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Analyzing Environments and Developing Scenarios in
Uncertain Times

By James L. Morrison and Ian Wilson

[Note: This is a re-formatted manuscript that was originally published in M. W. Peterson, D. D. Dill, L. A. Mets, and Associates (Eds.), Planning and Management for a Changing Environment. San Francisco: Jossey-Bass, 1997. It is posted here with permission of Jossey-Bass Publishers.]

College and university leaders are being bombarded by tumultuous forces for change as we go into the twenty-first century: virtual classrooms, global communications, global economies, telecourses, distance learning, corporate classrooms, increased competition among social agencies for scarce resources, pressure for institutional mergers, statewide program review and so on. It is no exaggeration to say that, in total, these forces hold the potential for a radical rethinking of the mission, structure, curriculum, student body, and stakeholder relations of virtually every college and university.

In order to plan effectively in this environment, college and university leaders must be able to anticipate the impact of new developments on their institutions and curricular programs. Efficient contextual planning in uncertain times depends on obtaining accurate and continuous intelligence about changes in the institution's external environment.

Environmental analysis has evolved slowly over the past forty years. Originally, in the 1950s, planning in most organizations was largely a budgetary, internally oriented effort. As the need for greater attention to the external environment became apparent in the 1960s, careful monitoring of current trends was added to the planning schedule. Then, as turbulence and surprises proliferated, monitoring was supplemented by "scanning" in an effort to provide an "early warning system" to trends-yet-to-come. Finally, as the limitations of forecasting became more and more apparent during the 1970s and 1980s, and as organizational leaders saw the need to consider the possibility of alternative futures, we saw the emergence of scenario-based planning.

This chapter describes and illustrates a three-pronged environmental analysis effort to obtain strategic intelligence: scanning, monitoring, and scenarios. Scenarios provide comprehensive, internally consistent, long-term perspectives on the future as a framework for strategic thinking as well as for the scanning and monitoring operations. The terms scanning and monitoring are often used interchangeably, but they have separate and distinct natures and functions. Scanning is focused mainly on the future (what may happen); monitoring, on the past and present (what has happened or is happening). Scanning is largely unfocused, taking a 360 degree horizon; monitoring is highly focused. Scanning identifies early warning signals of new trends that might become important; monitoring tracks developments in trends of known importance. The information generated by scanning and monitoring is essential in developing scenarios that provide the context for organizational decision making.

Since implementation of this effort involves the commitment of institutional resources, in this chapter goes into some detail describing how you can develop an environmental analysis capacity in your institution. We conclude with a brief discussion of readings that elaborate this topic.

Scanning and Monitoring the External Environment

Conceptually, the external environment can be subdivided into three components: the market environment, the industry environment, and the macro-environment. The market environment refers to customers (for example, students and potential students, parents of students and of potential students, political leaders, employers and potential employers of students, professional associations of faculty and administrators). This environment is specific to a particular institution. Thus, although the task environments of a community college and a research university within ten miles of each other may overlap, they also differ.

The industry environment comprises all enterprises associated with higher education. At this level, trends such as the number of institutions that require entering students to own computers or the percentage of faculty members using multimedia materials in their classes affect all institutions, although the effect of these factors varies depending upon the type of institution (research or comprehensive, two- or four-year).

The macro-environment focuses on changes in the social, technological, economic, environmental and political (STEEP) sectors that could affect colleges and universities directly or indirectly. These sectors are interrelated. Changes in one sector at any level (local, national, global) may lead to changes in another. A war in the Middle East may cause the price of oil to increase, thus stimulating a recession, which in turn results in budget cuts. Technological developments in California that enable the conversion of wind power to low-cost energy may be introduced worldwide, thereby reducing the costs of fossil fuel energy, with concomitant economic ramifications. Thus developments in the macro-environment can affect developments in the task and industrial environments. This point underscores the necessity of scanning the macro-environment as well as the task and industrial environments if we want to pick up the early signals of change that may affect our institutions.

Environmental Scanning

The use of environmental scanning as a tool for strategic planning in higher education has been described by Morrison (1985, 1987, 1992), illustrated by survey reports of Friedel, Coker, & Blong (1991) and Pritchett (1990), and analyzed by Hearn and Heydinger (1985) and Hearn, Clugston, and Heydinger (1993).

The purpose of environmental scanning is to serve as an early warning system by alerting institutional leaders to potentially significant external developments in their early stages. The earlier the warning, the more lead time we have to plan for the implications of these changes. Consequently, the scope of environmental scanning is broad-a full circle sweep to pick up any signal of change in the external environment.

