GALLUS BOOK CLUB - SIXTH SENSE - THE BEST BITS
OUR TAKE ON ‘SIXTH SENSE - ACCELERATING ORGANISATIONAL LEARNING WITH SCENARIOS’! BY HEIJDEN ET AL EVERY MONTH THE GALLUS BOOK CLUB EXPLORES A TOPICAL, RELEVANT BOOK THAT, ON FACE VALUE, COULD INFORM THINKING, SPARK SOME DEBATE AND GENERATE IDEAS AMONGST OUR MEMBERS. In a globally connected working environment, facing uncertainty, ambiguity, complexity and change is something that all leaders and organisations can relate to. Many of our GALLUS BOOK CLUB members are tasked with identifying and developing future leaders, facilitating strategic conversations and/or leading sizeable functions or business units themselves. Scenarios is a well-tested strategic tool which has proved its worth to many well-known, successful organisations. ‘The Sixth Sense’ is our second read this year. At first glance, you could be forgiven for thinking that high levels of concentration and focus will be required to navigate its ideas. However, its order of content is well thought through, its narrative flows well from one subject to the next, and it delivers a highly pragmatic yet evidence based map of the ‘scenarios planning territory’. Littered with case studies throughout, it shines a light on the benefits of scenario planning and how best to facilitate a scenario planning exercise to generate value and ‘process gain’ (the improvement to thinking and planning processes that intrinsically results from such an exercise). Here we present THE BEST BITS from our perspective…..
THE REASON WHY... Heijden et al create a compelling argument for the use of scenarios throughout the book. They highlight the demands of operating in an ever-changing and largely unpredictable environment, and the resulting need to overturn strategic inertia and ‘Business as usual’ thinking. They suggest that viewing uncertainty as the basis for future success and developing the thinking processes and capabilities required to adapt fast makes for better strategic business decisions.
‘ADAPTIVE ORGANISATIONAL LEARNING IS THE ULTIMATE COMPETITIVE ADVANTAGE’!
The book refers to the ‘Sharpbenders’ research; a study of why organisations fail. The research focused on organisations who had performed poorly and then had demonstrated a sharp upturn in results. According to the researchers, a sharp upturn signalled an understanding of what had caused the performance problem (in order to correct it) and therefore would provide insight into why organisations typically fail. The five categories of causes of decline identified were: 1. An adverse development in market demand or increased competition 2. A high cost structure 3. Poor financial controls 4. Failure of large projects 5. Acquisition problems Most business failures are not down to a bad business idea but are largely due to ‘hygiene factors’ such as poor controls, immature management style (perhaps inflexible, over-cautious, authoritarian, ineffective delegation and/or over-centralisation), failure to create and communicate purpose, or no systemic approach to sensing and responding to change evident.
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GALLUS CONSULTING Strategic reasons for failure are typically: •
Lack of recognisable strategies in areas such as functional policies, corporate strategies, environmental monitoring.
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Poor execution or timing of responses to developments such as declining market demand or increasing competition
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Inappropriate risk taking
It is therefore imperative that organisations notice and recognise new products, technology, demographic changes, changes in income distribution, and behavioural trends that may affect them. The ‘sharpbenders’ research suggests that the main success factors for a turnaround are: •
An emphasis on customers and their dynamic value systems
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A strong marketing focus
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A clear product focus – deliberate concentration on what an organisation can do best
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Regular reviews of strategy
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A forward looking approach and the resulting investment in R&D (research and development), training, strategic conversa tions.
Critically, successful organisations explore the environment within which they operate (and some way beyond) to understand customer needs and value systems and how they can position themselves to best meet them and deliver the most effective and sustainable customer experience. CREATING VALUE, therefore is the difference between success and failure!
SCENARIO PLANNING TO ADD VALUE: The book suggests (and we at GALLUS most definitely agree) that Scenario Planning delivers a wide range of benefits: ADAPTIVE ORGANISATIONAL LEARNING
UNDERSTANDING REALITY
A process through which an organisation adapts its behaviour to fit with the environment and better take advantage of it. Efficiency, effectiveness and innovation improve to drive higher performance in uncertain and dynamic market conditions. Faster learning becomes a differentiator in and of itself.
