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How to Future-Proof Your Strategy


HANNAH BATES: Welcome to HBR On Strategy, case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business.

So much has been written about how to future-proof a strategy. But Peter Scoblic says that too many companies still rely on short-sighted strategies that don’t effectively plan for difference potential futures.

Scoblic is co-founder and principal of the consultancy Event Horizon Strategies. In this episode, he explains how thoughtful and ongoing scenario planning exercises can help organizations decide which investments will allow them to thrive in varying circumstances and navigate many types of crisis.  You’ll also learn how to balance short-term factors with longer term modeling and why it’s so important to ensure your planning team is truly diverse.

 

This episode originally aired on HBR IdeaCast in July 2020 amid the global COVID pandemic. But its insights remain valid for scenario planning in any context. Here it is.

ALISON BEARD:  Welcome to the HBR IdeaCast from Harvard Business Review.  I’m Alison Beard.

We live in volatile, uncertain, complex and ambiguous times.  VUCA is the acronym we’ve all used to use and it’s a really tough environment in which to make business decisions.

Technology is advancing rapidly, geopolitics are unstable, and we’re so interconnected that it’s truly impossible to predict the future.  Sometimes world changing events like 911, the global financial crisis, or a world spanning pandemic take us by complete surprise.

So, how do we plan and prepare anyway?  How do we make sure we’re ready for the next emergency? Today’s guest says that leaders and organizations need to develop strategic foresight and that involves inclusive, in depth and ongoing scenario planning.

Peter Scoblic is cofounder and principal of the consultancy of Event Horizon Strategies, and a senior fellow at the International Security Program at New America.  He wrote the HBR article, “Learning from the Future: How to Make Robust Strategy in Times of Deep Uncertainty”.

Peter, thanks so much for joining us today.

PETER SCOBLIC:  Thank you so much for having me.

ALISON BEARD:  So, scenario planning has been around for quite some time.  What’s different about how organizations should be using it now?

PETER SCOBLIC:  Well, I think that the difference between the way that organizations often use it and the way that it should be used is that it’s sometimes seen as a one-off exercise, at moments of perhaps extreme crisis or in moments where leadership is trying to determine a particular strategy going forward.  Sometimes it’s the kind of thing that you tack onto the end of a corporate retreat.

The way that I think scenario planning ought to be used and strategic foresight ought to be used more generally is in an iterative fashion.  A constant cycle between imagining the future and acting in the present.  So that you reduce the potential for surprise and you increase your ability to sense, shape and adapt to the future as it emerges.

One of the conclusions that I’ve come to in my research is that imagination is a woefully undervalued strategic resource.  And that what organizations can benefit from tremendously is the institutionalization of imagination.

ALISON BEARD:  I think time becomes the issue though, right?  Because we are in this fast-moving world and leaders, organizations, teams are trying to adapt to it, to respond to what’s happening now on the ground.  And so, it’s really hard to shift to that long-term focus all the time.  How do you work with companies to do it?

PETER SCOBLIC:  The short-term is a constant demand.  We’re all subject to the tyranny of the present – whether it’s coming in the form of countless emails in the inbox, or the need for quarterly earnings reports, or the stresses of putting out the various sub crisis that have emerged from the pandemic.

There are no futurists in foxholes.  When there’s incoming fire it’s all that you can think about.  But I think that leaders and managers tend to overestimate the amount of time and resources that it takes to incorporate thinking about the future and iterating on visions of the future into their planning.

One of the in-depth case studies that I’ve done was of the U.S. Coast Guard.  And one of the things that amazed me was actually how few resources they dedicated to their strategic foresight program, to their scenario planning exercises, and yet it was able to have an outsized impact on Coast Guard strategy and a positive one, I think.

Often when you talk to foresight experts you’ll hear them say, we really need to change the culture of organizations so that they’re focused on the future.  And that is a really heavy lift.  That’s an almost impossible thing to do.  What the Coast Guard showed me was that you could do foresight in what I call a scrappy fashion.

ALISON BEARD:  So, what exactly did the Coast Guard do?

PETER SCOBLIC:  So, in 1998, Admiral James Loy, who was then the Commandant, the top officer in the Coast Guard, recognized that the organization was not adequately prepared for the changes it was likely to face in its operating environment.  And the Coast Guard had traditionally been a very, very reactive, short -erm focused organization.  They liked to say that they are constantly deployed, conducting search and rescues operations, drug interdictions, maritime safety operations, what have you.  And he saw this as having taken over the organization to the point where there was no sense of strategy.

