MIT Sloan Management Review: How Ghost Scenarios Haunt Strategy Execution
Featured article for this week's Brief
Read time: 3 min
Big Idea
Invest in strategic planning to chart your intended course of action, while using scenario planning to reveal blind spots and challenge and avoid implicit assumptions to be better prepared for future outcomes and situations, particularly socioeconomic and environmental shifts that may have an outsized impact on your business.
Top Thoughts
Executives often have a blind spot in planning and tend to focus on actions to be taken without considering socioeconomic and environmental changes and contexts.
Ghost scenarios are sets of implicit, unquestioned assumptions about the future that are embedded within existing strategies. Failing to question and examine these assumptions could lead to unanticipated, negative future consequences.
By making use of scenario planning, leaders are enabled to explore different future situations and plan and adapt their strategies to account for possible challenges and be more resilient to change.
Leaders must be aware of the importance of taking into account the broader context of a situation when developing strategies. Like the Rubin vase illusion, leaders need to be able to shift their focus between the figure (strategy) and the ground (context) to avoid blind spots.
Organizations should invest time and resources into identifying and exploring the changing factors that could impact their strategy and future planning.
Do not disregard or sideline insights gained from scenario planning. They should be integrated into strategic decision-making processes and be shared across the organization to prepare for a variety of future contexts.
Quick Quotes
"Strategic planners are often blind about how the future will challenge their status quo. A scenario-planning mindset can help them see what they’re missing."
"Business leaders are inclined, and their organizations configured, to work with only a single implicit view of the future. That view is typically deeply embedded within their strategies as a set of unquestioned assumptions about the future context. We call these sets of unexamined assumptions ghost scenarios because they are invisible — and because they may come back to haunt executives and companies in unanticipated and unwelcome ways."
"Underpinning every ghost scenario is a small set of implicit trends that leaders project into the future without questioning."
“Research on human perception has demonstrated that people differentiate the object of their visual focus from its background by bringing that object to the forefront of their attention while everything else recedes. Humans can focus on either the figure or the background but never both at the same time… It’s important that executives are able to recognize how people’s ability to focus can also blind them to important contextual information."
[Example] “Consider the ways in which dramatic changes in climate have come to haunt rail services in Britain. In July 2022, temperatures above 40 degrees Celsius (104 degrees Fahrenheit) were recorded in the country for the first time. These high temperatures heated the rails to slightly over 62 C (143 F), causing them to bend. As a result, many train trips were canceled and service on other routes slowed to 60 mph. The rail tracks had been engineered for a future in which the air temperature did not exceed 27 C (80 F). In short, the British rail network was designed and built to work not in the scenario in which it found itself in 2022 but in a scenario that made the implicit assumption that historical climate trends would continue unchanged.”
"Scenario planning exercises can help executives explore how their strategies might play out in different business contexts and conditions, with an eye toward honing those strategies to be more effective… (and) keep executives from being haunted by a ghost scenario."
"Making scenario planning a regular part of the strategy-making process... alerts leaders to how turbulent conditions could change the context within which they work and compete."
“Dedicate executive time and resources to the problem. Organizations must intentionally create a time and space for leaders to explore how relevant economic, political, technological, social, and environmental factors might be changing. Contrast a small set of future scenarios with the ghost scenario to pinpoint where current strategy might need to be adapted to be well positioned for the range of ways the context might develop.”
“For a strategy to be successful when the context changes, executives need to have a balanced approach — recognizing both figure and ground as important areas for discernment. That is, they must recognize the importance of the background or ground upon which their actions will play out, even as they plan their next move.”
“Savvy executives know that they must both envision and embrace change. The trick is learning to adeptly shift one’s attention between the figure and the ground to see how the context might unfold, so it doesn’t leave your strategy ungrounded.”
Actionable Advice
Use scenario planning - Brainstorm possible future scenarios to identify potential outcomes and impacts and evaluate what positive or negative impacts different responses will bring. Be prepared to be proactive in tackling potential future challenges instead of responding reactively.
Question implicit assumptions - Actively challenge and investigate the assumptions underlying currently accepted strategies to expose biases and be better prepared for changes and enable more thorough planning.
Context and strategy - Allocate time and resources to fully understand the broader context in which your strategies will operate, not just the strategies themselves. This will give you a clearer indication of how effective the strategies will prove.
Explore multiple futures - Develop diverse scenarios to explore how strategies might perform under different future conditions and adjust your strategies accordingly.
Share insights - Share the findings gained from scenario planning across all levels of the organization to encourage comprehensive readiness for future changes and challenges that could arise.
Source(s)
Lang, T., & and Ramírez, R. (2023, Oct 11). How Ghost Scenarios Haunt Strategy Execution. [Web Article]. MIT Sloan Management Review. (Link)
