Why Your Covid Planning Should Be Scenario-Free
(Originally published on Medium, Nov 2, 2020)
Inserting uncertainty where there is none creates dangerous consequences for leaders.
The next wave of Covid-19 cases has prompted the circulation of “updated” alternative scenarios for the pandemic. But leaders don’t need alternative scenarios right now, they need actions based on a singular point of view. They are in the water, and they just need a clear path to the shore.
Presenting future facts as just one out of four (or more) potential scenarios can have dangerous consequences for businesses by:
Delaying action
Preventing leaders from confronting reality
Obscuring market opportunities.
Scenarios Are Great Tools
Scenarios help companies grapple with future uncertainty. It is a big part of my job and one I’m doing now helping leaders sense-make and innovate for what happens after the post-pandemic boom. While scenarios were invented to include long-term critical uncertainties in strategic planning, they can be used for the nearer term when the external business environment becomes unpredictable. But that should be limited, because scenarios carry some dangerous pitfalls in addition to their utility, especially in short time horizons.
Sometimes There Is No Alternative
The biggest risk of using scenarios when it isn’t necessary is inaction and confusion due to multiple options. Leaders love options and will often wait for certainty before making a decision. This makes some sense. Decisions they make have consequences for the tens of thousands of their workers, the communities in which they operate, and the worth of the company itself. I vividly remember a CEO making a point of grabbing an envelope off his desk and doing a calculation of the EPS hit that each presented growth and innovation proposal would have. Not how I would suggest running a company, but it shows the pressure CEOs are under.
When I left my corporate foresight and growth job over a decade ago to start a consulting company, I suddenly experienced in a small way what large company CEOs face every day. Being the leader made it more difficult to take risks, and in fact one bad innovation investment almost sank our company.
Sometimes, rather than options, the future is presenting a TINA (There Is No Alternative). Enabling planning and decisions in uncertainty is what scenarios are all about. But a futurist’s job is bigger than scenarios (which is why scenario planning will always be a sub-discipline of foresight). We help leaders to take action by presenting both the probable and uncertain parts of the future, given the enormous consequences of getting it wrong. Introducing uncertainty where there is none should not be part of the equation.
Using scenarios when there is little uncertainty delays needed immediate actions by muddying the water with alternatives.
Confronting Reality
Multiple scenarios may keep companies from confronting the immediate reality. Companies, like individuals, have a shared mental model of the future. Whether explicit or implicit, every decision is made through the prism of this shared “official future”. A lot of the job of a futurist is to point out when this official future is keeping the company from seeing and responding to significant changes in the business environment.
Companies that continue to operate as if the world has not changed will end up shedding market share and eventually going out of business rather than take the needed steps to create value in the new ways their customers expect. Ram Charan warned about this and the need for business model innovation over a decade ago in his book Confronting Reality.
Alternative scenarios over the long term can help leaders build empathy with new potential futures and begin the process of taking risks to stay relevant. It can be difficult speaking truth to power, that the emperor has no clothes (or their traditional way of creating, delivering and capturing value is being disrupted), but it is a job requirement for a futurist.
Presenting multiple scenarios of how Covid-19 may play out is driven by fear. Sneaking reality in among other scenarios reduces the chances that leaders perceive the true change in the marketplace and react quickly enough to make the right decisions for their companies.
Missing Opportunities
Including uncertainty into planning is more often about managing risk than spotting opportunities. By focusing on critical uncertainties, companies can miss the obvious advantages the future is providing. The post-pandemic boom is a TINA. Once vaccines and antivirals are widely available, the world will party for at least 6 months. Consumers will spend every dime they have and go into debt to make up for travel, socializing, entertainment and dining experiences they delayed for a year.
Image by ktphotography from Pixabay
Companies need to look at the grim reality of the next 6–9 months, but also be ready for the massive explosion of the experience economy that will follow. There is uncertainty in what happens in 2022 when the party ends, but hiding this predetermined reality of the boom in alternative scenarios will make it harder for companies to see and respond as they should. For example, during the difficult winter ahead leaders should do everything they can to retain workers, because the business will need to have as many employees as possible before the summer boom when it will be much more difficult to recruit, hire and train new ones in time to profit.
A common pitfall in scenario planning is placing too much emphasis on the uncertainties to manage risk. This obscures the predictable opportunities in plain view.
The Unvarnished Truth
The path of Covid-19 has exhibited very little uncertainty since the first published research on its characteristics in January. It was basic math. It would spread, kill a lot of people, and be very difficult to contain without disruptive lockdowns. The uncertainties at the time were how national governments and their citizens would react, and how quickly the science community could produce vaccines and antivirals. Those uncertainties resolved themselves very early, even before a pandemic was declared. By February:
We knew the virus would sweep through the United States and be present everywhere when fall and winter temperatures and human practices would cause another massive wave
We knew our gridlocked political system would not be able to respond
We knew the polarized electorate, reinforced by social media’s ability to spread conspiracy theories, would make public health mandates more difficult
We knew the pandemic would increase economic bifurcation and highlight the massive social injustice in the United States.
There was so little uncertainty about the numbers and reaction that my February forecast that the US would have 250,000 deaths by the end of the year and 500,000 before the end of the pandemic is exactly on-track 9 months later.
But we also knew that the biopharmaceutical industry would push the development of a vaccine. We knew some day, most likely by the summer of 2021 that this virus would be contained, and our economy would open. And from history we know that the response to the previous end of the pandemic was a 10-year party.
There is some uncertainty still present, but not enough to create alternative scenarios and distract from the base forecast. Yes, the 2020 presidential election and 2021 peaceful transfer of power or continued Trump leadership looks to be a mess no matter which way you look at it. But political turmoil is already built into the base case and will not overly impact the businesses between now and next summer. The severity of the crisis may be deepened by an inability of the federal government to effectively support individuals and businesses hit by the pandemic. These are differences in impact, not kinds of threats. Again, they can be handled through planning around the base case, not separate scenarios.
We are back to a singular future: after enduring 6–9 months of another wave of the pandemic, the world will awaken in summer and party like there is no tomorrow until at least the end of 2021.
Businesses should plan for the pain this winter by helping their employees and communities as best they can to be in a good position to profit when the boom happens next summer. Uncertainty and scenarios enter the picture when the party ends. As mentioned at the top of this article, scenarios about the true long-term uncertainty of the post-2021 boom can be found here.
Use Scenarios for What They are Intended
It’s not the time to create alternative scenarios for Covid-19. We know enough to create a singular forecast that enables business leaders to make decisions and take action. Continuing to generate alternative scenarios in low uncertainty conditions is dangerous and works against the acceptance of scenario planning to help plan and innovate for the long-term, high uncertainty business environments that it was designed for.