Scenario Planning for the Long-term

Combining imagination and analytic realism to make better decisions about the future

This is a transcript of Scenario Planning for the Long-term, a talk by Peter Schwartz at the "Long Lived Institutions" special event at The Interval. It has been edited for length and clarity.

The Role of Mental Maps

This is a map of North America. It was made by a Dutch map maker by the name of Herman Moll, working in London in 01701. I bought it on Portobello Road for about 60 pounds back in 01981. Which is to say, it’s not a particularly valuable map. But there is something unusual about it: California is depicted as an island.

A 01701 map of North America by Herman Moll

What’s interesting to me as a scenario planner is how the map came to be, how it was used, and how it was changed.

The Spanish came up from the South, and they found what we now call Mexico, and the tip of the Baja Peninsula, and sailed up into the Sea of Cortez. Those who went further north along the West Coast eventually came to the Strait of Juan de Fuca, a channel separating present-day Washington and British Columbia. Assuming the two bodies of water were connected, they created the Island of California.

Now, this would only be a historical curiosity were it not for the problem of the missionaries who actually used the map to go inland. And of course, they would have to take their boats with them to cross the Sea of California. And when they went over the Sierra Nevada Mountains down the other side, they found this beach that went on and on and on and on until finally they realized there was no Sea of California.

And they went back to the map makers in Spain and said, “Your bloody map is wrong!” And the map makers fought back and said, “No, no, no, you’re in the wrong place, the map is right.” Anybody who works in a large organization understands this logic very well. Because the map is always right.

The first maps depicting California as an island were drawn in 01605. In 01685, the King of Spain finally figured out that this was wrong and ordered the maps in Spain to be corrected. But we still have maps dating from 01765 that were drawn this way.

So what’s the message? If you get your facts wrong, you get your map wrong. If you get your map wrong, you do the wrong thing. But worst of all, once you believe a map, it’s very hard to change.

We make our decisions about the future based on our own mental maps about how the world works. And we are very much prisoners of those mental maps. Part of the function of scenario planning is figuring out how to break out of the constraints. How do we challenge those mental maps that we see about how people behave, how organizations work and how institutions evolve?

The Importance of Diversity in Scenario-Planning

This is the slide that IBM used to make a decision about the future of personal computers. It is the costliest slide in business history. This is a $200 billion slide.

In 01980, IBM made the above forecast of what they believed the demand of personal computers would be to decide whether or not they should get into the business. They projected that the total computers sold through all channels, over five years, would be 241,683, peaking in 01983 and heading south. After all, why would anyone buy a second computer?

This product [the personal computer] was so funky that the theory was that pursuing it was going to kill Apple. That was the goal: get people back to real computers [large mainframes] because real men use big machines. It was nine men in the room making this call, and they got it totally wrong. The correct answer was 25 million units sold over that five year period.

So, they were a little bit off and they said, “Okay, 241,000 units, a couple thousand dollars a unit. Well, it’s not worth developing a chip. Intel, give us the chip. And there’s this kid from Seattle, Gates or something, who has got an Operating System called QDOS. He’ll give it to us for free, we’ll put it on the machine, we’ll put it in a box, we’ll call it an IBM computer.”

This was the moment they almost lost the future of the company, because they could not imagine that the world could be so different, that people would like a box with 16K of memory in it. That just seemed inconceivable to these nine men, who were the smartest people in their industry, who knew everything about what they were doing and yet still got it completely wrong. And it literally almost killed IBM as a result. And of course, they no longer make PCs because they could no longer compete, et cetera. This slide is why Bill Gates is one of the richest men in the world. If IBM had said, “You know, maybe there really is a future here, and we’ll develop our own operating system and our own chips,” it might’ve been a very different story.

So, again, part of our challenge today in our thinking is precisely how we challenge each other’s mental maps. And for that, you need diversity. Diversity is the single most important characteristic for thinking about the future. Every time I have been wrong, with no exceptions, it’s because we had inadequate diversity in the room. There are a number of embarrassing moments in the history of the Global Business Network (GBN), the Mexico meeting being maybe the lowest point. Two weeks before the collapse of the Mexican peso, we said there were three scenarios for Mexico: a good scenario, a better scenario, and a best scenario. Two weeks later, it all went in the tank. Why? Because we were all just talking to ourselves, and as a result, we got it completely wrong.

So, one of the most important messages about long-term thinking is the inclusion of diverse points of view. And if you’re trapped in one mindset, you’re going to miss an enormous amount.

The Spirit of Surprise

“Often do the spirits of great events stride on before the events, and in today already walks tomorrow.” — Friedrich Schiller (01759-01805)

The future is being born. We all remember the Bill Gibson quote: “The future’s already here, it’s just not evenly distributed yet.” The signals are out there.

And why diversity matters so much is because it enables you to pick up on a variety of signals from a variety of different disciplines, contexts, cultures, et cetera. And that’s an important part of what scenario thinking is about.

Scenario planning is rooted in the concept of Multiple Possibilities

The way most organizations have thought about the future is to project out from the present. And then, if they were concerned about uncertainty, they shaded it up and down a little bit, 10% up 10% down in what was called sensitivity analysis. It didn’t require much imagination; it required math.

But scenario planning involves imagining different possibilities and then figuring out how we can get from here to there. It requires a combination of two things: imagination and analytic realism. If it’s just forecasts, just analysis, it’s pedestrian. You miss the big surprises. You don’t see that new mental map. If it’s just imagination without analysis and rigor behind it, it is just that; it’s good fiction.

So, it’s important that both of these come to bear in the task of thinking about scenarios.

The Test of a Good Scenario

Scenario planning is not about prediction; it’s about making better decisions. That is, if you really do your homework well in multiple scenarios, you’re probably going to see this future. That’s not the hard part. The hard part is: what do you do? And if your scenarios are brilliant and nobody pays any attention to them, you have failed. Having been a consultant for many years, it was not a way to get more business to say to a CEO, “Well, we gave you the future and you blew it. You didn’t make the right decision.” That was our failure as consultants. Our job was to actually affect the mindset of decision makers.

In the end, what we want to do with the Organizational Continuity Project is not simply understand long-term institutions, but influence them. How do we actually make better decisions about our societies, our governments, our corporations, our educational institutions, our communities? How do we actually think long-term and make better choices? That’s the real goal here. It’s beginning to think long-term about what is likely to happen.

The Strategic Conversation and Strategic Options

It’s about a strategic conversation. What we want to empower is thinking about different scenarios, going out subsequently, creating new knowledge, doing research, doing serious homework, beginning to think about how you create what we call emergent strategies—strategies that emerge out of that conversation, as opposed to top-down control. And then testing those emergent strategies against what we’re already doing, and thereby improving the quality of decision-making.

So what this is really about is an orchestrated strategic conversation, with inputs from a variety of different sources, thinking about possible scenarios, thinking about how we might influence the shape of institutions going forward, and what the rules for those might be. And this continues on. This doesn’t stop. This conversation is a perpetual Long Now conversation.

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