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World Futures The Journal of New Paradigm Research

ISSN: 0260-4027 (Print) 1556-1844 (Online) Journal homepage: http://www.tandfonline.com/loi/gwof20

The Mind of the Scenario Thinker

Noboru Konno , Ikujiro Nonaka & Jay Ogilvy

To cite this article: Noboru Konno , Ikujiro Nonaka & Jay Ogilvy (2014) The Mind of the Scenario Thinker, World Futures, 70:1, 44-51, DOI: 10.1080/02604027.2014.875723

To link to this article: http://dx.doi.org/10.1080/02604027.2014.875723

Published online: 10 Feb 2014.

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World Futures, 70: 44–51, 2014

Copyright C© Taylor & Francis Group, LLC ISSN: 0260-4027 print / 1556-1844 online

DOI: 10.1080/02604027.2014.875723

THE MIND OF THE SCENARIO THINKER

NOBORU KONNO, IKUJIRO NONAKA, AND JAY OGILVY

In the face of increasing uncertainty and changes, corporations must dynamically examine their business environment and activate the knowledge creation process in a future-oriented manner without getting hung up on analyzing their past (much like driving a car using only the rear-view mirror). In the previous article, we discussed the basics of scenario planning. We should not use this tool as a mere technique. Our knowledge of the world and the environment around us is important because it underlies our scenarios. When we look toward the future in an uncertain environment, we necessarily create knowledge proactively. Scenario planning and knowledge creation are commonplace when working on knowledge of innovations that shape the future. In this article we focus on the importance of having “scenario mind,” the philosophy underlying scenario planning. With any managerial tool, you cannot create real knowledge if you use only superficial know-how, like procedures described in manuals, to seek quick results. In the following sections, we discuss how scenario planning must be recognized as a “discipline of knowledge” to be embedded as a way of thinking and behavioral pattern of each individual or organization, not as a mere tool.

KEYWORDS: Essentialism, existentialism, forecasting, future, knowledge creation, risk, scenario planning, the SECI process.

LIVING WITH AN OPEN FUTURE

Scenario planning is not a tool for solving specific problems. It is a discipline (day- to-day intellectual practice) that changes your attitude and way of thinking. Neither is scenario planning rocket science. It is a very human tool. It is designed to bridge the gap between the processes of making plans on the one hand, and business frontlines where these plans are put into practice on the other. The trajectory of a typical scenario planning project can be represented by the familiar silhouette of San Francisco’s Golden Gate Bridge (see Figure 1 in the previous article, p. 35 of this issue).

It is important to have a time lag of six to eight weeks between the first and second workshops because it offers you opportunities to look at reality differ- ently by going back and forth from the model worlds, the scenarios, to the real world. In the process of doing so, for example, a little story in a newspaper or a magazine that might not have attracted your attention will suddenly jump off

Address correspondence to Jay Ogilvy, HC 64, P.O. Box 3008, Castle Valley, UT 84532, USA. E-mail: [email protected]

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THE SCENARIO THINKER 45

the page saying to you, “This story is an early indicator of movement toward the northwest quadrant of our scenario matrix!” Sometimes new journals or publica- tions suggest the increasing popularity of some new technology that has caught your attention. Other times a few words in the speech of an important politician will signal some new legislation. Such indicators quicken visions of the future described in your scenarios and become truly significant to people working on the frontlines.

These processes continue when giving direction to a new strategy or evaluating the existing strategy after you developed a set of scenarios. The names of different scenarios come to serve as a kind of compressed shorthand or code in which executives can communicate with one another about the possible consequences of today’s decisions. The process of scenario planning, if it is embedded in day-to- day practices, forces senior executives to think about the long term even when a concern for making this quarter’s numbers may tempt them to ignore longer term issues. Thus, if you become a scenario planner who thinks and behaves differently from other planners who make plans based only on analytical strategies, it means you live with sets of different hypotheses about the future, not just one single- point forecast. The mantra of the scenario planner: What if? What if? What if?

Recall a famous anecdote about Soichiro Honda. During morning assemblies soon after the foundation of Honda Motor Co., he always stood on a wooden orange crate in front of his 30 employees and exclaimed, “We aim at becoming number one in the world.” Today Honda is well-known as an innovation-oriented company that is still enthusiastic about having in-depth discussions of its dreams; that is to say, how and what to become in the future. Such a mindset could be a starting point for organizational knowledge creation.

Knowledge creation is inherently future-oriented. The employees of each cor- poration should include creative individuals who can envision different futures. Any corporation lacking such creativity could be overwhelmed by waves of uncer- tainty. Fortunately, however, humans have an instinctive urge to create something. Aristotle (1966) argues in his “Metaphysics” that all men by nature desire to know. Humans like to take action on their own initiative in order to carry out their reso- lutions, stand on their beliefs, and make their dreams come true. Each individual has his/her dream or vision, cherishes an instinctive desire to know the unknown, tries to transcend him/herself being not content with the present situation, and lives toward the future.