Environmental Monitoring

Monitoring follows scanning. Every possible change or potential shift in the macro-environment cannot be given equal attention. We select items by defining topics or ideas that are incorporated in "the interesting future-the period in which major policy options adopted now could probably have significant effect" (Renfro & Morrison, 1983, p. 5). We put aside trends and potential events that are important, but are not now critical, and collect data periodically on them. These data are "monitored" so that changes in their status can be detected.

The purpose of monitoring is to ascertain the past and possible future directions of trends or to enable us to estimate the strength of indicators of potential events. Scanning provides us with critical trends and potential events. Monitoring entails using trend descriptors or potential event indicators as key words in a systematic search to obtain information about them. Thus, when monitoring, we seek information containing forecasts and speculations about the implications of trends and events identified in scanning for colleges and universities.

Establishing an Environmental Scanning/Monitoring Process

Establishing a continuous scanning/monitoring system to create strategic intelligence requires effort and resources. Simpson, McGinty, & Morrison (1990), in describing how the University of Georgia's Center for Continuing Education established their system, note that at least a half-time professional with support staff was necessary for that organization. The professional staff person is responsible for identifying information resources, maintaining the scanning files (electronic and paper copy), training scanners and abstractors, and maintaining the structure to process information into strategic intelligence for the institution. This section provides guidelines on what these tasks require.

Identifying Information Resources

The important criteria for information selection are diversity and assurance that all dimensions of each STEEP sector are covered. Information can be obtained from a variety of sources: newspapers, magazines, journals, TV and radio programs, conferences, and from knowledgeable individuals in personal information networks.

Micro-environmental Scanning Resources 

In order to ensure that we are adequately scanning the macro-environment, we must identify specific information resources for each STEEP category locally through globally. Although Morrison (1992) has compiled a comprehensive list of information sources organized by category for the macro-environment, the following scanning publications are particularly useful when initiating a scanning system.

The Wilkinson Group publishes a monthly scanning newsletter called What's Happening for nonprofit organizations (Wilkinson Group, 2319 Sierra Highlands Drive, Reno,NV85923, phone 702 747-5995). The World Future Society (7910 Woodmont Avenue, Suite 450, Bethesda, MD 20814, phone 301 656-8274) publishes Future Survey, a monthly abstract of books, articles, and reports containing forecasts, trends, and ideas about the future. The Global Network publishes John Naisbitt's Trend Letter (1101 30th St., NW, Suite 130 Washington DC 20007, phone 202887-6400). Kiplinger Washington Editors publish the Kiplinger Washington Letter (1729 H St., NW, Washington, DC 20006). Jossey-Bass publishes On the Horizon focusing exclusively on education (kindergarten through postgraduate, including continuing education). In addition, theHorizon Home Page (URL address: http://horizon.unc.edu) contains (1) a futures-planning database of articles on trends and events submitted for publication consideration in the print publication; (2) the archive of Horizon List, an Internet listserv on which these articles are distributed and discussed; and (3) a section with links to a variety of information databases in all of the STEEP sectors called The Education On-Ramp. Exhibit 11.1 contains the addresses of these Web accessible sources.

Perhaps one of the most useful information resources is your own network of friends and colleagues within the institution and in the profession. You can phone a colleague at another institution and get information quickly. Or you can post your question in two Internet newsletters published by the Association for Institutional Research (AIR) and the Society for College and University Planning (SCUP). [To receive AIR's electronic newsletter, contact air@mailer.fsu.edu; for SCUP, contact scup_office@um.cc.umich.]

Using Electronic Databases 

There are a number of electronic databases that contain up-to-date descriptions of articles (by title, and many times by abstract) available on a subscription basis. ABI Inform, ERIC, PAIS, Dialogue, and BRS, contain hundreds of databases specializing in all areas. Undoubtedly, your library already subscribes to these databases and database services. These resources are amenable to monitoring (that is, to retrieving information about critical trends and potential events that you and the planning team have identified earlier in the scanning process). In addition, there are a number of listservs on the Internet that contain discussions about potential events and emerging trends (see Exhibit 11.2.).

Maintaining the Scanning Files

Scanning files are usually both electronic and hard copy. It is faster and easier to maintain files electronically, which are accessible twenty-four hours a day across campus through local networking systems. Moreover, an electronic system allows scanners and abstractors to enter their information into the system directly, although it is usually a good idea for the person in charge of the system to exercise responsibility for formatting and editing.