So, he decided to hold a scenario planning exercise.  And he established a small strategic planning shop that reported directly to him, gave them a few hundred thousand dollars a year, which they used to bring in an outside consulting firm, and they held a scenario planning exercise called Project Longview.  Which envisioned a range of alternative far futures that they then sort of back stepped from to develop a set of robust strategies. And the effort was so successful in the ways that it helped the organization to adapt after the 9/11 attacks, that the Coast Guard then institutionalized the process, made it regular.

ALISON BEARD:  And so that’s obviously a military organization.  But you think that the lessons learned are applicable to the private sector as well?

PETER SCOBLIC:  Absolutely.  I think that if anything, the fact that a small military organization like the Coast Guard could pull this off so well, suggests that organizations that are both larger and that have more flexibility can do so far more easily.  It’s important to remember that as a military organization, the Coast Guard is very hierarchical.  It is subject to the budget dictated by Congress.  There are a lot of constraints that the Coast Guard is operating under.  For firms and for other organizations that have somewhat fewer constraints, there’s a lot more flexibility.

ALISON BEARD:  So, if I’m the leader of an organization, what would be the first few steps that I would take to get this going?

PETER SCOBLIC:  The first few steps I would take would be to, you know, socialize the idea among maybe the immediate top leadership.  But to the extent that you have the authority to put into place a strategic foresight process, I would set up a small office dedicated to that purpose that reports directly to you.  And then, to the extent that you need to engage outside resources, including consulting firms that specialize in this sort of thinking.  Have them work both with your strategic planning team and then a core team of individuals from throughout the organization to paint a broad picture of the trends that are likely to affect the organization in the coming years and even decades. And the potential uncertainties that it faces, and how those things could combine to create a range of possible futures.

And then, through that process, paint a picture of the futures the organization might encounter and involve the rest of the leadership in the organization in creating a set of what I would call robust strategies.  Strategies that would serve the company well, or the organization well, no matter which one of the futures that you outlined came to pass.

ALISON BEARD:  So, I want to pick apart that process a little bit.  You talk about imagination.  How do you find people who are going to be able to think out of the box and imagine those future scenarios that maybe they’ve never seen in their own experience?

PETER SCOBLIC:  It’s funny.  I feel like imagination is both the most difficult hurdle to get over and also the maybe most overestimated hurdle, or the hurdle whose height is most overestimated.  When I talked about the Coast Guard example, the people that were chosen to lead this project were not necessarily people who had been identified specifically for their strategic prowess.  Most of them were operators.  They were pilots, or ship drivers.

At the same time, it is absolutely a challenge to take people who are more analytical in their day to day work and ask them to envision a far future that in some ways is going to seem so divorced from our own, as to be silly.  But there are ways to engage the imagination.  Simply asking a group of executives to envision that they are a competing organization – a firm in their competitive space that they face every day, can radically expand their perception of reality and of what is possible, and what the competitive space actually looks like and what their own company’s competitive advantage is.

ALISON BEARD:  And are you pulling in people from all levels of the organization?

PETER SCOBLIC:  I think it’s important to pull in people from both all levels of the organization and from different functions within the organization.  This is a case where diversity absolutely matters, in all senses of the word.  Because what you want to do is as you say, get people to think outside of the box.  It’s very difficult to do that if you don’t recognize the box that you’re in.  It’s far easier to do if you have to interact, if you’re an engineer who has to then interact with designers, or you’re an accountant who has to operate with someone who is in the field in a different way.  Simply interacting with colleagues that you might not encounter on a day to day basis can broaden your mind significantly.

ALISON BEARD:  And so then after this initial brainstorming you settle on several future scenarios that you want to explore further?

PETER SCOBLIC:  That’s right.

ALISON BEARD:  And how do you narrow in on which ones you should choose?

PETER SCOBLIC:  I think what you want to do is articulate the set of futures that best captures the potential environments you might be facing while still remaining plausible.  So, you want futures that are distinctive of each other, that are plausible and that therefore together represent as much as you can of the possible future.  It’s impossible to imagine everything that might occur, but you want to capture as wide a swath of it as you can.