To corporations and their strategies, scenario planning represents a recognition that the future is not predetermined and anything is possible. It means that current practices could offer new possibilities to corporations and their businesses that are likely to produce fruitful results beyond the restrictions of their existing internal resources and core competence. Being future-oriented is not being optimistic or pessimistic, but living in uncertainty. Yet if one is an actively engaged practitioner rather than an academic, one must act in spite of that uncertainty. Scenario planning makes a contribution to strategies by offering knowledge and insight inspired not from the perspectives of bystanders, but from the perspectives of concerned actors in the marketplace.

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EXISTENTIALISM AND SCENARIO PLANNING

The results of scenario planning are completely practical: choices about actions that have financial consequences. But the mind of the scenario planner is philo- sophical. Scenario planning amounts to existentialism in the marketplace. This section contains (a) a brief introduction to existential philosophy and then (b) a series of links between existential philosophy and scenario planning.

The quickest way to describe existentialism is to contrast it with essentialism—the philosophy most closely identified with Plato and Aristotle. The formula of essentialism is: Essence precedes existence. How a thing exists follows from its essence. It is the essence of an acorn to become an oak tree. The essence of a knife is to be good for cutting.

According to essentialism, each thing and each person has an indwelling essence, and the existence of that thing in time is to be explained by reference to that essence. In Plato’s philosophy, the job of the educator is not to mold the child into something new or different from what he already was; instead, education is the drawing out (from the Latin, e-ducare) of that which was already within. Learning is remembering (anamnesis). In Plato’s Republic, part of the task of the educator is to separate the golden souls from the silver souls and the bronze souls. Whatever soul you were born with is the soul you will always have. The essence of your soul cannot be changed. There are limits to what education can accomplish.

In essentialist philosophy, the future is prefigured by the past. The life of the essentialist is like the unrolling of an oriental carpet. At first you see just a little bit of the pattern. As the carpet unrolls, more of the pattern is revealed—and the pattern is probably repetitive. But even if it is not, even if the rolled up part of the pattern is different from the exposed part, the pattern is already “in there.” It was woven in long ago, and the only difference between the future and the past is that the future has not yet been revealed. Its essence, its pattern, is every bit as determinate as that part that has already been revealed.

The simplest formula for existentialism is: Existence precedes essence. For the existentialist, who you are is not so much a function of who you were and always will be. Instead, your identity is a function of what you do—the choices you make. Your existence in the present determines your essence in the future. Existentialism is very much an American philosophy—a frontier philosophy of the New World—even though its origins are found in the writings of European philosophers like Kierkegaard, Nietzsche, Heidegger, and Sartre.

All of the existential philosophers are heirs of Hegel, who was the first philoso- pher to take time seriously. For Plato, time was the moving image of eternity. The job of the philosopher was to see through the illusions of appearance and temporal becoming and grasp the truths of eternal Being. For Hegel, on the other hand, the history of consciousness reveals a progressive unfolding of different forms of con- sciousness. The consciousness of the Greeks was different from the consciousness of the early Christians, which was then superseded by the consciousness of the rationalist Enlightenment.

For the essentialists, there is never anything really new under the sun. Time is an illusion. Truth is eternal. For Hegel and the existentialists, time is real. Things

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THE SCENARIO THINKER 47

change. Creativity and novelty are possible. The present is not like the past, and the future will not be like the present. Existentialism is thus a philosophy of possibility.

How, then, does existentialism relate to scenario planning? First and foremost through the idea of multiple possibilities. For the essentialist, the future is pre- dictable. Not so for the existentialist or for the scenario planner. Because the future is not predetermined, it cannot be predicted. Because it cannot be predicted, the best a strategic planner can do is to represent the future in the form of multiple scenarios that define a range of possibilities.

Not all possibilities are good possibilities. Worst case scenarios must be part of the mix. Heidegger wrote about “being-towards-death.” Existentialism has a well- deserved reputation for being somewhat dark and grim. Despite all the optimistic talk about creativity and possibility, the existentialists were known for staring into the abyss of death and meaninglessness. Nietzsche wrote about the death of God. Sartre wrote Being and Nothingness. Without a religion or a roadmap connecting human action to eternal essences, existentialists travel in a wilderness where man has only his own creativity to rely on.

And is this not a sobering lesson for business strategists to absorb? Nothing is guaranteed, not wealth, not lifetime employment. Bankers and the corporations they lend money to might lend more prudently if they thought more often about “being-towards-bankruptcy.”

