To combat business uncertainties and risks, leaders must adopt a strategic mindset to approach competition, the market, and the rest of the business realities at play. They must also look beyond the present to predict what changes and disruptions might lie in the future. As Javier Gimeno, Professor of Strategy at INSEAD, once said, "It's hard to ignore shareholder demands for quarterly earnings miracles. But too often, what looks like success today can inhibit a company's competitiveness tomorrow."
Scenario planning helps organizations flex this longer-term strategic muscle. In my experience, the process involves a few critical stakeholders with organizational superpowers in uncertainty and risk management to make it successful, from the chief executive officer (CEO) and chief strategy officer (CSO) to the scenario planners.
At a high level, the CEO and CSO (or VP Strategy in some smaller organizations) play essential roles in driving strategy and leveraging scenario planning benefits with the scenario planning team's support. All CEOs and most CSOs are involved in the upfront part of the strategy development process, leaving the execution to specific business units and functional leaders to ensure it is successfully implemented and cascaded down to front-line employees.
At a more detailed level, these three influential roles come together and contribute in different ways to drive collective success when scenario planning as follows:
1. Chief Executive Officer (Visionary) – The role of the CEO is unique. They stand at the organization's top, and everyone ultimately takes direction from this one individual. Only the CEO can ensure that the right resources spend time undertaking the necessary actions. The CEO plays a critical role in overseeing scenario planning and that of the broader strategy development. The CEO sets the tone from the top and is responsible for the company's vision and mission. The CEO must buy into the importance of future thinking using scenario planning. Otherwise, it will not be successful. Leaders will not support it, and challenges will occur when communicating the results to front-line workers.
CEOs need to engage actively, hold other leaders accountable, model the proper behaviour and be prepared to roll up their sleeves and get involved. CEOs need to communicate consistently throughout the organization to recognize the importance of scenario planning and the proper management of external risk, uncertainty, and internal complexity as part of the strategy development process. The CEO should also communicate the importance of organizational learning, strategic flexibility and nimbleness, and other beneficial aspects of the process. Messages need to be frequently repeated to employees to ensure they sink in.
At Zappos, former CEO Tony Hsieh treated employees as his most crucial audience with transparent and open communications in a way that broke down silos, allowing employees to raise issues. Zappos, which Amazon acquired in 2009 in a deal valued at $1.2 billion, is considered exceptional in customer service and one of the best places to work.
2. Chief Strategy Officer (Orchestrator) – Is the most senior strategist in the organization and has an essential executive sponsor role in supporting strategic processes like scenario planning. To meet the increased demand for an adaptable and coherent strategy, organizations must have a senior leader focused on strategic direction and potential futures that could play out: the CSO.
This role is crucial for companies today, and business leaders must be selective in choosing the position tomorrow. In a report on the DNA of the CSO, global professional services company Ernst & Young (EY) explored the different attributes of the role. EY indicated the criticality in understanding the changing business landscape, assessing what's important to know internally and externally, and filtering external noise. When the sensing is done well, the CSO can steer the company toward the future short and long term. The CSO is uniquely positioned to challenge fellow leaders, including the CEO, to stretch mental models on strategy. The power and importance of this cannot be underestimated when performing scenario planning. The CSO can help facilitate the process, align senior leaders, and stretch the organization to think more broadly about future realities.
According to a further report in the Harvard Business Review, a great CSO goes beyond leading the traditional annual strategic planning process, which typically struggles to absorb the shocks and disruptions of today's uncertain and complex market. The CSO is an individual who can help transform into an ongoing process with continual pressure testing discussions about the strategy among different groups of people.
3. Scenario Planner (Executor) – The scenario planning team, which typically reports to the chief strategy officer, has the vital role of supporting the entire scenario planning process in many organizations. These teams vary considerably by the company and combine skills and expertise that enable successful outcomes from a qualitative and quantitative perspective.
In Vaclav Smil's new book, Numbers Don't Lie, he highlights why it's essential to interrogate what we take to be true in these disruptive times and why facts matter. Scenario planners make this happen. They conduct research, plan, coordinate, prepare, facilitate, present, and run the process. Different sources of information and activity need to be coordinated, verified to be factually correct, and scenario planners ensure this occurs.
Another consideration and often overlooked and undervalued component of the scenario planner's role is writing. When building scenarios, the ability to tell a compelling story about potential future realities can be a difference-maker in engagement. Typically, four scenarios are developed as part of the planning process. Each tells a different story on a continuum of favourable, neutral, and unfavourable to the organization. The better a story is written, the more likely it will inspire a high degree of dialogue. It's one thing to gather all the research data and other associated information as part of the exploration and analysis phase but quite another to explain what it all means in a way that will engage others. Jennifer Aaker, a professor at the Stanford Graduate School of Business, said, "Our brains are wired to understand and retain stories. Story is a journey that moves the listener, and when the listener goes on that journey they feel different, and the result is persuasion and sometimes action."
Like in business, in the world of the fictional superhero's the DC Trinity (Wonder Woman, Superman and Batman) pack a powerful punch and rain supreme when they integrate and collaborate. Success in scenario planning is also a combination of superhero roles working together with the broader organizational stakeholders to support the process effectively. Everyone wants to win, but most understand that they cannot do it alone. Success is a team effort. The process must be impelled from the top down. If the CEO does not buy into the power of the scenario planning process, it cannot be truly successful. The CSO is also crucial in this equation and must act as the provocateur and sponsor of the process, the purveyor of a new way of thinking. Finally, the scenario planners bring the technical expertise necessary to coordinate such a significant effort.
Authored by Lance Mortlock (EY Canada Managing Partner, Energy & Haskayne School of Business Visiting Professor).
To learn more pre-order my new book Disaster Proof: Scenario Planning for a Post Pandemic Future, available on Indigo in Canada and Amazon in the U.S., or visit my book website at www.lancemortlock.com