How to think about the future - scenario forecasting - includes related article

American Demographics, Feb, 1998 by Dan Fost, Brad Edmonston

ABUSING THE FUTURE

Scenario planning is not without its critics. "It has been adapted into a tool people use to develop strategies, rather than a tool to test strategies, and that's a big problem," says Bob Frisch of Chicago, a vice president of Gemini Consulting, a global management consultant based in Morristown, New Jersey.

Frisch tells his clients to look at trends that are already happening, rather than speculating about what might come in the future. He says scenario planning is a useful way to test strategic assumptions, but that it is commonly subverted by the human tendency to want to predict the future. Scenario exercises often end up with the participants "feeling like they are in a casino, asking themselves how many chips to put on each method," Frisch says. "That's a misuse."

Frisch tells his clients to develop a "megatrends" list of six or eight things that are happening that could have an impact on their business. "You should understand the high-level forces that are reshaping your world," he says. "Scenario planning separates the trends from the uncertainties and takes off down the uncertainties path. We say, go down the trends path, then bring the uncertainties back and test that course of action."

At Sears Roebuck and Company, where Frisch once headed corporate strategy, the company used scenarios to plot the future of the Prodigy online service. Planners worked with possibilities ranging from online services growing into a mass medium, to only a few companies serving a small number of online customers. Prodigy bet that online would become popular to the masses, but that only a few providers would dominate. Instead, the World Wide Web appeared, with many vendors serving many customers. "The one they bet on was not the one that evolved" Frisch says. The venture was a spectacular failure, and Sears and IBM sold it at a huge loss.

Ted Turner's launch of CNN, in contrast, was more than just a risky bet that people's appetite for news would increase. It was also a solid exercise in trend-based decisionmaking, says Frisch. People's use of time was changing, the number of independent television stations was on the rise, and cable television operators were looking for higher-quality programming. "It didn't sit on a platform of uncertainty" Frisch says. "These things were already happening. [CNN] knitted it together in a unique way."

Frisch also worked with the Natural Foods Retailers Association to adopt a similar trends-based strategy. Any retailer, he says, should pay attention to the big trends: an aging population, an increasingly multiethnic population, a rise in alternative households, and the growth of electronic commerce. "You don't have to be a very big store to take your surfboard and put it on a couple of those waves," Frisch says. "I don't necessarily think it depends on the scale of your business." For example, a grocer looking to appeal to an aging clientele might install wider aisles and take packages out to cars.

Still, Frisch says, he wouldn't rule out using a scenario once the strategy is mapped out. "I still have to say, `What if Whole Foods Markets puts a store next to me? Will I be out of business?' At the end of the day, you still want to play the 'What if' game."