In his time developing the work of the scenarios team at Shell, Pierre Wack made a huge contribution to how we think about scenarios and futures. But it is still not fully understood. I re-read his two Harvard Business Review articles, ‘Uncharted Waters Ahead’ and ‘Shooting the Rapids’, for an article that was published in the October edition of the APF newsletter Compass. This version is slightly revised.
At the start of ‘Shooting the Rapids’ (STR), the second of Pierre Wack’s two articles on scenarios for Harvard Business Review, published in 1985 after he had left Shell, he tells a story about a futurist.
“After I had listened to his presentation of a set of six scenarios, he asked me what I thought. “It was beautifully written, if complex,” I replied. When pressed, I admitted that it was “impenetrable.” I added, “The managers who hear it won’t know what to do with it.” To which the consultant responded, “That is not really my concern. I simply lay out the possibilities for them. It is up to the managers to know what they should do.” (STR)
The limits of futures practice, and of the futurist’s responsibility to their client, still seem to be a live debate more than thirty years on. Re-reading Pierre Wack’s two HBR articles after a gap of some 15 years, his views on how deep futures work needs to go, and why, are the sharpest thing I took away. While Wack had the luxury of working within one organisation with which he was deeply familiar, these are critical issues whoever we work with. Three things in particular stood out for me.
The limits of uncertainty
The first is how little he thought of the worth of the double-uncertainty scenario matrix. Such scenarios were no more than a staging post, if a necessary one, along the way to a deeper understanding. As he says in ‘Uncharted Waters Ahead’ (UWA),
“[W]e realized that simply combining obvious uncertainties did not help much with decision making. That exercise brought us only to a set of obvious, simplistic, and conflicting strategic solutions.”
He reiterates the point later in the article, specifically in the context of Shell:
“no strategic thinking or action could be taken from considering this material.”
The double-uncertainty scenario matrix (pdf), then, is a “first generation” scenarios set. It is a building block in the process of creating this deeper set of scenarios that will enable businesses to make decisions. The reason:
“it is almost impossible to jump directly to proper decision scenarios… The goal of these exploratory first-generation scenarios is not action but understanding.” (UWA)
In other words, the often repeated notion that the double-uncertainty 2×2 scenarios matrix is based on the Shell process is at best a half-truth.
The second thing is at the heart of Hardin Tibbs’ article (pdf) on Wack’s thinking, written shortly after Pierre Wack died and re-published in the same edition of Compass. Wack, in short, had a fundamentally different view of the role of scenarios from most futurists, either then or since. For Wack, scenarios work, done properly, was not about illuminating uncertainty but eliminating it. Its purpose was to get to decision.
“Scenarios structure the future into predetermined and uncertain elements… The foundation of decision scenarios lies in exploration and expansion of the predetermined elements: events already in the pipeline whose consequences have yet to unfold, interdependencies within the system (surprises often arise from interconnectedness), breaks in trends, or the ‘impossible.’ Decision scenarios rule out impossible developments; they deny much more than they affirm.” (STR)
This idea is usually explained by reference to the flooding of the River Ganges. This analogy is quoted everywhere when Wack’s work is discussed, and it comes from Wack himself:
“Suppose, for example, heavy monsoon rains hit the upper part of the Ganges River basin. With little doubt you know that something extraordinary will happen within two days at Rishikesh at the foothills of the Himalayas; in Allahabad, three or four days later; and at Benares, two days after that. You derive that knowledge not from gazing into a crystal ball but from simply recognizing the future implications of a rainfall that has already occurred.” (UWA)
(Image: Satellite image of the flooding of the Ganges: NASA.)
On the face of it, this has similarities with Peter Drucker’s notion, first outlined in the 1960s, of “looking for the future that has already happened” (1989/1964, Managing for Results, Heinemann). This might, for example, include responding to demographic or economic changes. The example Drucker used in the 1960s was the growth of America’s black middle class.
The future that has already happened is as far as Peter Schwartz gets in his discussion of the idea of the predetermined in Inevitable Surprises (2003, The Free Press) where the most credible discussion is of demographics.
But reading Wack’s account of the Ganges, it has the air of a story told to help people understand a more complex idea. As applied in practice, Wack’s version runs far deeper. By deep analysis of the system, he argued, it is possible both to identify predetermined elements and also reduce and even eliminate uncertainties. The purpose of the first-generation scenarios discussed above is,
“to give insight into the system, to identify the predetermined elements, and to perceive connections among various forces and events driving the system. As the system’s interrelatedness became clear, we realized that what may appear in some cases to be uncertain might actually be predetermined — that many outcomes were simply not possible.” (UWA)
This is a world away from the conventional discourse that says that the purpose of scenarios, and of futures work by extension, is to help us to manage uncertainty. The method is worth noting. In terms of process, Wack and the Shell scenarios team eliminated uncertainties by looking at both structural outcomes and also, in effect, actor responses. The article lists, among others: Oil demand; the implications of high oil prices for each nation’s balance of payments and inflation; the possible reactions to higher oil prices; interfuel competition; construction of refinery, marine, and market facilities.
This approach seems to me to speak to a gap in much futures work. Only in La prospective, as I understand it, is actor analysis a formal part of the method (Godet, 2001, Creating Futures, Economica) (pdf). The idea that understanding actor responses can eliminate uncertainties perhaps also connects to Bazerman and Watkins’ idea of “predictable surprises” (2004, Harvard Business Review Press). In their explanation, the difference between the predictable and the unpredictable surprise is largely down to the limits on actor behaviour.
One illustration of this idea can be seen by the 2015 refugee crisis in Europe. The crisis itself was a predetermined event, given the build up refugees in the Middle East and north Africa. But so was the response. The political climate across Europe made it impossible for political leaders to act ahead of the event in a way which might help to defuse the crisis.
The third point is about decision-making, and the role of scenarios in changing the “microcosm” of managers and corporations to improve strategy-making. For strategies are always the product of a worldview. The point is to align the microcosm — the mental model — with the “macrocosm” of the world beyond. When a decision is good, it is because microcosm and macrocosm are aligned. However, in times of rapid change and increased complexity they can drift apart.
“During stable times, the mental model of a successful decision maker and unfolding reality match. Some adjustment and fine tuning will do. Decision scenarios have little or no leverage. In times of rapid change and increased complexity, however, the manager’s mental model becomes a dangerously mixed bag: rich detail and understanding can coexist with dubious assumptions, selective inattention to alternative ways of interpreting evidence, and illusory projections. In these times, the scenario approach has leverage and can make a difference.” (STR)
Hence the importance of “reperceiving” in Pierre Wack’s view of the world, and also the importance of being able to focus on a small number of critical elements. While the job of reconstructing their mental model is the task of the managers themselves, it is the job of the scenario-builder to do whatever they can to help. They need to be able to connect the new realities of the outside world, the “unfolding business environment” it represents, and the managers’ microcosm. As Wack notes, “Good scenarios supply this vital ‘bridge’; they must encompass both managers’ concerns and external reality. Otherwise, no one will bother to cross the bridge.” (UWA)
For Wack, this is the critical task, and one of the reasons for the emphasis in the articles on “decision scenarios.”
“Unless we influenced the mental image, the picture of reality held by critical decision makers, our scenarios would be like water on a stone. This was a different and much more demanding task than producing a relevant scenario package.” (UWA)
The image at the top of the post is from the collection of the Pierre Wack Memorial Library at Said Business School in Oxford. It is used with thanks.
Originally published at thenextwavefutures.wordpress.com on December 9, 2017.