Soft is hard in scenario planning

Scenario planning requires structured emotion management

Continued global and local uncertainties have forced most companies to adopt scenario tools for strategy formulation. When we do not know where the world is going, trying to be prepared for more contingencies is a natural reaction.

However, while many companies now recognize the need to develop new scenarios, they have faced challenges in forming them effectively. This is partly because the scenario-based process differs from traditional planning in several important respects.

Emotional challenges of effective scenario-based strategy making

One of the most challenging aspects of scenario planning is the risk of emotions distorting your conclusions. External uncertainty and threats often create a highly stressful environment. When managers are under stress, they may become less patient increasing pressure on others and making snappy comments. This behavior feeds the cycle of anxiety and stress that undermines high-quality thinking by their colleagues. Feeling this pressure, strategists are bound to react to both fear of what is coming tomorrow —and what the chairman may say today.

Furthermore, the generation of multiple options that good scenario planning demands may require people to bring up unpleasant options, radical deviations from the company’s traditions, and even taboo topics. However, executives often react negatively to some potential alternatives and, thus, suppress the process in such a way that it becomes difficult to generate value. For example, executives may feel bad about ideas that might cannibalize their traditional business, and refuse to discuss them seriously.

Three principles of emotion management in scenario-based strategy making

The intensity of emotional distortion can be reduced, however, by following three principles:

 1. Create psychological safety. The scenario-based process fails unless people feel safe enough to bring up difficult topics and unpleasant options. As a leader, you need to structure the process in a way that creates a feeling of safety and—it should go without saying—communicate in non-threatening ways.

In our projects, we set clear guidance for the emotional tone of different phases of the strategy-making process. The first few weeks are “yes, and” (as opposed to “no, but-“)-weeks: we focus on understanding the external situation and generating potential options for the client firm without judging their value. In this way, all participants in the project feel that they can voice their concerns and express their ideas. We amplify this feeling by communicating explicitly that the time for judgment and critique comes later—for now, we embrace all ideas and perspectives.

 2. Ensure balanced evaluation of options. While negative emotions are the main challenge in the early phases of a strategy making process, it is often positive emotions that become more harmful in later stages. Like all of us, executives and managers tend to fall in love with their own ideas and evaluate them in a biased way. If you want a good strategy, you need to crush that love.

In our scenario planning projects, we ensure a balanced evaluation of the strategic options by agreeing on the evaluation criteria before the options are finalized and by using role-plays that force people to challenge their own ideas. The former approach ensures that people commit to specific criteria and cannot therefore dismiss analyses as irrelevant if they aren’t favorable to their pet idea. The latter approach, which we often perform as a debate, creates a context that forces people to criticize their favorite idea. When they do this, they start seeing the emotional biases in their own thinking. This makes it easier to abandon their early love and look more objectively at their option’s chances.

 3. Take calendar time. Emotions change slower than thoughts. We have often witnessed situations where a core project team goes through extensive analyses and an emotional roller-coaster before arriving at strategic recommendation that is logical and solid. But then, when they present the recommendation to the board, the board follows the logic and evidence, yet still fails to believe in the recommendation.

This happens because the board has not been part of the project team’s learning process. They remain emotionally attached to their old thinking and have not had enough time to process the new situation and evidence. To prevent such awkward moments, we require that the key decision makers be kept in the loop during strategy making. From the early stages of the process we update them on the external trends and potential options we are considering. We share the pros and cons of different alternatives with them, as well as the key unanswered questions and potential updates on the answers. In this way, the board can “travel” on the emotional journey with us and be ready to make the rational choice when the time comes.

Soft is hard

The key lesson we have learned by performing and studying dozens of scenario-based strategy making processes is that the soft side often determines the hard results. If you want to get the facts right and ensure that people are committed to the choice, you need to make sure that they are not blinded by fear, tradition, nostalgia, or the other emotional tendencies that often lead smart people to make bad choices.

Timo Vuori, Executive Advisor
+358 50 441 9072
firstname.lastname@august.fi

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