After you have fully absorbed the bad news, though, and after you have been motivated by a certain sense of urgency that the sight of death and bankruptcy will foster, then you are free to imagine and create better futures. You are no longer satisfied to move forward on mere momentum, putting your right foot in front of your left and left in front of right. You are no longer satisfied with “core competencies” or “sticking to your knitting.” You know that time is passing, things are changing, and consumer tastes are evolving. You suspect that your competitors may be closer to those changing tastes than you are. You must be creative, you must innovate. .. or existential time will pass you by. There is a sense of urgency that existentialism lends to the life of the scenario planner.

FREEDOM, IMAGINATION, AND CREATIVITY

Freedom is not free fall. Freedom is not absolute. The kind of freedom the existen- tialists embrace has texture to it, and a sense of exigency. Neither the individual nor the company comes into the world as an utterly blank slate. Heidegger used the term “Geworfenheit” to describe what is best translated as “thrownness.” We are each thrown into the world in a specific place with a specific momentum. But the origin and direction of our specific Dasein—our specific being-there—does not fully determine our future. Instead, for both the individual and the company, the present moment is a time of decision, a time when we could choose to move one way or another.

Not all paths are open to us. Part of the significance of being-toward-death is captured in Heidegger’s concept of finitude. You will not live forever, so each moment is precious. The choices you make are finite in two senses: first, each choice you make is a negation of other possibilities. Second, you only have so

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much time, so you only have so many choices you can make. Just as each moment is precious, so is each choice. You cannot choose everything. To allow anything is to choose nothing at all.

The existentialists’ stress on thrownness and finitude says to the business strate- gist: If you are not saying No, then you are not making strategy. When IBM decided to cater to businesses and to say no to the consumer market, that was strategic. You cannot have seventeen highest priorities. If your priorities are not finite, not few in number, then they are not really priorities.

If time and choice are so precious, then how is an individual or a company to make those choices wisely? For the essentialist, the answer would depend on the discernment of eternal essences, or the calculation and engineering of a predetermined future. For the existentialist, however, essences are not eternal and the future cannot be calculated. Even though thrown, even though finite, the existential scenario planner cannot rely on essence or momentum to determine her future. Creativity is required in order to determine that which has not been predetermined. Choice and an act of will can create a path where none existed before.

Consider as an example the challenge that settlers face when they come upon a virgin landscape. In some terrain it makes sense to build a town where two rivers meet. But what if the settlers find themselves on an open plain with almost no defining features like hills or rivers. If the settlers are essentialists, they will be motivated by what the continental rationalists called “the principal of sufficient reason.” And if they wait for a sufficient reason to place the town in one place rather than another, they may suffer the fate of Buridan’s ass. Parked equidistant between two bales of hay, argued John of Buridan, the ass would lack a sufficient reason to choose one bale over the other. And lacking a sufficient reason, according to rationalists and essentialists, the sorry ass would starve to death. Not so the existentialist, for whom the motto, “Just choose!” was the precursor to Nike’s very existentialist slogan, “Just do it.”

In business, there are times when it is better to just choose and do something rather than doing nothing. But it is at precisely those times when creativity is a better substitute for “sufficient reason” than mere whimsy. Creativity that builds on where you have been “thrown,” creativity that is constrained by finitude, can find new ways to build upon the old.

When building a set of alternative scenarios for the future of a company, it is important to have creative people as part of the scenario-building team. Part of their role is to challenge received wisdom. Creative people can imagine futures that are not like the present or the past. Without pretending that they start with a blank slate or an infinite range of possibilities, creative people can work within the finite confines of a company’s current reality, and imagine how the very same people with the very same skills might make new products or enter new industries.

Innovation demands creativity, and creativity demands context. Alternative scenarios provide a range of different contexts in which creativity can come into play, both in the invention of the different scenarios, and in the innovation of new products that fit like well adapted species into the niches described by those scenarios. Consider the fate of those little black pagers that were so popular in

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China in the early 1990s. Too many planners in the pager division at Motorola thought that pagers were like one of Aristotle’s eternal and unchanging species. They had not yet grasped the significance of the passage of time, the innovation of new technologies, and the likelihood that pagers would become an endan- gered species. It took creative scenario planners to imagine futures where pagers would be replaced by full function cellular phones. And then it took creative en- gineers to come up with those full function phones once that scenario had been imagined.

Rationalists and essentialists like to believe that the future and the products that will populate its shelves can be calculated from some combination of scientific law and systems theory as applied to the essence of human nature. Not so. In the mind of the scenario planner, the future that eventually comes to pass will be built by acts of will, choices among options, and feats of creativity that cannot be engineered or calculated on some principle of sufficient reason.