Creating a greater understanding and recognition of ‘below potential performance’ at an organisational level.
HANDLING COMPLEXITY Ambiguity, uncertainty, change and complexity are constants for leaders to navigate. Handling complexity requires experimentation; scenario planning provides a relatively ‘safe’ sandpit in which to play and develop relevant capabilities. PROCESS GAIN More important than the scenario itself; the scenario process leads to far higher quality ‘strategic conversation’ greater awareness of potential opportunities and threats and habitual scenario based ways of thinking and decision making in all participants. It unlocks thinking and generates game-changing solutions for potential futures. REHEARSING THE FUTURE Whilst scenarios cannot promise to predict the future (in fact this is not the objective), the process can develop an organisation’s ability to spot potentially relevant ‘dots on the horizon and to ‘rehearse’ potential futures thereby creating ‘memories of the future’ that are stored in the collective memory of the organisation, have already been well considered and can act as a reference point should certain scenarios transpire.
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INTEGRATION OF PERCEPTION, THINKING & ACTION When crises arise, thinking can become disjointed and vital clues can be missed or ignored while decision makers focus internally to think through their response and plan their next steps. Scenario planning is a process through which perceptions, thinking and action are all considered, challenged and discussed in each other’s contexts. EXAMINING CULTURAL RESPONSES Scenario planning forces the group to examine cultural diversity and to explore different potential cultural responses to a given situation. Underpinning values and beliefs, globalisation and localisation issues, along with conflicting cultures between professional groups can all be exposed and assumptions can be objectively tested. It enables: • • • • •
Understanding of cultures across boundaries Examines language and meaning and therefore overcomes ambiguity Increases diversity in a world of similarity Shines a light on your organisation’s and leaders’ cultural programming Develops multiple perspectives and, with practice, the ability to consider ‘multiple perspectives’ within business as usual decision making
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GALLUS BOOK CLUB - SIXTH SENSE - THE BEST BITS
AVOIDING ‘GROUP THINK’
AVOIDING BIAS
Scenario planning by its very nature and, typically, delivery creates a forum where diverse opinions, beliefs and approaches can be examined and discussed.
The process encourages new ideas and criticisms and ensures that the group listens for potentially important minority views. The management group are prevented from forming an early consensus.
“LUCK FAVOURS THE PREPARED MIND” Louis Pasteur
DRIVERS FOR STRATEGIC INERTIA AND ‘BAU’ THINKING: So what drives senior managers to think in a linear way? Driver
Which means...
Managerial Recipes
These are routine success formulas that have been developed over time and have become habitual and part of the ‘thinking’ of an organisation. Helpful in many respects they can create a dangerous ‘closed loop’ and miss critical information or challenges. At Gallus we often talk about the importance of facilitating regular strategic loops (circling back on strategy and related decisions to ensure that they are still fit for purpose). Scenario planning is a great way to support such ‘strategic loop’ processes and in fact is such a process.
Framing Flaws
A lack of diversity in the thinking group or approach can lead to subtle and hidden biases informing thinking and decision patterns. These ‘framing flaws’ may cause a group to consider and solve the wrong problem. History is littered with the stories of organisational failures caused by marketing myopia across the ages. ‘Sixth Sense’ provides a number of examples where organisations concentrated on solving the problem they thought they had rather than looking up and out to solve the problem their customers considered to be important!
Confirmation Bias
Typically people look to find evidence in support of the current, favoured strategy. Put simply ‘you get what you expect’. However, whilst this may be true when researching a problem, real world results can produce quite different and unexpected outcomes. Scenario planning drives leaders to consider how their expectations are driving customer behaviour (and perhaps driving them elsewhere too).
Hindsight Bias
Humans have a tendency to look back and see their prior predictions as correct and, to make matters worse, wrongly attribute high levels of confidence at the time of their making. This creates overconfidence in prediction and forecasting capabilities. A tendency to remember when predictions were right as opposed to when they were wrong (unless the consequences were significant) can therefore start to lessen the ability to rationally observe predictive success and drive overconfidence in future predictions. Scenario planning can help to correct this.
