Scenarios and Black Swans
Scenarios are a widely-used means of seeing potential Black Swans—inherently unpredictable and highly disruptive events—before they fly into you. But scenarios can be created at several different levels of sophistication. The most common method involves identifying two key uncertainties in the strategic environment and using them to create a 2×2 matrix in which the two alternative outcome states of each uncertainty are combined to generate four different scenarios.
Although helpful as an initial structuring of the uncertainty field, this type of scenario suffers from a number of weaknesses. The choice of key uncertainties is often arbitrarily subjective, and many other—often equally important—factors are underplayed.
A better method is to move to a deeper level of analysis and build a qualitative systemic model from which to derive the scenarios. This ensures that as many factors as necessary are included in the analysis, and that interactions among the uncertainties play a significant part in the scenario creation process.
Systems models are of course also useful in the next step—understanding the impact of scenarios on an organization’s strategic action landscape. But the use of systems thinking to generate the scenarios themselves is much more likely to produce breakthroughs in strategic insight that will identify roosting Black Swans.
Thinking systemically after scenarios are built tends to take the strategic status quo for granted and simply subjects it to various stresses. This type of stress test is useful, but will only give variations around the official future if the scenarios themselves are lacking in structural insight.