writing and analysis are intertwined, with your initial scenario insights providing the basis for your storyline, while the immersive activity of writing leads to newer insights.

Writing effective scenarios

Similar to the environmental scan, but with one significant difference, the only useful scenario is one that is read, considered, shared and acted upon. Here are some leads on writing an effective scenario.

  • Enable judgement. Your scenarios should contain enough detail to enable managerial judgements in relation to the strategic challenge. Your goal here, writes futurist Jamais Cascio, ‘is to make sure that what you think they [decision makers] need to know is what comes across in the scenario’.12 In doing so, your scenarios should provide an outline of what could happen without being too detailed or specific — remember, you’re not trying to predict the future.
  • If one door shuts, another must open. The scenario should highlight both the challenges and the opportunities for the organisation. For example, in a scenario in which the organisation’s current business model is challenged, it’s not enough simply to highlight that the business will be in trouble if it continues to do what it does; this will be obvious and not helpful. Your scenario should also provide enough detail to make alternative choices and applications of the organisation’s capabilities apparent: What other opportunities are relevant to our business?
  • Describe the journey. Don’t simply focus on the end-scenario; describe the plausible journey showing how this scenario came to be and highlighting the events and outcomes that led from today to the future. Similar outcomes may involve very different journeys, inviting different decisions from the organisation along the way.
  • ‘Keep it short.’ This advice was delivered to Betty Sue Flowers by the head of Group Planning on her first day as scenario editor at Shell, and I think it’s the key to ensuring a scenario is both useful and usable.13 Just as in an environmental scan, denseness is the greatest impediment to readability and usefulness. The scenarios must be digestible for those who were involved in their development and those who weren’t. Of course, with the key decision makers involved in the actual process of developing the scenarios, there’s no need for the narratives to be too long. The scenarios are merely a cohesive articulation of their thinking. And don’t make the mistake of overcompensating with content for those who weren’t involved, as this will have the reverse effect — your scenarios just won’t be read.
  • Make the name ‘sticky’. In naming your scenarios try to capture the essence of your story in a word, a phrase or a metaphor. These names should be easy to remember and enable people to recall the essence of the scenario through word association. There’s no need to come up with a particularly clever scenario name; often a simple word that captures the key scenario themes is best for ongoing internal communication.
  • Take your time. Finally, allow enough time to step inside each scenario and permit ideas and concepts to percolate and develop. I try to allow a minimum six weeks between the scenarios workshop and the follow-up workshop on strategic positioning to give myself enough time to fully understand and express the different insights within each scenario. As mentioned earlier, the future clarity and new insights that emerge from scenario immersion can be among the most satisfying aspects of the project.

MacGyver scenario example

This scenario is defined by community resourcefulness, self-sufficiency and ingenuity. It’s about making the most of what you have. The name refers to the 1980s television series MacGyver, whose lead character epitomised resourcefulness, agility, inventiveness and unconventional problem-solving.

Narrative

The MacGyver scenario taps into the growing backlash against globalisation and the increasing desire for greater local or community agency that has been expressed by voters across the globe in recent years. We saw this trend play out in the US presidential elections of 2016 when millions of ‘forgotten’ voters who felt disempowered by globalisation and disenfranchised by the political system supported Donald Trump all the way to the White House. And in the June 2016 UK Brexit referendum we again saw a pushback from communities who were tired of being ‘dictated to’ by a big central government in Brussels.

After a sustained period of outward-looking global economic policies, and with trust in the political process at an all-time low, voters are taking a sledgehammer to remind politicians of who they actually work for.

As a consequence of this new focus on localisation, the increasing economic protectionism first signalled by Donald Trump during his presidential campaign and then enacted via US trade tariffs on China in early 2018 is soon escalated by retaliatory responses from China. A sustained trade war ensues, as other countries go down the protectionism path, stifling global economic growth.

Australia finds itself exposed to the new protectionist dynamic and the subsequent downturn in export demand affects the local economy. This has a flow-on effect in the domestic building and construction industries. Unemployment begins to rise and the ‘housing bubble’ bursts, causing housing development in the suburbs to stall.

Feeling squeezed by decreased revenues, state governments increasingly look to shift costs, giving more and more responsibility to local governments. These economic circumstances represent the push factors for greater local government autonomy.

This increased responsibility is welcomed by local communities, as it satisfies their growing desire for greater local representation and agency. Their expectation is that increased local government autonomy will lead to services and infrastructure that better meet the specific needs of their region (‘We determine what we deliver and how we deliver it’). In this scenario, community expectations of Council delivery remain high despite the constrained economic circumstances. This community-driven trend towards greater communal independence and representation provides the pull factor for greater local government autonomy.

Accordingly, Council gains more control over resource allocation and more levers to respond to whatever conditions arise, while having greater accountability for local economic performance.

The creative and collaborative habits formed during this scenario lay the groundwork for future long-term economic recovery as Australia emerges from a bloated, disposable culture to become an efficient and innovative twenty-first-century economy.

Community

This is a scenario in which the community has to work together and be innovative to solve issues brought on by lack of funding and rising costs. Such constrained conditions help bind the community together, creating a stronger sense of community spirit.