So, for example, when the Coast Guard ran Project Longview, they identified four forces for change that they thought would significantly impact the future.  So, they looked at the role of the Federal Government, whether it was sort of narrow, or whether it was expansive.  They considered the strength of the U.S. economy.  Would it be strong or would it be weak?  Would the threats to U.S. society be wide ranging or would they be fairly narrow?  And then being the Coast Guard they asked themselves about the potential demand for maritime services.

So, they sort of looked at these four dimensions and if you took the extreme values for each of them, you could generate 16 possible worlds.  And then they looked at those potential combinations and said OK, so here are five that we think are distinct from each other and they’re a little bit out there, but they’re still plausible.  These could happen.

So, they described a world called “Taking on Water.”  And that was a future in which the U.S. economy was struggling and there was significant environmental damage.  They had a somewhat ironically titled future “Pax Americana” in which the United States had been humbled by its efforts to intervene in the world.  And instead, it was confronting a world filled with political instability and economic unrest, but it was doing so from a position of relative weakness.  They had one called “Planet Enterprise” in which transnational corporations had really become the dominate actors internationally.

And so, you can see how the fundamental things that were sort of the most conspicuous characteristics of each of these future worlds were very different.  And the question was, OK, if we’re the Coast Guard and that is the future that we’re going to have to be operating in, what would we need today to best set us up for that world, for that future?

ALISON BEARD:  So you see how all these different scenarios play out for your own organization and then where do you take it from there to make sure that it’s actually changing what you’re doing currently?

PETER SCOBLIC:  So, this is no small challenge.  It is one thing to identify strategies that make sense in the face of these futures. It can be a much, much different thing to actually implement those strategies. The idea being that the futures that you can create, put some guardrails around uncertainty.  I t’s neither true nor useful to say that absolutely anything can happen.  But let’s paint a picture of the things that could happen and identify strategies that would serve us well no matter which one of those things happened.

The Coast Guard for example came up with this set of 10 strategies that all made tremendous sense to them.  The Coast Guard had traditionally been siloed into roughly two halves.  There was a side that handled maritime issues, more sort of safety, environmental regulation and then there was the more operational side that people who flew helicopters and conducted operations and so on an so forth.

Those two halves of the Coast Guard didn’t really talk to each other particularly well.  And what they realized was that in no future did it really make sense for the Coast Guard to be divided in that way.  That going forward, the missions that they were likely to face was likely to involve both halves of the organization.  But tearing down siloes within an organization is not an easy thing to do.  That’s a massive restructuring.

The Coast Guard began to experiment with it little by little, in certain ways, but it actually took the shock of 9/11 for them to recognize that the entire structure of the organization needed to be rethought.

ALISON BEARD:  But the idea is to get momentum for it before that crisis hits?

PETER SCOBLIC:  Absolutely.  Absolutely.  But one of the, one of the benefits of strategic foresight of, in this case, the scenario planning process, was that it not only articulates strategies that you want to act on in the present, but even in the event that you are not able to act on those strategies immediately for whatever reason, whether it’s a lack of resources, or a lack of consensus, it does provide a foundation so that if crisis hits you are able to respond more nimbly.

ALISON BEARD:  Are there any private sector organizations that you’ve seen do a really good job of this so far?

PETER SCOBLIC:  There are organizations that are beginning to.  The iconic organization that has scenario planning as a continual part of its strategy process is Shell.  Which really brought scenario planning into the corporate world back in the 1970s and in fact, one of its, one of its progenitors wrote two articles for Harvard Business Review in the 80s, detailing their process.  That process in an updated form continues to this day.  But there aren’t a tremendous number of organizations that have successfully institutionalized it.

ALISON BEARD:  Because we have been hit by this surprise pandemic, which some people did predict, but no one really prepared for, I’d love to just explore how a company might have engaged in strategic foresight and scenario planning to plan for this new reality we’re in now.

PETER SCOBLIC:  Yeah.  It is a bit, it’s difficult to call it a surprise as you suggest given the number of exercises in various forms that have been held over the decades about the possibility not only of a pandemic, but post 9/11 and the anthrax attacks of a bioterror attack.  It’s difficult to call it a surprise given that we have dealt with pandemics in just the past decade and the fact that the Obama administration left the Trump administration a playbook on how to handle this exact sort of thing.