We encourage the practice of backing up electronic files with hard copy of information sources (e.g., newspaper articles) as well as abstracts of these sources. Hard copy files can be maintained in the office of the professional staff person responsible for the scanning/monitoring system, or even in the library in a vertical file under the care of a professional information scientist.

Training Scanners and Abstractors

It is important to recruit and train faculty members, key administrators, and members of the board of trustees as well as planning committee members to serve as scanners and abstracters. Heterogeneity of backgrounds, experience, and perspectives guards against parochial viewpoints and provides assurance that the scanning/monitoring system includes people who read a variety of materials across the STEEP sectors.

An effective way to recruit scanners is to hold a one-day workshop focused on potential developments in the external environment that can affect the future of the institution. Ask participants to identify critical trends, potential events, and emerging issues. These exercises allow participants to bring their individual knowledge to the discussion, thus initiating the development of an event-and-trend set that you can use to construct the scanning/monitoring taxonomy. Identifying critical trends and potential events, and discussing their implications for the future of the organization, generates both agreement that this activity merits inclusion in institutional planning and enthusiasm for being part of the scanning/monitoring process. Exhibit 11.3 contains a sample instructional handout for such a workshop. It also illustrates the general concepts essential for conducting an external analysis.

Morrison (1992) suggested that scanners and abstracters be instructed as follows.

Seek information about signals of change in the STEEP categories (social, technological, economic, environmental, political), on the local, regional, national, and global levels. Examine information sources for movement in relevant variables (such as number of institutions requiring computers of entering students, or percentage increase in the number of students with e-mail accounts). What change is already taking place? Is the movement upward or downward? What are the projections? What are the incipient or emerging trends. That is, what combinations of data points-past trends, events, precursors-suggest and support the beginnings or early stages of a possible trend? What external events, policies, or regulatory actions would affect the projections?

Look for signals of potential events on the horizon. For example, the number of courses offered on the World Wide Web may portend a major change in how teaching will be conducted in higher education.

Look for forecasts by experts. Are we moving toward a sustainable world (as argued by Brown, Slavin, and Postel [1991], a world where attention is focused on energy efficiency, reusing and recycling materials, protecting biological and environmental bases, feeding and stabilizing the world population)? Or we are moving toward a world where commercial telecommunications firms dominate the schooling function (e.g., as argued by Perelman (1992). What are the implications of such forecasts for your institution?

Look for indirect effects. A particular item might not have direct implications for your institution, but it could nevertheless be included as a variable for monitoring or for further analysis as it might affect you through second- or third-order effects. For example, the development of the North American Free Trade Agreement in response to the free-trade agreement among the European Community portends either free-trade zones with tariffs between them or international free trade. If the latter occurs, there will be tremendous shifting of capital and labor (severalfold amplification of the "giant sucking sound" Ross Perot described before the NAFTA treaty). The effect on postsecondary education would be indirect and in response to the need for immediate retraining of people for jobs in new or greatly expanding industries.

Remember that scanning is an art form; guidelines on how to do it are necessarily few. There are no hard- and fast-rules leading to correct interpretation of information nor to correct interpretation of an issue or change. Keep in mind that your institution has a variety stakeholders (faculty, administrators, staff, parents, legislators, community leaders); try to view information that you receive vis--vis implications from their point of view. The data do not speak by themselves. Your skills, abilities, experience, and judgment are critical in breathing life into and interpreting the meaning of data. View yourself as an artist "to mold and shape material into a coherent whole; to present a vision; to help others imagine and reflect" (Neufeld, 1985, p. 44).

Write abstracts. Abstracts assist the scanning/monitoring process because they provide a brief summary about a potential development so that other members of the scanning/monitoring team do not have to read the entire source; abstracts provide members of the team with preliminary thoughts as to how this potential development could affect the institution.

When preparing abstracts, write the lead sentence in response to these questions: "If I had only a few minutes to describe this article to a friend, what would I say? What is the most important idea or event that indicates change?" Your response to these questions should be one paragraph. Include statistical data where possible. And include a statement of the implications of the emerging trend or potential development for the institution. The summary-and-implications section of the abstract should be one typed page at most.

The resulting abstracts and the general experience of key institutional decision makers in identifying critical emerging trends and potential events constitute the major input for the third component of external analysis: developing scenarios.

