Today is the one year anniversary of the Corona virus being first reported in China. And quite frankly, one year ago I personally would not have expected my life as it is today. Otherwise I would have clearly not have booked a drop-dead expensive trip to Tanzania for the summer of 2020. There is some comfort in the fact to be not alone with this (although my friends love to tease me about the fact that I work for a strategic foresight company and still did not see Corona coming, duh).
But giving the current circumstances and the sharp increase in uncertainty, another fascinating development has been taking place. During the last months, more and more economic institutions all over the world have started to work with scenarios in order to describe the upcoming months and years of economic, societal, technological or political development given the rather pandemic circumstances. Both qualitative and quantitative, even up to simulations, we see scenarios being employed to describe the development of the pandemic itself, but also the global economy scaled down up to a corporate level. Working for a company being specialized in Scenario Management I cannot hide being pleased with this fact since scenarios are a great and effective tool for dealing with the future. On the other hand, I cannot help but wonder why there is all of the sudden rage about scenarios when the advantages of this technique stem far beyond the use case of Corona.
Dealing with the future is a messy process which we more often than not love to ignore. And this is all understandable given the way our minds are build and which functions they are supposed to serve. Compared to daily survival seen basically up to medieval times, thinking about the future of complex system apart from one’s own existence plus given a long time horizon seems more like a waste of spare cognitive resources. We as humans like it simple which might explain our proneness to straight-forward forecasting techniques such as prognoses and trend management. Furthermore, the business of uncertainty is piled with fancy names for simple concepts, such as black swans or unknown unknowns. But if there is one thing that COVID19 has taught us it is that making good predictions for the future is simply not that easy. We fail to put a simple trend on the mere development of COVID19 infections because we. Simply. Don’t. Know. It. There are too many factors influencing one simple development and this one simple development will have an influence on so many other factors and so forth. This is the price we pay for highly interconnected systems. If there is one way to describe the nature of our world today, given global interconnections stemming far beyond economic relations, it is the infamous VUCA world.
COVID19 is one of today’s challenges which like no other makes the implications of a VUCA world become visible. And for everyone who is not too sure what VUCA actually means, here are a few examples which might illustrate why it is so difficult forecast the future and what this means for good decision-making:
V for volatility: The environment we find ourselves in is changing quickly. We have seen the increase in speed of developments clearly in the exponential nature of COVID19 infections. But, the truth is, this is the case for so many other business areas as well as our everyday lives. Changes are often time not so obvious, but they are still there. One only has to think about the increasing data flows as well as the speed of technological advancement to get reminded of the fact that we struggle to describe our future for the next ten years. Basically and as a straight-forward example, there is a reason for ongoing debates about the adaptability of education given the fact that we don’t know how work environments might look like only few years from now. We cannot work with trends if we fail to identify the relevant ones in the necessary time frame.
U for uncertainty: As a direct outcome of increased volatility in developments, we have to accept the fact that we are unable to clearly predict our future with the help of one prognosis or trend. But how are we supposed to drive forward good decision-making given the lack of certainty? We can see this challenge clearly during the ongoing pandemic by the variety of strategies to lower infection rates. We have to accept the fact that there are different approaches with their own advantages and disadvantages. We have to say goodbye to our wish of being presented with one right way of doing things – for good. Especially with the continuous development of multidimensional goals afar from shareholder values, good corporate decision making is a complex process.
C for complexity: Speaking of complex processes, it is more than clear that due to the high degree of interconnections in our environment, we struggle at foreseeing developments due to unknown effects of dynamics. The mere factors of decision-making increase and some can even remain unknown. Take for example so-called superspreader events. We don’t know where and when they will happen, but whenever a larger group of people comes together, there is a risk of a wave of infections which has then the potential power of creating even more waves under the condition that people do not largely reduce their contacts. In addition, there might be even more reasons and events for certain infection waves of which we are completely unaware of. But the challenge of dealing with a complex world stems far beyond COVID19. We see it in organizational cultures where small decisions might shift complete workplace dynamics but even on larger scales, say economic regulation policies. Decision-making must thus have the capacity to foresee the potential reactions of different players within systems.
A for ambiguity: We find ourselves in environments which at some point can seem more than unfamiliar. This feeling is driven by the fact that there might be information available but we struggle to interpret it unequivocally. In addition, we find ourselves confronted with situations which cannot be interpreted with already existing knowledge from past experiences. Given COVID19, each and everyone of us was confronted with unfamiliar situations in their day to day life. For example, one might remember the ongoing debate in spring if masks might help in inhibiting the transmission of the virus. It took some time to get data and to adapt behavior. And this time can cost us directly, so fast and good decisions are needed. And still, we are not sure which indicators are best to describe the current development of infections which leads to more than one remark having to be made when interpreting values such as notification rates, general cases and deaths by COVID9. On another level, we find ourselves oftentimes failing at predicting human behavior, such as the Rebound Effect taught us. How are we supposed to work with data we fail to interpret clearly? One way being to increase adaptability, there are clear limitations to this method. An elaborate approach might be to accept different potential implications and work with both of them, creating different cognitive scenarios.
Revising the implications of COVID19, it becomes clear that scenarios are a highly suitable tool in order to forecast future developments. By allowing oneself to think through different possibilities, we can allow and even control uncertainty. Since scenarios consist of a variety of factors, they guarantee the depiction of interconnections and thus reduce complexity. Due to this approach of interconnected thinking, we find ourselves able to predict changes in the future and become more robust considering volatility. And, as already discussed, with given data being interpreted in more than one way, we use ambiguity to our advantage as it enriches our models of the future. This way, our forecasting becomes robust. We have thought through different potential developments, instead of dealing with the anxious task of picking “the best one”.
It is without questions that COVID19 has induced a shock of uncertainty to our economies, on a global level. Analyzing consequences is crucial in order to generate robust strategies. This is the reason why we at ScMI AG created our own scenarios together with more than 80 future experts. If you are interested in the results, they are on our homepage, for free.
Erasing doubts of why so many researchers, consultancies or federal institutions have created scenarios for COVID19, it is now more a question of why we do not work with this method much more often. By analyzing the VUCA world, it becomes apparent that its underlying patterns count for large parts of economic and societal developments. But in difference to COVID19, this fact remains much more hidden from us, since change usually has the tendency to appear more incremental than disruptive. But still, we should not be fooled by the comforting simplicity of prognoses and trends. They have proven in the past more than once to fail and with the future becoming even more dynamic, are sure to keep on failing. One should not be afraid of putting in some extra thought when it comes to the future, but rather see it as a well-made investment in the robustness of thought and strategy.