Getting better at seeing ahead

BLC: One caution that you raise is the bias/irrationality that can be triggered by “the compelling nature of a good narrative.” How can boards challenge “the seductiveness of a particularly good narrative” that could undermine decision-making?

Scoblic: As soon as we tell ourselves a story about the future and what it's going to look like or what we want it to look like, we start seeing evidence of it emerging everywhere. Stories trigger a whole host of judgmental biases. What the research psychologists would say happens is that a story we tell ourselves about the future becomes a focal hypothesis. It's essentially an assumed-to-be-true belief about how the future is going to work out.

Better framing and organization of questions—into what Wharton Professor Philip Tetlock calls question clusters—can help the board better evaluate whether the future the company has in mind is materializing or not. Question clusters do this by forcing us to establish markers in advance of what would signal that a future is coming to pass, but also what would signal that it's not. Confirmation bias is a decision-making bias whereby we look for evidence that backs up our preexisting beliefs, and we tend to ignore evidence that doesn't. Question clusters focus us on disconfirmatory evidence. 

BLC: For management, what would you recommend as an exercise or leading practice to help ensure that daily operational demands don’t overwhelm their ability to plan or forecast?

Scoblic: If you think of the notion of mental models—the maps we have in our head about how reality works, the relationships between cause and effect, and so on—what scenario planning exercises are very good at is changing mental models and making them more malleable. You can hold a scenario planning exercise, and people will come away not only thinking differently about the future, in the sense that they think what is possible is different than the assumptions that they went in with, but also come out thinking differently in their day-to-day.

Scenario planning seems to affect people whereby they stop thinking that the long term and the short term are competing necessarily, and they are more complementary. Beliefs about the future influence our actions in the present. As people go about their daily work, they start thinking more about what their actions mean for the long term. It becomes like software running in the background. You're not walking round constantly thinking about the future, or about the longterm future and about future uncertainty, but when you stop to make a decision, especially a difficult-to-reverse decision that may have long-term consequences, it's easier to think about long-term implications.

For this type of thinking to permeate an organization, bring in a wider range of participants to scenario planning exercises. And hold them more frequently than once-a-year. Involve as much of your organization as you can, or at least the decision-making components of your organization, so that they stop thinking of the present and the future as competing.

BLC: What role do you see technology—data analytics/AI—playing in all of this?

Scoblic: There's great potential for using technology in combination with these techniques to aid in the discovery of weak signals of the future, of patterns that are occurring before human beings may notice them. Take the early outbreak of disease, for example. AI or just large swathes of data may enable identification of case trends sooner.

But I think there is danger in believing that the predictive capabilities of AI are all that we need, or that everything that we need is in the data. The feedstock for these things is data from the past. There's no way to account for the uncertainty of the future or the fact that maybe we haven't even conceived of all the things that may come to pass, and so there will never be a substitute for the imagination that goes into scenario planning, and the ability to account for a wide range of plausible futures.

There’s a lot of potential for hybrid human/AI interaction to work. But there's just a very strong temptation to say now that we have this technology, we're going to have a much clearer vision of the future. This kind of belief comes in waves, where suddenly new worlds of data or data analysis open up, and people think, “Okay, we've solved the riddle, we can now see the future.” And then, of course, surprise inevitably follows.

BLC: How can companies build robust strategies related to climate change?

Scoblic: Climate change poses situations of both risk, which we’re already beginning to see and model, and future uncertainty. We know that the planet is warming, and that climate scientists are able to model many ways in which that will manifest—sea-level rise, for example. The models aren’t perfect—no model is—but we can still probabilistically state what the impact of climate change will be on a given physical system. Admittedly, given the complexity involved, there will be surprises—it is hard to pin scientific probabilities on specific severe weather events. Still, firms can go a long way toward planning for the physical effects that climate change could have on their business. It is possible to get quite granular about how climate change will affect a business’s ability to create value.

The greater business challenge comes in assessing the impact that climate change will have on social, economic, and political systems. That is where uncertainty really enters in. It is very difficult to pin “objective” probabilities on those second- and third-order effects because we’ve never seen a change of this kind and of this magnitude before. We lack analogies to past experience. So, we are left with far more subjective estimates of possible effects, and we must face the fact that there may be impacts we have not even considered. There is not only uncertainty about the future, but ignorance.

Here, scenario planning can play a useful role. It can help reduce ignorance by providing a structured framework to aid imagination. We may think of potential developments that we hadn’t before and consider whether we need to formulate strategy to account for them. And scenario planning can help us map uncertainty, so that we can get a better grasp on the range of plausible futures. The effects of climate change on business are likely to be wide-ranging, and scenario planning helps put boundaries on those uncertainties. It is neither true nor useful to say that anything can happen, and scenario planning puts some guardrails on the road to potential futures. That, in turn, can enable businesses to formulate smarter strategy.

Scoblic, a Fellow at Harvard’s Kennedy School, was awarded the 2019 Wyss Award for Excellence in Doctoral Research from Harvard Business School. He is a cofounder and principal at Event Horizon Strategies.

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