Scenarios as a Planning Tool

Scenarios can play a critical role in environmental analysis systems. They are particularly appropriate to colleges and universities, given the consensus-building decision making processes and the new uncertainties in those institutions' environment. When combined with environmental scanning and monitoring, scenarios provide college and university leaders with the long-term perspectives and recognition of alternative possible futures that they need to inform planning-and thinking and action-in uncertain times.

Those leaders, responsible for organizational planning, immediately and instinctively turn to some sort of forecast of the future as a starting point. Why? Because we have all been educated to believe that if we are to make decisions about the future of an organization, we must first know what the organization's future will be like.

On the face if it, that is a reasonable proposition. Yet in reality we are asking for the impossible: certainty and predictability in an uncertain world. The further out on the horizon of forecasting we go, the more unreasonable is the demand. But, even for the shorter term the expectation of precision is a snare and a delusion.

The future is, in a profound sense, unknowable. But not everything is uncertain; some things are relatively predictable. We can do a respectable job of "sensing" the basic dynamics of the future and the alternative courses they might take. Building on this foundation, scenarios steer us on a middle course between a misguided reliance on prediction and a despairing belief that we can do nothing to envision the future and therefore cannot shape our future.

Scenario-Based Planning

The term scenario, taken from the world of theater and film, refers to a brief synopsis of the plot of a play or movie. In a planning context, scenarios can be described as "stories of possible futures that the institution might encounter." Scenarios are graphic and dynamic, revealing an evolving future. They are holistic, combining social, technological, economic, environmental, and political (STEEP) trends and events, the qualitative as well as the quantitative. They focus our attention on potential contingencies and discontinuities, thereby stimulating us to think more creatively and productively about the future.

By basing decisions on alternative futures, and by testing planned actions against the different conditions these scenarios present, we are better able to prepare for uncertainty and ensure that our decisions are as resilient and flexible as possible to deal with contingencies that we might otherwise deem unthinkable.

One way to develop scenarios is to turn the job over to a brilliant futurist or to an imaginative planner to sketch out alternative possible futures that our planning should consider. The fundamental problem with this approach, however appealing it might be, is that the decision makers-those who will ultimately use the scenarios-do not "own" them. The scenarios remain forever the product of someone else's thinking, and so they lack the credibility necessary for them to be the basis for action.

To deal with this problem, SRI International developed an approach that (1) is a structured blending of rationality and intuition, and (2) relies on decision makers themselves to develop their own scenarios. Its process is tight enough to give organization and logic to scenario development, but loose enough to encourage creativity and imagination.

The methodology involves a relatively straightforward six-step process (Figure 11.1) with two important elements. The first is what we term the decision focus of the scenarios. The starting point for the process is not a generalized future of the world, but the very specific decision(s) that confront the organization. The point here is that the scenarios should be designed specifically to help us make those decisions. The range of decisions that scenarios can address is quite broad, from an immediate, pressing decision (a major investment in a new building or computer system, for instance) to broader, longer-range concerns such as the strategic posture of the university or long-term prospects for certain curricular areas. Regardless, the choices to be illuminated give scenarios their focus; they are where scenario efforts begin and end.

The other key element is the scenario logic. This gives scenarios a kind of organizing principle or logical structure. The logic of a scenario comes from a theory, assumption, or belief about change. Each distinct scenario logic is an argument about the future, a different interpretation of the uncertainties in the underlying forces that leads to a different view of the future.

A scenario process that stresses focus and logics is adaptable to many different applications, and it fits relatively well with other forecasting and planning approaches often taken by colleges and universities. David Hornfischer (1995) described how the Berklee College of Music used this process to assist in the development of its strategic plan. In the following section, we describe the scenario process the college used and include excerpts from the Berklee experience to illustrate the outcomes at each of the six steps of the process.

A Sample Scenario Process: Berklee College of Music

Step 1: Identify And Analyze The Organizational Issues That Will Provide The Decision Focus 

Clarifying the decision focus of the whole process is the first task. It is doubly important. In the first place, it reminds us that scenarios are not an end in themselves; they are a means to help us make better strategic decisions. Second, the decision focus effectively grounds the scenarios in specific planning needs. A tight focus prevents the scenarios from drifting into broad generalizations about the future of society or the global economy, thereby clouding their implications for any particular institution.

