Published in Futures 40 April 2008. doi: 10.1016/j.futures.2007.08.011 http://dx.doi.org/10.1016/j.futures.2007.08.011
Dr Richard Whaley, Director Business Trends Library, 2 Rotherwick Court, Alexandra Road, Farnborough, GU14 6DD, 01252 548115
Abstract T J Chermack (Ref 1) suggested that scenarios could be theory building, but pointed to problems. These Reflections, using the role that theories play in the hard sciences, rules out theory building with these problems that Chermack points to, and others that are defined. A method to correct these problems is suggested.
Key words Scenarios, theories, strategic planning, prediction, scientific method.
Chermack's paper debates if scenario building develops theories, presumably on what is going on in the scenario (Ref 1). It examines what is involved in theory in the authors' branch of learning in particular, and discusses the extent to which scenario planning is theory building. Chermack admits he has difficulties.
In the hard sciences, my own original background, theories are associated with hard data and analysis. Whereas most scenarios do not indicate where any data used came from, nor what analysis was done. Chermack admits that scenario planning methods are ill defined and ill understood. He does not cite my 1985 paper in Futures (Ref 2), in which the concept of theories as understood in the hard science context can be applied.
Theories play a central role in the development of knowledge in the hard science. A finder of facts is expected to propose a theory which embraces those facts. The theory should predict other associated facts, which can then be sought, either confirming the theory or requiring amendment or replacement. At any stage anyone else can propose a better theory - in this way scientific knowledge advances. Chermack acknowledges that theories should predict, with important implications for scenarios.
My 1985 Futures paper contains the elements of this hard science method. Basic data is obtained by Historical Analysis, evolved into Constant Trends describing what tends to happen in that area of Man's activity since the beginning of man's history. These are theories Chermack is seeking. Interactions and impact from other Sectors of the Business Trends Library are incorporated to form an Impacted Scenario. Evidence from the real world can then be examined from the many time series available for the scenario's operation, giving more detail. There are several iterations here of the scientific method involving the theory, giving theories of what is going on in terms of trends, and where they may lead to.
From near 40 years involvement in planning and scenarios, seeing practitioners' sales literature and their presentations at conferences and seminars I have attended or organised, in general they are vague about where their scenarios come from. They allude to a process, people working behind the scenes, giving the impression of expertise. But hard facts of what is done to create the scenarios, what data is processed and how, is not generally set out. No theory can be applied or arise from this in the hard science context - where the concept of 'showing your workings' is as important as the results they lead to. The concept of repeatability is also central in the hard sciences - you must describe your methods sufficiently for any one else to be able to repeat what you have done.
Chermack gets to the gist of these issues and their relation to theory formation in various places, but admits not to understand the reluctance to study them in the scenario process. This reluctance can be explained, but I do not propose to attempt to do so here. A flavour may be obtained from Ref 3, indicating the Magico - Religious state of play, and the mode that consultant practitioners find the most profitable at the present time.
Chermack mentions that there are many tools to help think about the future, but that a refusal to study them has gone on too long. Presumably he is alluding to a school of thought which has grown up in part of the scenario planning area, that it is impossible to predict the future. I have commented on this school of thought in the past (Ref 4). Anyone undertaking any scenario or forecasting exercise by whatever name it is called is attempting to gain insights into the future to help guide their organisations. There are plenty of outcomes where a high probability of occurrence can be assigned over given time scales, others where it is low, and many in between. In fact in Refs 2 & 4 I reproduce some choice examples, where pretty high probabilities of outcome can be asigned. This applies to the Futures reference of supply of energy to dwellings (plateaued and may decline); and to the Long Range Planning reference (Ref 4, but p87) of the 'return' of women to work (though in the 20 years this has largely happened in the US and UK, with current US futures suggesting that women's participation rates will exceeding men's - US lags behind the UK in this dimension of an advanced society). The skill is assessing these probabilities, and using decision theory techniques in Strategic Management. In Ref 4 I mention the scientific method and the role of theory with respect to scenarios (p86 Time Series and Other Evidence). So I have beaten Chermack to it by 20 years.