Furthermore, a positive and innovative outlook permeates the community. People do not see lower economic growth as a constraint, but rather as a challenge to be overcome. In this respect, the world is full of opportunities and there is a stronger appetite to try new things and innovate to make a positive difference (‘Necessity is the mother of invention’).

Habits are generally more frugal in 2036. People tend to grow at least a portion of their own vegetables, and community gardens are scattered throughout the city. There is increased demand for public resources including transport, education and health services. Car sharing is much more widely adopted compared with 2018.

Club memberships of all kinds grow as participation in recreational and sporting activities increases. This is a scenario in which people want to belong to communities of common interest.

There is a strong belief in making a positive contribution to the community and increased volunteerism, particularly among those under 40.

There is higher demand for shared public spaces and community facilities and a greater willingness among organisations to share recreational facilities and to utilise informal public spaces for formal participation purposes.

Economy

The economic landscape is challenging, with high unemployment, low capital investment, low interest rates, low wages growth and many small business closures.

The economy is dominated by more frugal attitudes towards consumption and the aspiration of many to pay down debt. This behaviour places further downward pressure on inflation and interest rates and reduces per capita GST revenue for the states.

There is a booming sharing economy, which represents a further example of an innovative response to challenging circumstances. People are comfortable with repurposing assets and goods, and the disposable culture is a thing of the past. This attitude extends from personal possessions to community assets, where the emphasis is on using existing infrastructure assets to the maximum. ‘Sweat the assets!’ is the mantra for the times.

The building and construction industries have declined since 2018 and there is less mobility and fewer transactions in the housing sector, affecting stamp duty receipts for state governments. Unemployment is higher, particularly among youth and minorities. Underemployment flatters the unemployment number, as many overqualified people are forced to take on lesser roles. Many others are forced to work multiple jobs or to freelance their skills to make ends meet. Mortgage stress is an issue throughout the community and loan defaults are not uncommon.

Discretionary spend (retail, lifestyle services) and luxury industries have declined, as people spend more of their time ‘doing’, particularly undertaking activities that are free and local, such as socialising with friends.

Organisations place a greater emphasis on reducing costs and inefficiencies, and actively seek out opportunities to collaborate with partners with complementary capabilities.

There is less transience in the workplace, with people prioritising job security. Accordingly, more and more employees are choosing to work beyond the age of 70. Workers seek refuge in unions, which become more powerful political operatives. Manufacturing and construction become more prone to union unrest and strikes, further destabilising Australia’s economic competitiveness.

Politics and governance

With less reliance on external grants, the focus of local government is on efficient and sustainable communal solutions. This requires Council to be more entrepreneurial, resourceful and creative. Services are rationalised, shared service models operate throughout the state, and councils collaborate with public and private partners to take out costs and inefficiencies in business operations.

With greater accountability for local economic development and Council economic autonomy, we see the ‘corporatisation’ of local government practices and a greater emphasis on entrepreneurial management styles to seek out alternate sources of income. A changing perspective of Council debt may place a greater emphasis on risk management as entrepreneurial managers accustomed to working with higher debt levels look to secure capacity through debt.

The shift to more autonomous local government, which effectively moves the decision-making process closer to the people, successfully closes the trust deficit between the public and politicians that had become a chasm in 2018.

Finally, having achieved more autonomous local representation, the community now has higher expectations of Council delivery (Be careful what you wish for).

Melton

With sporadic and patchy population growth, public assets need to be ‘agile’ so as to deliver optimal community value and usage. This means there is greater multipurpose usage throughout the city and throughout the day, and residents and associations have successfully adapted to this sharing culture.

There is greater demand for social services, including family violence and mental health services, but the deeper sense of community spirit guarantees a strong emphasis on community welfare provision. We see an example of this spirit in the upsurge in local volunteers since 2018.

With a more proactive approach to sustainability, individuals and neighbourhoods take personal responsibility for home front environmental issues and have high expectations of government to do the same.

Evaluating the scenarios

So, after all that effort, how do you judge whether a scenario exercise has actually been successful or not? Well, it’s not about how well the scenarios are written; how structured, logical or comprehensive their content; how memorable their names; or how novel they appear to the outsider (‘I could have done better than that’). The scenarios themselves are merely the means to an end. And the end against which scenarios should be judged is this: Did they make a positive impact? For this reason, the success or otherwise of a scenario process can be judged only by the intended users of the product.

In saying that, I believe there are three criteria by which scenario exercises can be assessed:

  1. Insight: Were new perceptions generated?
  2. Impact: Were these insights acted upon?
  3. Judgement: Were better decisions made?

Unless these criteria are met, the exercise is likely to prove a disappointment. The goodwill and enthusiasm generated throughout the process (‘This is different’) will quickly dissipate, and good luck trying to gather support for any future efforts (‘Fool me once … ’). Unfortunately, this is where many scenario processes end up: overpromising and underdelivering, leaving management and participants unsatisfied. My early efforts certainly did.

Of course, the final criterion, better decisions, can only be assessed over time, within the context of specific objectives being achieved. And before this assessment can take place, the scenarios must first drive action. This means addressing the so what? and now what? challenges.

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