Scenario Planning and Strategic Thinking: What does the Pandemic tell us?

The COVID-19 pandemic has brought devastation, disruption and death into every community and every sector of the economy. While governments were prepared for some of the impacts, many aspects of this disaster have been unprecedented. In the wake of this experience, businesses and organizations looking at their future are wondering if they need to include future pandemics and similar disruptions in their strategic planning systems.

What are we dealing with?

Planners have known about pandemics for years - from the bubonic plague, to the Spanish flu, and the recent experience with SARS and MERS. But pandemics are not all alike; factors such as the transmission rate or mortality rate make each unique. The Spanish flu tended to kill otherwise healthy young adults (the older generations having gained immunity to a related strain decades before). SARS had a much higher mortality rate than other incidents, but the extreme nature of the symptoms made it easier to identify sufferers, who didn’t tend to infect many others before they were either isolated or succumbed. The nature of public health systems (which varies by location) and contemporary medical knowledge also affect the spread of a virus.

Other types of context are also significant in business planning. For North Americans, the COVID-19 pandemic is taking place in a setting where Zoom is widely available, but the manufacture of PPE has moved offshore. Factors like these influence the ability of organizations to make decisions, to carry out operations, to sell their products or services, and to pay their employees and suppliers.

So how do organizations prepare for the next global crisis? How do they decide what to stockpile, what processes to strengthen, what technologies to develop, what products to emphasize, or what competencies to invest in?

Companies can choose to respond in two different ways. If they want to focus on preparing for specific events and threats, they can invest in scenario planning. On the other hand, they can focus on creating a resilient and flexible organization, which can respond effectively to any challenge, while keeping the long-term mission and goals in mind.

Scenario planning and forecasting

The application of scenario planning to business strategy started with pioneering work done at Royal Dutch Shell in the 1970s, but it ultimately originates in the ancient human instinct to observe and forecast from patterns. Historians such as Fernand Braudel and Jared Diamond have shown how the foundational structures of our times (including economic and political power) are based on centuries, or even eons, of environmental and trade patterns. These patterns allowed participants to make reliable forecasts, and led to the rise of lending, insurance, and the whole capitalist system.

But even as the mechanisms for prediction have become more sophisticated, the confidence in the predictability of the future has waned. Change is being driven by geometric improvements in technology. Whether it’s the steam engine or artificial intelligence, technology has opened up unexpected vistas, and set off changes that echo for years. 

Despite the accelerating speed of these changes, they are still amenable to forecasting. Scenario planning adds another dimension by considering events that are not easily forecast, but where their effects are predictable, and in some cases, almost instantaneous. 

The list of potential crises with immediate widespread impacts can be broken into just four categories: war, revolution or civil unrest; pandemic diseases in humans, animals or crops; viral threats to computer networks; and disasters (both natural and caused by humans).

Complexity arises from the fact that each event will be unique, requiring a myriad of planning scenarios. Details that seem minor when forecasting (such as patterns of pandemic mortality) can result in outcomes which differ at the strategic level. In addition, there may be something in our future that we simply cannot imagine – this is the truly unthinkable, which Nassim Nicholas Taleb famously characterized as “black swans.”

In some organizations, scenario planning has been supplemented by “corporate foresight”. This new discipline searches for predictors of disruption and discontinuity. Essentially an improved approach to trend spotting, corporate foresight does not lend itself to predicting one-off events like pandemics, but  trends in other areas (such as travel) can help predict the impact of a sudden disaster.

Resiliency and Strategic Thinking

The experience of COVID-19 proves that scenario planning alone is not sufficient for readiness. True, it can help organizations program certain responses, set up certain frameworks, or highlight certain decisions that will need to be made in the event of a crisis. But deep resiliency requires something foundational – something that overturns the old forms of decision making, challenges organizational culture, and perhaps even turns the business model on its edge. “Strategic thinking” promises to address those needs.

Strategic thinking provides a way to approach decision making and inform action throughout the organization.  While originally just a synonym for games theory, the current version of strategic thinking combines systems thinking (or logic), creative thinking (both divergent and convergent) and critical thinking.  Like its cousin design thinking, it balances linear and non-linear thinking, but it also brings a focus on making decisions and taking actions. At its core, strategic thinking is goal-oriented and aligned to the long term, so decisions made under pressure still reflect the organization’s ultimate mission and survival.

Strategic thinking is not simply a personality trait that one is either born with or not; it can be learned. It can be used to deal with all levels of problems, from the small quandaries of everyday life, to profound prioritization of enterprise effort. When used across a range of situations, learning is reinforced and made routine (allowing it to be deployed quickly in a crisis). Training in strategic thinking allows users to identify resources, options, constraints and challenges, all while keeping the end in mind.

It is not enough that leaders employ strategic and critical thinking; they must champion it throughout their organization’s culture. Since every manager, supervisor and worker can be taught to think strategically, resilience can be developed at all levels of the organization. In a strategic thinking culture, every person or team will be prepared to make good decisions, and be empowered take action in the moment that drives towards the organization’s long-term goals.

What have we learned?

Strategic thinking, design thinking and structured innovation have allowed firms to respond to the current crisis in unexpected ways. Distilleries are making hand sanitizer by the barrel; small manufactures have switched from making toys or automobile parts and are turning out face shields or ventilators instead; big banks are facilitating brand new government financing programs and redesigning their offers to small businesses.

As change accelerates across the globe, the impact of sudden shocks will remain unpredictable. In some ways the world is becoming more vulnerable (worldwide travel, huge cities), but in others more resilient (remote work, immunology). Scenario planning, informed by foresight, can allow organizations to build out options in advance. But injecting strategic thinking into the company culture is the best way to guarantee an effective response when the crisis arrives.

With all the work that has gone into responding to the COVID pandemic, it would be a shame if we didn’t learn from it.

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Header image: Seattle Police during the influenza epidemic, December 1918. From National Archives at College Park, MD