Decision Avoidance
It is common that when decisions start to go wrong or strategy begins to fail, the decision maker commits further resources in an attempt to get the situation back on-track. This escalation of commitment is largely irrational and emotionally driven and a scenarios planning process can drive a more objective evaluation of strategy and related decisions. Essentially decisions are put off, reinforced or responsibility for a failure is shifted; whereas the better approach would be to take stock and alter direction.
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GALLUS CONSULTING AND WHY DO ORGANISATIONS GET ‘LOCKED IN’? Driver
Which means...
Lack of Honesty
People have reservations – they just don’t get voiced! People are reticent to share their thoughts and feelings….
Group-think
Group relations become more important than sound decision making processes. People care more about belonging and adjust their beliefs, opinions and behaviours to fit the status quo…
Mind-guarding
Uncertainties exsist – but they are removed when communicating with other groups within the organisation. A real positive for alignment towards an agreed strategic direction but a real problem for strategic direction setting…a forum needs to be created for open and honest discussion which can then be aligned to!
Fragmentation
Suppressed dissent prevails…Opinions are present in the background and are evident in informal exchanges rather than formal meetings…
Identity Issues
Limitations are imposed by identity or history…The ‘for us / not for us’ filter….
Lock-in
Locked in thinking results where the organisational system doesn’t consider external or contradictory feedback sources. ‘Lock in’ is a feature of systems that feedback on themselves…
There’s clearly a balance to be struck between open debate and anarchy - alignment is important after all. scenario planning creates a formal environment where diverse opinions and ideas can be heard and considered and allows a balance to be struck between change and consistency.
“CHANGE REQUIRES CONSISTENCY”
In essence, typical business strategic planning processes only add to the risks and minimise the ability of an organisation to spot ‘DOTS ON THE HORIZON’ and formulate potential responses accordingly. In times of high uncertainty, cognitive and behavioural limits are even more dangerous. All paths lead to STRATEGIC INERTIA and UNCONFLICTED ADHERANCE unless scenario planning is deployed.
SCENARIO PLAN HERE
High perceived level of threat
Increased stress
Coping behaviour
Level of perceived environmental threat
• Bolstering • Procrastination • Buck passing • Escalation
Low perceived level of threat • Confirmation bias • Over-confidence
Strategic inertia • Unconflicted adherence
Low stress level
The relationship between the business environment and the strategic process Adapted from ‘The Sixth Sense – Accelerating Organisational Learning with Scenarios’; Heijden et al; Pg 62; Fig 2.1
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GALLUS BOOK CLUB - SIXTH SENSE - THE BEST BITS SCENARIO PLANNING ENABLES THE ORGANISATION TO: PEN PICTURES OF A WIDE RANGE OF PLAUSIBLE FUTURES: Scenario Planning does not predict the future.... FOCUS ON KEY UNCERTAINTIES AND CERTAINTIES ABOUT THE FUTURE: Tests, constructs and identifies possible shifting environments FOCUS ON HOW THE FUTURE MAY EVOLVE: critical uncertainties and how they may resolve themselves; important pre-determined trends (for example demographics); behaviour of actors who have a stake in the future (and their tendency to preserve or enhance their own interests)... DRIVE DISCUSSIONS, DECISIONS AND ACTIONS: early recognition of opportunities; early contingency action....
“CHAOS THEORY SHOWS THAT IT IS FUNDAMENTALLY IMPOSSIBLE TO PREDICT IN A COMPLEX SYSTEM”
Heijdan et al propose five key interrelated activities and conditions that contribute to the successful management of change:
THE SCENARIO
LEADERSHIP
PROJECT MANAGEMENT CAPABILITY MOTIVATION AND EMPOWERMENT
THE SCENARIO
Environmental assessment of the need for change - the reason WHY.... Leading the change - being an effective and engaging sponsor or champion and demonstrating BELIEF
Linking strategic and operational change - making it happen STRATEGY TO REALITY Linking the management and development of the total skill base of the organisation with he change process - ENABLING the organisation
Creating the management coherence on the change project - creating ALIGNMENT - No room for mixed signals
Model created from ideas within ‘The Sixth Sense - Accelerating Organisational Learning with Scenarios’; Heijden et al; 2002
IT ALL STARTS AND ENDS WITH THE SCENARIO! In summary it delivers.... •
Enhanced Perception
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Integration of corporate planning
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Greater thinking agility
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A structure to cope with complexity
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A communication tool
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A management tool
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GALLUS CONSULTING HOW TO DO IT... We’ve talked about the ‘why’ the ‘when’ and ‘what’ you will derive in the way of outcomes. The book then moves onto explore the ‘how’ and offers some sage advice about the important requirements of the process and how to ensure they are delivered effectively.
