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
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
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.
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
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
the following scanning publications are particularly useful when initiating a scanning
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 email@example.com; for SCUP, contact firstname.lastname@example.org.]
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
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
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 , 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-à-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
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.
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
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
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
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-à-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
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
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
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.
- 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.
- They should be structurally different, that is, not so close to one another that
they become simply variations of a base case.
- 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
- 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.
- The scenarios should challenge the organization's conventional wisdom about the
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.
- 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.
- 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.
- 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.
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.
Environmental analysis is an essential first step in issues identification and
management, in developing strategy and vision, in organizational learning, and in
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.
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