Shell’s executives must have a lot on their minds. At any given moment, a shift in global politics could send crude prices through the roof. Innovation in the auto industry changes the way we consume gas, and new environmental regulations are reshaping oil extraction.
Given the volatility of its industry, you would assume Shell’s leaders don’t have the time to scrutinize their decisions. However, it’s because of this landscape that Shell overthinks things. If they hadn’t been analyzing the future for the past 30 years, Shell wouldn’t be where it is today.
Scenario planning – the art and science of planning for the future – isn’t quite as sexy as the “fail fast” mantra popularized by startup culture, but it shouldn’t be dismissed as a bygone business tool. After all, even Facebook has abandoned its “move fast, break things” mindset.
An ounce of prevention
With so many factors shaping the course of a business, a strategy that might be effective in one set of circumstances could fail in another. Overthinking through scenario planning is like a gut check before leaping into the unknown. It’s creating a wide range of potential scenarios, contemplating their impact, and proactively planning for the future.
In 2004, the Austrian Federal Ministry for Education, Science, and Culture employed scenario planning to identify possible disruptions in the food supply due to landscape. By assessing different angles, they were able to identify sustainable ways of managing the food chain.
In another example, a McKinsey white paper [PDF] shows how the English National Health Service used war game techniques to prepare for major policy changes. And according to The Economist, the New York Board of Trade used scenario planning to build an alternative trading floor to the one in the World Trade Centre, “a decision that kept it going after September 11th 2001.”
Overthinking can help businesses prepare for potential complications, and while there are lots of ways to overthink, it’s worth keeping a couple of general guidelines in mind.
Input from multiple stakeholders: A diverse range of perspectives helps organizations gain a more holistic view of their situation. Ford Motor Company solicits input from stakeholder committees to develop its human rights approaches and uses feedback from environmental groups to shape its sustainability approaches.
Defined processes: Without a concrete system to ensure a rigorous analysis of all possible options, it’s easy to dismiss certain scenarios without proper consideration. There are lots of templates out there, including PEST analysis, Porter five forces analysis and SWOT analysis.
Forward momentum: In the face of multiple options, companies run the risk of paralysis by analysis. Overthinking is a strategic tool, but it’s one that becomes counterproductive when it prevents action. Businesses are sharks: They must keep swimming to survive.
Think fast, swim far
Taking the time to weigh out options before jumping into a decision is vital to intelligent planning and implementation. The deeper an organization’s curiosity is now, the better informed it will be in the future.