Nor is it true that there is a refusal to study these many tools. I led a study with the Business Futures Study Group, of the Strategic Planning Society, London, into Forecasting Methods (Ref 5). There are over a dozen key forecasting and futures research methods, and books have been written on most of them separately. In fact all or many of the methods available should be used in the various iterations suggested above that a scenario may go through. There are several problems here. In many respects scenarios are a method of exporting the results of FR, forecasting, business environment analysis, and the like, to decision makers - or to assess the impact of the business environment on the firm. Scenarios may not themselves be developing futures or futures alternatives, but rest on a large body of research. As above, what is essential is to know the details of this research.
The Strategic Planning Society Study found that what was important was how to use the various forecasting methods in concert. While books had been written on individual methods, the Group could however find no best practise on how to use the various methods in concert (Ref 6), while it was clear to it that most issues need to be tackled by several methods. Use of one method alone was liable to be dangerous. From Chermack's discussion no progress appears over the last 10 years. A clear understanding of this best practise is needed.
A further problem is Chermack has not identified much about the practitioners. He mentions the methods of one, as retiree from a major oil company known for their scenarios, which enabled them to form their own consultancy. Scenario planning was originally developed by Herman Kahn, at the Rand Corporation in the 1950s, and later at his own Hudson Institute. Kahn, originally a physicist, always maintained that a sound knowledge of history was required. He was a founder advisor of Futures. One of his last publications still provides a useful framework for the beginner (Ref 7). While it is a summary of a larger study, substantial data and argument is given enabling the reader to come to his own conclusions. It is except from criticisms of scenarios above. Scenarios were adopted by General Electric, Shell, OECD, and by various consultants.
Today there are a number of US institutes who publish outputs, one used to be advisors to Futures. Firms may engage in the activity, either on their own or with consultants. More often this is not made public, with confidentiality agreements entered into.
What is needed is an identification of the main practitioners, and their practise of using the different methods in concert on different problems. Thus an account of best practise could be produced. Searches of the academic literature may not be adequate, when practitioners do not contribute much to it, or reveal their methods. Putting choice key words into Google and following up the links may produce a better database of practitioners. A number of them are what would be called in the UK as charities, whose missions are likely to encourage participation in such a study, even if purely commercial consultants are less likely to. If a statement of best practise in the use of FR and allied methods could be part of education for business executives, more informed use of scenarios would occur. This should encourage practitioners to 'show their workings'. Then you have the means of using meaningful theories.
1. T J Chermack Disciplined Imagination - Building Scenarios and Building Theories Futures 39, No. 1, Jan 2007
2. Richard Whaley Interactions and Impacts among business futures, Futures 17, No. 3, p269, June 1985
3. Graham Cleverley Managers & Magic, Longman, London 1971, pp 68 -70 in particular
4. Richard Whaley, Data Bank on the Future Business Environment, Long Range Planning 17, No. 4, pp83 to 90, 1984 (p90)
5. Richard Whaley (Ed) Forecasting, proceedings of the Business Futures Study Group, Strategic Planning Society London 1996. www.BusinessTrendsLibrary.co.uk/forecast.htm
6. As 5, p46, www.BusinessTrendsLibrary.co.uk/forecast.htm#methods
7. Herman Kahn & others The next 200 years - a scenario for America and the World. Associated Business Programmes, London 1977.
Dr Richard Whaley is a Director of Planning & Control Investments Ltd, and of the Business Trends Library, 2 Rotherwick Court, Alexandra Road, Farnborough, Hants GU14 6DD. He has been Chairman of the Business Futures Study Group of the Strategic Planning Society, London, and a member of its executive. He was also largely responsible for the initial conception and development of Futures. Email