Academic Reflection Egon Gleisberg

Academic Reflection

So far no more than good words on scenario planning. I also tend to see only the positive sides of the story, but what are the less positive sides of this approach?

Paul J.H. Schoemaker wrote an article [2] in Sloan Management Review in the winter of 1995: Scenario Planning: A tool for Strategic Thinking. Besides all positive sides of scenario thinking, he also says something about the less positive sides of this approach. Paul Schoemaker examined a couple of questions to a MBA class at the University of Chicago. He asked them to give their best estimates and confidence ranges before and after scenario construction. What he concluded is that most typical managers at start were overconfident and the range of confidence was much too narrow. Therefore if scenario planning works, it should at least widen confidence ranges. After constructing the scenario’s confidence ranges widened about 50 percent.

Another topic in his experiment was the question if an executive team can generate and distribute scenario’s to managers and get the same effect as it would if the managers participated in creating the scenario’s himself. His conclusion was that not everyone needs to be involved with the creation of scenario’s, but the biggest advantage of personal involvement is a higher degree of intellectual ownership. That means that Schoemaker says that senior executives need to be closely involved in the process.

Schoemaker also brings forward the way of thinking with people that are involved with scenario development. “When we are making predictions, we tend to look for confirming evidence and discount disconfirming evidence, and this bias can creep into the scenario development” [2]. His experiment concludes that his students identified two positive trends against 1,48 negative trends for every subject in their field. Also the inclination to weight the positive outcomes higher than the negative outcomes are subject of discussion.

Michael Y. Yoshino and Carin-Isabel Knoop [3] bring the amount of time spent to scenario planning to question. In their short article in Harvard Management Update they mention the difficulty for managers to spent time, because most are in first place struggling to find out what business they are in 3 months from now. So, why should they spent time to think about their future in maybe 10 or 15 years. Luckily, they conclude that managers should make time, because it’s a fast-moving society and missing a big trend or being attacked by a huge threat is unthinkable.

References:
[1] www.scenariothinking.org
[2] Paul. J.H. Schoemaker, 1995, Scenario Planning: A Tool for Strategic Thinking, Sloan Management Review
[3] Michael Y. Yoshino, Carin-Isabel Knoop, 2006, Scenario Planning Reconsidered, Harvard management update