Because creativity and imagination are such critical components of scenario planning—both in the invention of the scenarios, and in the creation of products to populate those scenarios—it is important to include creative people on the scenario development team. Some jobs call for discipline and skill. As the scandals at Enron and Worldcom have shown us, you do not want a lot of creativity in your accounting department. But part of the social capital of every corporation should include those creative individuals who can imagine scenarios very different from the present. Without such creativity, and without acts of will by senior executives, corporations run the danger of looking for and manufacturing reasons where there may be none. Like settlers on the open plain, they need people who can imagine a town existing just here, not because two rivers came together there, but just because one person could see it in his imagination, and another had the will power to make it happen. Without such people as part of its social capital, the corporation may, like Buridan’s ass, just sit there and starve.

KNOWLEDGE CREATION: SEEING THE UNSEEN

There is no guarantee that a scenario team can think of all possibilities in the process of scenario planning. There is no absolute guarantee that all possible environmental forces affecting focal issues have been considered. The best possible guarantee is a good team of well-informed, creative, and diverse people. While this task calls for imagination and creativity, the process of turning a set of scenarios into a strategy calls for the recognition and justification of these scenarios as new contexts for the future of the organization.

Let us look at this process from the standpoint of knowledge creation. Trying to see the future is a process of social knowledge creation in which one recog- nizes and sees “the unseen.” Social science, whose disciplines include business administration, is basically a methodology for seeing and creating “the unseen” (such as intentions, motives and values) in order to analyze, grasp, and describe human society or economic phenomena. The Knowledge Creation Process (the SECI model) is a continuous, spiral-like movement seeking “things yet unseen”

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(Nonaka and Takeuchi 1995, 56–94). It turns something latent (tacit knowledge) into explicit knowledge through verbalization and conceptualization.

When a certain belief of an individual (subjective view) is justified through the process of social interactions, it becomes a knowledge asset that can create value. In the tradition of philosophy, knowledge has been defined as “justified true belief.” Knowledge, however, is not something static in each individual. Individuals in an organization acquire pieces of knowledge through their experiences inside and outside the organization. They are provisional and partial as long as these individuals keep them just for themselves. They have to go through the process of justification in the organization in order to become organizational (social) knowledge. New insight, then, is added to such organizational knowledge through interactions with the market. In this way, the justification process continues at multiple levels.

Scenario planning expands the possibilities for a new idea and can be utilized to simulate a strategy to be put into practice. By using scenarios as a kind of windtunnel for stress-testing a strategy, you can experience a cycle of strategic planning and practice. In this process, our ideas become more focused (external- ization), systematized in the form of the scenario matrix (combination), and are used to give direction to strategy, or make new experiments (internalization.) One of the distinctive characteristics of scenario planning as a methodology is this strong awareness of practice.

What underlies knowledge creation is an ontological and epistemological view of humanity that we by nature want to create knowledge for the future. The dynamics of knowledge creation is a dialectic movement advocated by Hegel, which, in the end, synthesizes the essentialist and existentialist approaches.

This discourse offers a new perspective on how business strategies should be created and applied. It presents a dynamic view of a temporal world that is fundamentally different from approaches to strategy that claim to be able to predict the future. Scenario planning provides an approach to value creation very different from Barney’s (1991) Resource Based View (RBV). Resources can be counted and their allocations precisely calculated. Likewise there is an appearance of exactitude in the calculations of real options. Scenarios may be rich in specific detail, but in their multiplicity, they articulate a range of uncertainties. In this sense, the genealogy of scenario planning and knowledge creation is theoretically different from that of analytical or scientific management.

In summary, rationalism underlies strategic planning while essentialism under- lies ideas like RBV and core competence. According to RBV, the organization grasps its core competence, creates new products and services, and develops and utilizes such products and service based on its existing internal resources. On the contrary, knowledge creation is future-oriented. RBV also requires knowledge. It, however, is static and puts importance on past resources. RBV focuses on re- sources that can produce economic value and sustain competitive advantage, and offers a framework based on the scarcity, replicability, protection, replaceability and transferability of these resources. In other words, RBV analyzes the char- acteristics of knowledge and skills believed to exist within the organization as managerial resources, and establishes a model of how they should be allocated.

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However, RBV, as well as core competence, does not focus its discussion on how the organization should create new internal resources, including knowledge.

REFERENCES

Aristotle. 1966. Metaphysics. Trans. R. Hope. Ann Arbor, MI: University of Michigan Press.

Barney, J. B. 1991. Firm resources and sustained competitive advantage. Journal of Man- agement 17(1):99–120.

Nonaka, I., and H. Takeuchi. 1995. The knowledge-creating company. New York: Oxford University Press.

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