Part 1: Introduction to scenario thinking and planning… as a way to imagine and anticipate the future.
Would you like to know what the future holds for us in 5, 10, 15 years? Healthcare, retail, media, advertising, financial services, manufacturing, education, food & agriculture or energy – will those fields be influenced by crazy new technologies? What about technologies like Augmented Reality, Virtual Reality, Artificial Intelligence & big data, robotics, the internet of everything, 3D printing? How will they evolve, what will be the most viable playing field, what will be the competition landscape and big tech players’ moves? What will be the consumer behaviors and attitudes and main shifts? How will they adopt new technologies?
Well, no one knows the exact answers to the above questions – even in the 21st century no one can predict the future. But we may try to imagine it and prepare for it. There is no single pattern to follow that would name opportunities or exclude dealing with risks and threats. The business environment is becoming extensively unpredictable. The speed of change is accelerating, the scale of interconnection is increasing and the world is becoming more complex and turbulent. Also, the character and business models of most industries are changing as competitors, suppliers, clients and other stakeholders undergo fast transformations. Complexity of the industry challenges organizations to anticipate and adapt quickly to the unprecedented levels of change. As uncertainties raise investment risks, also the management becomes more complex and several opportunities may be left uncapitalized. The uncertainty has become the “new normal” (Schwartz and Kelly 2012), thus scenario planning is becoming more popular. Scenarios are short, plausible stories of how the future might turn out in e.g. 5-10 years. Alternative (meaning more than one) scenarios of the future enable companies to better anticipate the inevitable surprises and benefits of those emerging business opportunities.
The key for crafting scenarios is to understand the difference between trends and uncertainties. Trends are continuities and certainties that develop quite foreseeably within a certain direction. Trends that have been strong for a long period of time are called megatrends. Some of the current megatrends are globalization, digitalization, environmental change, urbanization, aging, connected living and political power shifting towards east. Uncertainties are discontinuities with less indications on the probability of occurrence. Uncertainties are driving forces that have both a high uncertainty and a high impact on the company. To cite Frank Knight (1921), “uncertainty is quite different from risk, as a man cannot be certain about uncertainty”.
If we think not only with certainties (trends) in mind, but also uncertainties that both help craft scenarios, we may to a greater extend understand what the future holds for us. Scenarios help with understanding the surrounding macro and business level trends and discontinuities. For example, the changes in technological, economic, legislative and customer or value-based factors may have a dramatic effect on startup success. Scenarios are useful in developing insights about the company’s macro and business levels of future developments. For example, Hi-Tech companies or startups can utilize scenarios to build a holistic picture of future trends and discontinuities among technological development, consumer needs and a competitive environment. The competition moves when it comes to big tech players to imagine the future of augmented reality, which is the most interesting playing field. In addition to testing and creating strategy, vision and business plans, companies can utilize scenarios to identify upcoming business opportunities on the macro and business level. Scenarios can be used to identify 1) different kinds of business models, 2) emerging technologies and technological discontinuities, 3) consumer behavior trends and discontinuities and 4) societal trends and changes in the area of values, regulation and legislation. Scenarios help the company to understand the rapid changes in the complex and uncertain operating environment in which startups normally thrive.
In a series of articles „The future of…” I will try to reveal the logic behind the scenario-planning method, which might help in imagining the future of some sectors of technologies, and look deeper into factors that will shape the future – both trends and uncertainties.