Posted by Ray Poynter, 28 April 2020
I have heard several brand managers saying that they plan to avoid doing research at the moment, because now (i.e. during the pandemic crisis) will not be predictive of how things will be when they ‘get back to normal’. I think this approach is flawed. These people are very good at their job, but they are assuming that it is likely we will ‘get back to normal’. And, they are assuming that it will happen reasonably soon. Those two assumptions constitute a large and unnecessary gamble. We do not know how long it will take before we are in a new stable state, and we do not know if that new stable state will be similar to the pre-pandemic crisis market.
When you can’t predict the future, you need to use Scenario Thinking to determine what factors you need to consider and what research you need to support that process.
What is Scenario Thinking?
Scenario Thinking looks at the future and seeks to identify the different sorts of futures that might happen. Once these sorts of futures have been identified, an organisation can consider the implications of each Scenario and how to recognise which Scenario is happening.
What do I mean by ‘sorts of futures’? Let’s imagine you are organising a summer party, two months from now. The party will be at your house and let’s assume you have a large garden. One Scenario is that it does not rain, another Scenario is that it does rain. Neither Scenario is a prediction of the weather. Neither Scenario is narrow description of what the weather will be like. The rain Scenario could range from intermittent light rain to a real downpour. The no rain Scenario might vary from cloudy to very sunny. But these two Scenarios provide good insights into what sorts of things you should plan for. Will you be eating inside or outside, along with issues such as what sort of activities will you provide? As you get closer to the date of your party, you can monitor the weather forecasts to determine which Scenario is most likely to happen, and make that your plan, but you still might keep a contingency in mind.
The three key steps in Scenario Thinking are:
- Identify the scenarios
- Consider how your current plans and potential plans interact with those scenarios.
- Create scouting processes to give insight into which of the Scenarios is materialising.
What is a Scenario?
A Scenario is a description of a future that is different to other Scenarios, which is detailed enough to be useful, but is not so precise as to render it a prediction. A prediction is something where the value relies on its accuracy, as opposed to its power to describe a range of consequences.
If we look at the image below, we see a red sphere about to roll down a mountain. We can’t tell which way it will roll, but we can be relatively sure it won’t go up the mountain, it won’t go through the trees and rocks, it will probably follow one of the three tracks down the mountain, but we can’t accurately predict which track. The tracks are the Scenarios.
A Scenario about the pandemic crisis could be as broad as: ‘It will be under control in the next few (4 to 8 perhaps?) months. Under control in the sense that most aspects of normal life are possible, and few people are dying.’ A prediction would try to say when that would happen, what the transmission rate was, and how many people were dying or developing symptoms at that point.
Applying Scenario Thinking to the Pandemic Crisis
In terms of the current pandemic crisis, at a global level, there are two key factors at play:
- The Covid-19 Pandemic.
Will it be under control soon, or will it NOT be under control soon? We could perhaps take anything less than eight months (i.e. in 2020) as soon, and anything beyond this year as NOT soon.
- The global recession.
Will the recovery from the recession be soon (starting in 2020), or NOT soon, starting next year or later?
From these two factors we use a flip-flop approach to create four scenarios for consideration.
- The virus is controlled in 2020 AND the recovery starts in 2020.
- The virus is controlled in 2020 AND the recovery does NOT start in 2020.
- The virus is NOT controlled in 2020 AND the recovery starts in 2020*
- The virus is NOT controlled in 2020 AND the recovery does NOT start in 2020.
*I have some difficulty in believing that Scenario C, is a plausible Scenario. It would mean that the lockdowns were ended, death rates would be much higher, but the economy is free to recover. However, there are right-of-centre advocates for this approach, who tend to say the cure for the pandemic is worse than the pandemic. So, it is best to leave it in.
Using the Four Scenarios
Each organisation needs to look at the Scenarios and assess:
- Broadly, how likely are they to happen?
They can be categorised using a five-point scale Very Likely, through to Very Unlikely. Or, (my preference) give each of the Scenarios a band of probabilities. For example, I feel that Scenario B has a probability of something like 40% to 80%, but I think Scenario C has a probability of something like 0% to 5%.
- Characterise the scenarios.
What are their key characteristics? For example, Scenario A might be the ‘Back to Normal’ scenario. By early 2021 the economy is heading upwards, people are able to mix, most companies are allowed to operate. There might be some short or medium-term changes (e.g. people might not want to go on a cruise) – but mostly the world is like is was in 2019. This is often called creating stories for the Scenarios.
- Review the scenarios in terms of your markets.
If you only work in one country, how does the global picture apply? Will your products or services be quicker or slower to change than others?
- Create business plans/strategies for each Scenario.
The Role of Insights with Scenario Thinking
There are two elements where insights are crucial when using Scenario Thinking. The first is to help identify what is happening and how fast it is happening. The second is to provide detail information about the Scenario that becomes reality, the new normal.
Identifying what is Happening
Governments and economists only declare a recession as having started some months after it has started. Similarly, there is a big lag between the end of the recession and it being officially declared over. As an organisation, you need to know if your users or customers are going to be able to spend more money next month than last month, more next quarter than last quarter, and more next year than last year. You are less interested in what the average person is spending on the average product or service. Your insights and research should (in conjunction with other data) help you understand the direction and speed of travel of the red sphere down the mountain.
Detailing the Scenario that Materialises
Remember, each Scenario is a broad category, it is not a prediction. When it is clear that one of the Scenarios is becoming the new reality, you need to understand it more deeply. For example, if it turns out we are in Scenario 2 (The virus is controlled, but we are in a longer recession), then you need to know who is affected by the recession? What sorts of things are still going to be bought? And, did the Covid-19 lockdowns cause any differences that relate specifically to your market.
The Danger of Waiting until Things get back to Normal
At the start of the post I mentioned that several brands have been saying they wanted to stop their research ‘until things get back to normal’. The problem with that approach is that you are gambling the future of the company on the belief that things will ‘get back to normal’ and that they will ‘get back to normal’ quickly enough for you to cope without insights. If you look at the four scenarios above and if you feel that Scenario A is more than 90% likely, then you might be OK to pause lots of your research. However, if you think that one or more of the other scenarios might happen, then you need to be prepared. If you are not doing the right research now you won’t understand how to operate in the short term, you won’t know when the short-term is ending, and you won’t know how the new normal is being shaped.
Want to find out more?
My favourite book on this topic is ‘Art of the Long View: Planning for the Future in an Uncertain World’ by Peter Schwartz. It was published in 1997, but it remains as relevant today as it did then.
If you want to see a discussion between a scenario thinker and a forecaster, then this ten–minute video will be what you are looking for. Stratfor Editor-in-Chief David Judson discusses the similarities and differences between geopolitical forecasting and scenario planning George Friedman and Jay Ogilvy.
And for a complete starter, here is a ‘Strategy 101 – Scenario Planning’, a ten-minute video by Christian Stadler.