The decisions that form the scenario focus tend to be strategic rather tactical in nature for the simple reason that scenarios deal more with longer-term trends and uncertainties (often with a five to ten year time horizon) rather than shorter-term developments. Virtually any decision or area of strategic concern in which external factors are complex, changing, and uncertain can be appropriate for treatment by scenarios. A university might, for instance, be trying to develop a long-term strategic vision for itself. Or it might be confronted with major capital allocation decisions in which the main concern is the long-term need for, and viability of, expansion plans. A current issue is the need to assess the impact of information and communications technology on curriculum, student-teacher relationships, and the location of education ("Is the 'virtual university' a realistic prospect?"). Given the inherent uncertainties in the conditions surrounding such decisions, the use of scenarios to explore alternative futures in which the results of a decision might be played out makes a great deal of sense.

As a general rule, the narrower the scope of the decision or strategy, the easier scenario construction-and interpretation-will be. Developing scenarios for broader strategic concerns-the long-range positioning of a university vis--vis distance learning is substantially more difficult than for a straightforward investment decision.

The Berklee College of Music began its scenario development process by defining its decision focus as what is the future of enrollment at Berklee? This question was chosen because as a relatively young institution its long-term financial stability is dependent on maintenance of a stable enrollment.

A word of caution. While clarifying this strategic focus is critical for a successful project, it is important to note that this is not the time for strategizing. That comes later, in the final step of the process. Decision makers, particularly senior administrators, have a natural impatience with analysis and want to cut to the chase. However, this otherwise praiseworthy bias toward action must, for the moment, be held in check so that the context for action (that is, the scenarios) can first be established.

Step 2: Specify The Key Decision Factors 

Having thought through the strategic decision(s) we want to make, we need then to examine the key decision factors (Figure 11.1). In simple language, these are the key factors we would like to know about the future in order to make our decision. Granted that we cannot actually know the future, it would still be helpful to have some "fix" on the future course and "value" (or range of values) for these factors. Decision factors for an anticipated major expansion of manufacturing facilities, for example, might include market size, growth, and volatility; competing products or substitutes resulting from new technology; long-range economic conditions and price trends; future government regulations; capital availability and cost; technology availability and capacity. For a college or university, the relevant factors are more likely to be social values and priorities, demographics of the potential student pool, governments' education policies, changing workforce skill requirements, financial concerns, and so on.

In the Berklee case, the key factors affecting future enrollment levels were identified as student costs (tuition and aid availability), the state of the world economy, the relevance and quality of Berklee's program, increased competition for students, and marketing programs.

The important thing to note about decision factors is that they normally relate to external, largely uncontrollable conditions. The Berklee case is an exception in that only two factors, the world economy and competition, are external; the remainder are internal factors under Berklee's control. As a general rule, however, scenarios are best thought of as descriptions of alternative external futures; and the key decision factors normally relate to conditions in an organization's environment. This is not, of course, to suggest that the more controllable internal factors such as an organization's strengths and weaknesses, culture, and organization, are unimportant and irrelevant to the decision. Of course, they are important. But, because they are controllable, decisions about them belong more appropriately in the strategizing phase than in the scenario-development phase of the planning cycle. Scenarios, we should remember, are designed to give us insights into the sort of market and competitive environment, the social and political climate, the technological conditions that we may have to deal with. Then, and only then, should we make our decisions about what we should do.

Step 3: Identify And Analyze The Key Environmental Forces 

The next step is to identify the external forces that determine the future course and value of our key decision factors. Here we may benefit from the environmental scanning/monitoring system described earlier, ensuring that we scan for signals of change in the task, industry, and macro environment.

The objective is to start building a good conceptual model of the relevant environment, one that is as complete as possible, including all the critical trends and forces, and that maps out the key cause-and-effect relationships among these forces.

The next step is to get a clear picture of future prospects for these environmental forces: what the major trends and uncertainties are, how the forces are interrelated, which are most important in determining the key decision factors, and which best represent underlying or driving forces for significant change in the future. In practice, these analyses are less complex than they might seem; the basic thrust of analysis here should move quickly to focus on the few most important forces. Here a review of the abstracts collected in the scanning process informs our discussion of (1) the current direction of the most critical forces today, that is, current trends and the reasons for them; (2) their future prospects, that is, how much, in what ways, and how fast these trends might change in the future; and (c) their relevance to the decision focus, that is, the direction and magnitude of their impact on the future course of the key decision factors.

At this stage we need to do some sorting out of these forces, recognizing that they are not all equally important or equally uncertain. Clearly, our assessment should try to differentiate between trends and developments that we believe to be relatively predictable and those about which we have some feeling of uncertainty. For instance, while the typical scenario process is likely to identify a total of fifty or so relevant external forces, the number of key drivers of an organization's environment is certainly significantly fewer. And, while uncertainty is a prevailing condition of the external environment, not everything is uncertain. Indeed, some key trends such as demographics may be considered virtually predetermined elements of the future; the potential students ten years hence, for example, are already born, so their number is already known.