I think companies in a range of sectors can think about potential disruptions that they might face and how they would effect operations.  That doesn’t mean that you have to anticipate the precise nature of the disruption.  Nobody precisely anticipated what this pandemic would look like even if they thought it could happen someday.  But that’s not the only sort of disruption there might be.  We can certainly envision terrorist attacks.  We can certainly envision natural disasters. It’s worth asking to what extent your firm or your organization can cope with disruptions of that kind.

Or, even if you’re not thinking about disruptions and you’re simply thinking about a range of futures, what do the trends suggest that your organization would want to be doing now, no matter which potential future emerged?  Whether that had a massive disruption in it or not.  I was reading the New York Times this morning which has a story about how the ubiquity of the fax machine in health insurance claim processing or just in the health industry general, has served as a bottleneck to both treating people during the pandemic, and gathering information.

And as I was reading that I thought to myself, if you are a healthcare organization, and five years ago, or 10 years ago, you had sat down and said OK, well what are the trends and the potential uncertainties that we face?  One of the trends you likely would have identified was an increasing trend towards digitization and an increasing amount of information as the patient base grew older and so on, as just as the population increased.  It strikes me that a strategic foresight exercise held in the healthcare industry would have identified as a robust strategy a desire to develop, or a need to develop a more streamlined digital way of processing information.  That would have been a robust strategy that would serve us well.  When Washington State has to call in the National Guard to do data entry because its systems are so antiquated it suggests that something’s gone wrong.

ALISON BEARD:  Do you see companies in some sectors doing a much better job of this than others?  Like our tech companies much more creative about thinking about the future than say old school industrial companies.

PETER SCOBLIC:  I think that tech companies are more creative in thinking about the future in the sense that they have a much greater sense of agency.  They believe that they can shape the future. And of course, like we, companies can shape the future to some extent, but there’s also a tremendous amount that lies outside of our control.  And so, not only do you need to be able to shape the future, you need to be able to adapt to it as it emerges and you need to be able to sense it as it begins to emerge in the present.  A number of tech companies are very good at beginning to sense change and where things are headed and take advantage of that.  And a lot of older companies in more placid industries are less so.

I think one of the key management competencies of the future, if not the key competency, is going to be able, is going to have the flexibility to change your mental model of how the world works.  We all carry around in our heads these ideas of how the world works, maps of what reality looks like.  But in incredibly uncertain times, when the territory is shifting so fast, our minds have trouble keeping up.  And so, companies in industries that haven’t had a shake up in a long time tend to be less flexible.  And companies who, companies that are, who, for whom you know, change is part of what they are trying to drive, do tend to be a bit better.

ALISON BEARD:  Should leaders derive strategies solely from these kinds of exercises?  Because surely they also have to take a short term factors into account, even when we’re not in crisis mode?

PETER SCOBLIC:  Absolutely.  Strategic foresight is not meant to be the be all and end all of the way an organization behaves.  One of the key ideas in business scholarship is the notion of ambidexterity.  That organizations need to be able to act in the present and think in the future.  They need to be able to both sort of exploit their existing competencies and explore new ones.  So, you need to be able to learn how to make widgets better and more efficiently, at the same time you have to be able to think about well, what’s the next widget going to be that’s really going to drive my segment, that’s really going to matter to my organization?

What strategic foresight lets you do is link those two things.  The problem is that the short term and the long terms sort of require different ways of thinking.  They require different organizational structures.  They can require different allocations of resources.  The nice thing about strategic foresight is that it’s not simply about thinking about the far future and creating some kind of science fiction world that you can think of, hey how well would we do in that world?  It’s about linking the present and the future more tightly.  So that the thinking that you do, do about the long term actually improves your performance in the short term.  The two things are not in contradiction.  They’re actually complimentary.

ALISON BEARD:  Peter, thank you so much for joining us today.

PETER SCOBLIC:  It’s my pleasure.  Thank you for having me.

HANNAH BATES: That was Peter Scoblic in conversation with Alison Beard on the HBR IdeaCast. Scoblic is a cofounder and principal of the consultancy Event Horizon Strategies.

We’ll be back next Wednesday with another hand-picked conversation about business strategy from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review.

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This episode was produced by Mary Dooe, Anne Saini, and me, Hannah Bates. Ian Fox is our editor. And special thanks to Maureen Hoch, Nicole Smith, Erica Truxler, Ramsey Khabbaz, Anne Bartholomew, and you – our listener. See you next week.



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