Everything Is Obvious_ _Once You Know the Answer - Duncan J. Watts [82]
FROM PREDICTION TO REACTION
A more fundamental concern is that even if senior management did embrace Raynor’s brand of strategic management as their primary task, it may still not work. Consider the example of a Houston-based oilfield drilling company that engaged in a scenario-planning exercise around 1980. As shown in the figure on this page, the planners identified three different scenarios that they considered to represent the full range of possible futures, and they plotted out the corresponding predicted yields—exactly what they were supposed to do. Unfortunately, none of the scenarios considered the possibility that the boom in oil exploration that had begun in 1980 might be a historical aberration. In fact, that’s exactly what it turned out to be, and as a result the actual future that unfolded wasn’t anywhere within the ballpark of possibilities that the participants had envisaged. Scenario planning, therefore, left the company just as unprepared for the future as if they hadn’t bothered to use the method at all. Arguably, in fact, the exercise had left them in an even worse position. Although it had accomplished its goal of challenging their initial assumptions, it had ultimately increased their confidence that they had considered the appropriate range of scenarios, which of course they hadn’t, and therefore left them even more vulnerable to surprise than before.22
Scenario planning gone wrong (reprinted from Schoemaker 1991)
Possibly, this bad outcome was merely a consequence of poor execution of scenario planning, not a fundamental limitation of the method.23 But how is a firm in the throes of a scenario analysis supposed to know that it isn’t making the same mistake as the oil producer? Perhaps Sony could have taken the home video market more seriously, but what killed them was really the speed with which it exploded. It’s hard to see how they could have anticipated that. Even worse, when developing the MiniDisc, it’s unclear how Sony could possibly have anticipated the complicated combination of technological, economic, and cultural changes that arrived in short order with the explosive growth of the Internet. As Raynor puts it, “Not only did everything that could go wrong for Sony actually go wrong, everything that went wrong had to go wrong in order to sink what was in fact a brilliantly conceived and executed strategy.”24 So although more flexibility in their strategy might have helped, it’s unclear how much flexibility they would have needed in order to adapt to such a radically shifting marketplace, or how they could have accomplished the requisite hedging without undermining their ability to execute any one strategy in particular.
Ultimately, the main problem with strategic flexibility as a planning approach is precisely the same problem that it is intended to solve—namely that in hindsight the trends that turned out to shape a given industry always appear obvious. And as a result, when we revisit history it is all too easy to persuade ourselves that had we been faced with a strategic decision “back then,” we could have boiled down the list of possible futures to a small number of contenders—including, of course, the one future that did in fact transpire. But when we look to our own future, what we see instead is myriad potential trends, any one