In our planning and decision making we need to be very clear about what is important and what is truly uncertain, and why. To be systematic in this sorting-out process, we can use an impact/uncertainty matrix (Figure 11.2). With a simple high-medium-low scoring system, we can position each of these forces on the matrix in terms of (1) the level of its impact on the key decision factors (obviously, all the forces are presumed to have some impact, but some are more important than others) and (2) the degree of uncertainty we feel about the direction, pace, or fact of its future course.

As a result of this sorting out, we can focus our attention-and the search for scenario logics that comes in the next step of the process-on two quadrants of the matrix. The "high impact/low uncertainty" forces, those in the top left cells are (we think!) the relative certainties in our future for which our planning must prepare. The high impact/high uncertainty forces (those in the upper right quadrant) are the potential shapers of entirely different futures (scenarios), ones for which our planning should prepare.

In Berklee's case, their scenario team focused on seven key driving forces that would, they felt, affect the future course of their key decision factors, and hence the outcome of their decision issue. Two of these driving forces were essentially economic in nature: the state of the global economy in general and the level of national spending on education. Two others related to the state of Berklee's market and competition: the state of the music industry and its products (including record and instrument sales) and the changing nature of music literacy. Two were demographic forces: the size and character of the future student population and changing faculty demographics. The seventh driving force was Berklee's ability to impact its environment and shape its own future.

Step 4: Establish the Scenario Logics

This step is the heart of the scenario development process: establishing a logical rationale and structure for the scenarios we select to develop. It is that stage in the process where intuition/insight/creativity plays the greatest role. Theoretically at least, it would be possible to develop scenarios around all the high impact/high uncertainty forces identified in the previous step. Practically, however, this would result in an unwieldy process and an impossibly large number of scenarios. Even if the sorting-out process in Step 3 reduced the number of critical forces to, say, fifteen or twenty, taking all the permutations and combinations of the alternative outcomes of these forces would produce an almost astronomically high number of scenarios, far more than the human mind could encompass and any planning system could utilize. As a practical matter, we must recognize that even those executives who are prepared to venture beyond single-point forecasting balk at having to deal with more than three, or at most four, alternative scenarios in their strategic thinking and decision making.

So the central challenge in this step is to develop a structure that will produce a manageable number of scenarios-and do so logically. Scenario logics are a response to this challenge. The term, however, clearly stands in need of definition if we are to understand, and act on, its premise. In this regard, it is more helpful to think in terms of an operational (rather than a dictionary) definition of the term. We can, for instance, think of scenario logics as being the organizing principles around which the scenarios are structured. They focus on the critical external uncertainties for the organization and present alternative "theories of the way the world might work" along each of these axes of uncertainty. For example, economic growth will be "driven by expanding trade" or "hobbled by increasing protectionism"; competition in our markets will be "marked by growing consolidation" or "restructured by the entry of new players." They are logical in the sense that a persuasive and rational case can be made for each of the contradictory outcomes; indeed, it is often the case that our disagreements about the future are the very source of these logics.

Berklee organized their scenarios around a four-quadrant structure (see Figure 11.3) built on two "axes of uncertainty": the overall strength of the U.S. and global economies and the demand for musical education. Each has alternative logics describing and explaining radically different outcomes.

Step 5: Select and Elaborate the Scenarios 

In determining how many scenarios to elaborate, we should remember a basic dictum: develop the minimum number of scenarios needed to bound the "envelope of uncertainty." This number is usually three or four. The objective is not to cover the whole envelope of our uncertainty with a multiplicity of slightly varying futures, but rather to push the boundaries of plausibility using a limited number of starkly different scenarios.

In Berklee's case, their structure led to the identification of four different scenarios. This, the planners considered, was a manageable and useful number, so all the resulting scenarios were developed and further elaborated. However, what happens if we end up with a structure consisting of, say, three axes of uncertainty, giving rise to eight (2 x 2 x 2) derivative scenarios? Some selection is clearly needed if we are not to overwhelm the decision makers who must use them. Once again we need a combination of intuition and rationality to guide our selection. It is helpful to use five criteria at this point.

