How to prepare when the future is uncertain…
Canadian Ice Hockey player and occasional philosophical genius, Wayne Gretzky, once explained his success on the ice with the simple observation: “I skate to where the puck is going to be, not where it’s been.”
That same principle is true for strategy, particularly for charities with commercial ambitions. There’s no point developing new services or products that are relevant to customers now, only to find that by the time they’re ready to launch, the audience has moved on. You need to skate to where the puck is going to be, in two or three years’ time, not to where it is now.
Scenario planning is a great tool for doing this, but it’s often misunderstood: it’s seen as a way to predict the future, an attempt to divine the “central” scenario that most likely to come about. The problem is, those central scenarios are rarely the ones that unfold – ask any central banker. Even Gretsky can’t predict the future, instead, he looks for the area of the ice within which the puck is probably going to appear, and puts himself into the best position to react, wherever it emerges within that space. That’s what scenario planning is for – proscribing the range of possibilities and positioning yourself well for any eventuality within that range.
The way you do that, is not by modelling every possible scenario, or trying to pick the most likely; you do it by focusing your effort on the “plausible extremes”. With Brexit, for example, you don’t need to model every possible deal scenario – just look at the extreme: cliff-edge Brexit. That extreme scenario will give you the clearest picture of the big risks and opportunities that could emerge within the entire range of possible futures. Outlining the things you’d do for that scenario will provide you will all the actions and contingencies you might need to deploy, in any of the less extreme outcomes that could emerge. From those, it’s a simple step to work up a flexible strategy where certain plans get triggered by specific events depending how the future begins to unfold.
Plausible extremes are easy to develop and quick to use. There are only two steps to take: identify which trends and potential events to take seriously – no more than half a dozen of the most significant things that could affect your beneficiaries, paying customers, competitive landscape and your own operation, and imagine what the most impactful but credible combination of those trends and events, might be. I’ll illustrate with an example:
I was working with a UK charity that operated a variety of social care services, mostly under contract from Local Authorities. We looked at the trends that would affect “the paying customer”, the main ones being: a sharp reduction in budgets; a move away from residential provision towards community services; and a growing interest in less expensive “early intervention” activities that might reduce the more costly “crisis management” workload across the sector.
Our inferences, from all of the conversations, were that: the budget cuts would remain, and potentially increase over the next five years; the move away from residential would continue at a consistent rate; and while there were plenty of conversations going on around early intervention, they’d yet to turn into any meaningful commitments by commissioners, so it could go either way. This gave rise to three distinct scenarios, ranging from chronic and systematic underfunding, to a rapid growth in “social prescribing”, to distinct gaps opening up in provision for services that could help people with very complex needs to live safely within a community setting.
By working through these scenarios, the charity identified a number of markets that might be about to open up for which it could start exploring models. But it also drew out a number of features that would be common across all of the likely futures: the need to create a much clearer picture around outcomes and costs for supporting different levels of need in different settings; the need to develop powerful, evidence-based insights, to help commissioners make appropriate decisions; and the need to prepare for some big decisions on the financial viability of some of their existing operations.
None of those were a massive surprise, and several had been on the “ought-to-do” list for a long time. But the real benefit from the scenario was to catalyse action. The session took two hours, and within two weeks, each of those areas had moved right up the agenda, owners had been identified, approaches and resources were being discussed, and plans were being built.
The beauty of that fast-approach to scenario planning is that you don’t need to limit it’s use to the strategy process – it can, and should, be used all the time, as an ingrained way of thinking about the future. Gretzky doesn’t work out where he’s going to skate before the game starts, or over half-time drinks, he does it on the fly, during the game, play by play. It’s how he thinks. And it’s why he’s the only NHL player to score over 200 points in a season – a feat he accomplished four times in his glittering career.