THE PROCESS MUST:
Surface and challenge managerial assumptions and mindsets in a constructive and creative way
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Recognise uncertainty and make it explicit
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Provide a way of making sense of an overabundance of information
=
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Facilitate the devlopment of new insights that would not result from conventional planning methods
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Ensure that this is all achieved in an organisation in which individuals align on coherent action
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Integrate thinking, planning and key future investments to exploit the scarcity landscape
A NECESSITY FOR GOOD PROCESS AND EXCELLENT FACILITATION
Model created from ideas within The Sixth Sense - Accelerating Organisational Learning with Scenarios’; Heijden et al; 2002
“A METHODOLOGICAL TOOL FOR POLICY PLANNING AND DECISION MAKING IN COMPLEX AND
UNCERTAIN ENVIRONMENTS”
Heijden et al describe a scenario planning process model in some depth and outline the critical stages and considerations when embarking upon a scenario planning project. The high level process is captured in essence below…..
Structuring the scenario process
Exploring the scenario context
Identify gaps in organisational knowledge
Conduct interviews with the team members
Create a facilitation team Decide on the duration of the scenario project
Collate and analyse the results of the interview process Invite any ‘remarkable people’; those who can help the team challenge conventional approaches & attitudes
Developing the scenarios
Identify the driving forces through structured thinking, test the outcomes and handle complexity Impact and uncertainty
Stakeholder Analysis
Test your understanding of the business problem
Systems Check
Using an influence diagram
Test the internal logic of your storylines
Impacting organisational thinking and acting Stimulate the organisational ‘jolt’ Identify the early indicators Action plans from the future to the present
Scope the scenarios Flesh out the storylines
Model created from ideas within ‘The Sixth Sense’ Accelerating Organisational Learning with Scenarios; Heijdan et al; 2002.
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GALLUS BOOK CLUB - SIXTH SENSE - THE BEST BITS
QUESTIONS TO ASK OF YOUR ORGANISATION... Heijden et al ask…. 1. 2. 3.
To what extent does your strategic thinking rely on routines or previously successful formulas? Are you able to ‘think outside the box’ Are you keeping in touch with market developments and the needs and expectations of your customers? Are you prepared to challenge inappropriate confidence in existing orthodoxy? Are you prepared to accept that a strategy is failing, or are escalation, procrastination or blustering more characteristic of your reactions to a strategy that is beginning to show signs of failure?
Be brutally honest – it might just change the course of your organisation’s future and put it on the route for success! Can your organisation afford not to use scenario planning in your strategic planning cycle and leadership development activities?
Gallus build sustainable, high performance environments that everybody can believe in. With particular expertise in leadership capability and alignment, organisation design, business transformation and enterprise risk management, Gallus challenge assumptions, cultivate belief and drive positive change by making performance excellence systemic. An established business with Headquarters in Northampton, UK and offices in London, Manchester and Aberdeen, Gallus work with ambitious organisations across the world from a wide range of sectors. Find us at www.gallusconsulting.com or call +44(0)20 3751 6345.
JOIN THE GALLUS BOOK CLUB ON LINKED IN TO REVIEW AND DISCUSS RELEVANT, TOPICAL BUSINESS BOOKS WITH LIKE-MINDED INDIVIDUALS. EACH MONTH WE WILL CHOOSE (WITH MEMBERS INPUT) A BOOK TO REVIEW AND ONE LUCKY MEMBER OF THE GROUP WILL RECEIVE A COPY OF THE CHOSEN BOOK!
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