  1. The selected scenarios must be plausible, that is, they must fall within the limits of what logic says might happen-regardless of our judgments as to probability.
  2. They should be structurally different, that is, not so close to one another that they become simply variations of a base case.
  3. They must be internally consistent, that is, the combination of logics in a scenario must not have any built-in inconsistency that would undermine the credibility of the scenario.
  4. They should have "decision-making utility," that is, each scenario, and all the scenarios as a set should contribute specific insights into the future that bear on the decision focus we have selected.
  5. The scenarios should challenge the organization's conventional wisdom about the future.

Using these criteria, it is usually possible, within a short period, to winnow the eight candidate scenarios down to the requisite three or four. Some of the possibilities may be eliminated because their combination of logics is thought to be implausible or inconsistent; others, because they would not present any significantly different insights to the decision makers; still others, because they do not push the envelope far enough.

Once the scenarios have been selected, they then have to be elaborated. At this point, all they have by way of description is a combination of two (or three) driving logics (e.g., in the Berklee case, "Back to Bombay" is driven by strong economic growth and high demand for musical education). There are many ways to elaborate the description of scenarios, but their are three important features.

  1. A highly descriptive title: short enough to be memorable but descriptive enough to convey the essence of what is happening in the scenario. After people have had the scenarios described to them, they should find each title to be a memorable encapsulation of the scenario. One warning: avoid such terms as best case, worst case, high growth, low growth. Such terms say nothing about why it might be the best case (from whose point of view?), or why the growth is high or low. They tend to favor making snap judgments about the scenario; they work against provoking decision makers to examine the scenario conditions and their consequences, seriously and thoroughly.
  2. Compelling "story lines." Remember: scenarios are not descriptions of end points (how big will our market be in 2005?) but rather narratives of how events might unfold between now and then, given the dynamics (logics) we have assigned to that particular scenario. In simple terms, a scenario should tell a story; that story should be dramatic, compelling, logical, and plausible.
  3. A table of comparative descriptions. This provides planners and decision makers with details along specific dimensions, a sort of line-item description that details what might happen to each key trend or factor in each scenario. In theory, this table might include every one of the macro- and microenvironmental forces that were identified in Step 3; but in practical terms it is usually advisable to prune this list to the more important forces. It is difficult to get from such a table an overview of what is happening in each case; that is the role of the story line. But the table does provide the detailed back-up material-the flesh on the skeleton-that gives the scenarios their nuance and texture.

These three features can always be embellished with charts, graphs, and other visual material to help to bring the scenarios to life. The guiding principle in determining the extent of this elaboration is, as always, the requirement of the decision focus: provide as much detail as is needed to help executives make the decision, and no more.

Berklee named and described the four scenarios as follows:

1.) "Back to Bombay" (high demand/strong economy). This the good news scenario in which a rising economic tide coupled with strong demand for a Berklee education allows the school to expand and become a truly global musical college. A backdrop of solid economic growth of over 3 percent paves the way for a second Clinton term with a renewed sense of community and public purpose. The music business rides the economic tide; in combination with increased diversity of music styles, Berklee's contemporary/technology-based curriculum is ever more appealing to potential students from around the world.

2.) "Competitive pressures" (low demand/strong economy). Here the economy is also strong, but pressures from other schools as well as noninstitutional (perhaps Internet-based) competition created by new technologies diminish the attractiveness of a formal and expensive degree to a more business-aware student.

3.) "Berklee Inc." (High demand/weak economy). While interest in a Berklee education remains strong because of its contemporary curriculum, economic pressures make the cost even more burdensome. The impact of a weak U.S. economy growing at less than 2 percent is felt across the globe. The U.S. government, overwhelmed by social and economic issues, reduces its commitment to student aid programs. Berklee is forced to increase scholarship budgets and to seek greater corporate support.

4.) "Dazed and confused" (low demand/weak economy). This is the disaster story, where a faltering economy combined with the continuing diminishment of school music programs and a slumping music industry put increased pressures on Berklee's enrollment.

These brief encapsulations do not do justice to the texture and level of detail in Berklee's full scenario story lines. In this case, as in others, the logical structure of the scenarios is intended to provide a framework for the human imagination to engage in what-if thinking, explore the future, and speculate in detail about the consequences of trends and actions.

Step 6: Interpret the Scenarios for Their Decision Implications. 

This is the stage at which we close the loop, linking back to the decision focus of the first step and starting to turn scenarios into strategy. This is our repeated reminder that scenarios are a tool, a means to an end, not an end in themselves.

