Scenario Planning - Delivered at the AAM Conference
By Sally Osberg 05.09.01

Why strategic planning efforts fail…

• Don't embrace uncertainty, simply project past into the future (Business as usual)
• Plan away uncertainty: pretends future can be predicted
• Isolation-no input from key constituencies, staff, etc.
• Reactive-Motorola's engineering staff likes to point out that a survey 100 years ago asking buggy owners what improvements they'd like to see would have generated responses like "put more fringe on the top" or "add another horse," but not "invent the Model-T.

Perceiving the future…

• Important to acknowledge limitations-what Senge and Argyris have called mental models (deeply held beliefs, assumptions, blind spots). "Given the state of modern shipbuilding, I cannot imagine any conditions that would cause a ship to founder" 1906. Capt. E.J. Smith, who was to become the captain of the Titanic six years later. So confident-first lifeboats less than 40% full because passengers felt safer on the big ship even as it started to go down.
• Recognize variability of the future, inevitable limitation of any technique that presumes a single possibility: ie., that de-regulation would be beneficial to both energy consumers and suppliers; that eyeballs would equal customers would translate into profits for eCommerce companies; that computer technology would result in a paperless society…And lest you think such predictions are a failure of intelligence, consider these statements:
• In 1943, Thomas Watson, then chairman of IBM , forecast a world market for about 5 computers;
• In 1970, Kenneth Olson, founder of Digital Equipment Corporation, said no one needed to have a home computer
• In 1981, Bill Gates stated that 640K would be enough memory for anyone.

Scenario planning…

Art of imagining possibilities that others can't, won't don't. ART and Science. In the Art of the Long View, author Peter Schwartz draws upon an ancient Egypt to describe scenario planning. Most important annual event in Egypt of those times was the flooding of the Nile.

The Nile is fed by three upstream tributaries, and the level of flooding determined by which of these tributaries received the most rainfall-. Of course, flooding was the key to a successful agricultural cycle, timely planting, optimal conditions for the river basin would produce a healthy yield, and the Pharoahs-just like contemporary CEOs, Museum directors, Governors, Presidents, were in better shape if they knew how best to prepare for an uncertain future.

Here's what told the story. If the Nile was dominated by the clear waters of the White Nile, the flood would be mild and late, resulting in poor crops; if the river was dark from the flow of the Blue Nile, the flooding would yield a bountiful harvest; and if the green-brown waters of the Atbara were in major evidence, flooding would be catastrophic, and a disaster for the agricultural process.

3 scenarios, each with driving forces. To prepare the Pharoahs for the future, each spring the temple priests gathered upstream, check the color of the water, and report back on the flooding to follow. The prognosticator of the future was read in the color of the water in the Sudan-with implications for Egypt's government and economy: crop yields, grain stores, taxation, public works projects (those pyramids!), and war. Scenarios for each of the three possibilities, and not just a single "party line," must have had something to do with the thousands of years of Egyptian dynastic rule.

The classic of contemporary scenario planning is the story of Royal Dutch Shell, whose head of corporate planning Pierre Wack questioned the value of traditional planning exercises and became concerned over widespread and deeply held assumptions within Shell and throughout the world about the price of oil-that it would remain low and that supplies would continue to be plentiful.

Out of this general frustration, Wack developed the process now described as scenario planning. Story-telling. Wack's first story, which he told to Shell management-about a terrorist event which severed a pipeline, decreasing supply. Market forces then drove prices up. Oil producing states figured out they could produce less oil and make more money. By making this assumption specific, Shell developed an alternative strategies suited to the possibility that prices would escalate and supply decrease.. Six months later, the OPEC price shocks of 1973 occurred, leading to gas rationing and inflation-and only Royal Dutch Shell was prepared. Shell was again prepared when the Soviet Union collapsed in the 1990's.

It has long been my contention that cultural, philanthropic, and social institutions like Museums and foundations have much in common with organizations like utilities and the timber industry, all of which have by their very nature to plan for the long term and act in the short-.

Because they are institutions organized and built to last, Museums are well-suited to the discipline of scenario planning.