Strategy, of course, requires far more than scenarios in its development: strategic vision, goals and objectives, competitive analysis, assessment of core competencies, for instance. But this final step in the scenario process can develop some initial and valuable strategic insights.

How to produce these insights is, again, a matter of discretion; but there are certain approaches that should be considered. Most obviously, we can examine the scenarios in detail to determine the opportunities and threats that each poses for our organization. Then two questions suggest themselves. First, which opportunities and threats are common to all (or nearly all) the scenarios? These are the ones on which presumably our strategic thinking should be focused. The second question is: how well prepared are we (or can we be) to seize those opportunities and obviate (or minimize) the threats? The answers to these questions provide an initial assessment of the core competencies that the organization needs if it is to succeed in the conditions portrayed in the scenarios. Bringing together the answers to these two questions suggests some discrete strategy options (though not yet an integrated strategy) that deserve more disciplined analysis.

A second possible approach is to use the scenarios as test beds for assessing the resilience and vulnerability of the organization's current strategy. This exercise can be as straightforward as a judgmental assessment by the executive team as to how well (or badly) the strategy plays out in each scenario. A start would be to go through an opportunities/ threats assessment (as above) and then use this assessment to address a second set of questions: are we satisfied with the resilience of our current strategy, its flexibility to deal with different possible conditions? Are there things we could do to improve its resilience? And, importantly, are there contingency plans we should put in place to help us move in a different direction, if that is necessary?

The planners at Berklee used their scenarios and discussion of their implications to develop a shared vision and a resilient strategy for their institution. The vision, "Creative Musicianship for a Changing World," provides for increased student diversity and for the continuing introduction of new technologies and teaching methodologies into the curriculum. It commits Berklee to strengthening its participatory and collegial culture, and to expanding access to secondary collaboratives, postsecondary consortia, international music education, and relationships to the music industry.

Conclusion

Environmental analysis is an essential first step in issues identification and management, in developing strategy and vision, in organizational learning, and in contingency planning.

Developing a comprehensive environmental scanning/monitoring process to feed scenario planning is expensive in that members of the academic enterprise are heavily occupied with day-to-day problems and may see the time spent in external analysis as taking away time from handling immediate problems. This is particularly true for senior members who have the responsibility for organizational decision making. Noal Capon (1987) and Henry Mintzberg (1994) have noted that one of the weaknesses of external analysis in corporate strategic planning is that often senior decision makers are not involved in making the analyses; consequently, the results of the analyses lack validity. However, if senior leaders are involved with scanning, monitoring, and scenario development, the analyses have organizational validity and usefulness. And in turbulent times, not expending the resources-including the time of senior leaders-to anticipate developments that can affect the future of the institution is foolhardy.

References

Morrison, J. L. "Environmental Scanning."  In M. A.Whitely, J.D. Porter, and R.H. Fenske (eds.), The Primer for Institutional Research. Tallahassee, Fla.: The Association for Institutional Research, 1992.

Nuefewld, W.P. "Environmental Scanning: Its Use in Forecasting Emerging Trends and Issues in Organizations." Futures Research Quarterly, 1985, 1 (3), 39-52.

Pritchett, M.S. "Environmental Scanning in Support of Planning and Decision Making: Case Studies at Selected Institutions of Higher Education." Paper presented at the annual meeting of the Association for Institutional Research, Louisville, Ky, May, 1990.

Renfro, W.L., and Morrison, J.L. "The Scanning Process: Getting Started. In J.L. Morrison, W.L. Renfro, and W.I. Boucher (eds.), Applying Methods and Techniques of Futures Research. New Directions for Institutional Research, No. 39. San Francisco: Jossey-Bass, 1983.

Simpson, E., McGinty, D., and Morrison, J.L. "Environmental Scanning at the Georgia Center for Continuing Education: A Progress Report." In D.M. Johnson (ed.), A Handbook for Professional Development in Continuing Higher Education. Washington, D.C.: National University Continuing Education Association, 1990.

Schwartz, P. The Art of the Long View. New York: Doubleday, 1991.

Wack, P. "Scenarios: Uncharted Waters Ahead." Harvard Business Review, 1985a, (5), 73-89.

Wack, P. "Scenarios: Shooting the Rapids." Harvard Business Review, 1985b, 63(6), 139-150.

Wilson, I. "Realizing the Power of Strategic Vision." Long Range Planning, 1992, 25(5), 18-28.

Wilson, I. "Strategic Planning Isn't Dead--It Changed." Long Range Planning, 1994, 27(4), 12-24.

 

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