The single greatest challenge to management today is that the business environment is constantly changing. Not only does this erode the value of previous experience (what happened last time is no longer a useful guide to what might happen next time); it also presents a range of emerging issues that have serious implications for organisations now and in the future. Some of these are well understood, well structured and can be resolved in various ways. Many more are poorly defined, complex and time sensitive.
In other words, just as it gets harder to make the right decision, it becomes even more important to do so, and to do it quickly. Too often CEOs find themselves having to make decisions without understanding their full consequences – a dangerous practice.
The discipline of organisational learning was developed to address just this issue. It is an approach that helps people develop innovative solutions in circumstances that are complex and uncertain. Characteristic of organisational learning is the use of groups to challenge assumptions, develop new ideas and beliefs. After all, beliefs are the hidden foundations of strategy: if beliefs don’t change, nor does strategy development. For any organisation to succeed, it must be able to change its strategies to meet the demands of a changing environment. Many tools can be used to develop strategy in the learning organisation. They include:
- systems thinking, which helps to define and understand problems;
- scenario development; which helps us understand how possible futures
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can unfold for an organisation; and
- computer simulation models, which capture the complexity of particular issues in a computer and permit “what-if” analysis.
These tools can be used individually or together to help people make the fast and effective decisions that permit an organisation to manage change at short notice (see salibafigure1 119.17 Kb).
Systems thinking: understanding why things happen
Systems thinking is about synthesis (grouping together) as opposed to analysis (pulling apart). It helps people clarify their perceptions of how a business operates or how a particular problem or issue eventuates by considering it as a whole rather than trying to break it up into individual parts.
Systems thinking is characterised by:
- identifying the major parts which comprise the whole;
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understanding the relationships between the parts;
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exploring feedback between the parts;
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recognising the system's unique “emergent properties” – the properties that are more than just the sum of the parts; and
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understanding that changes to one part of the system will affect the rest of the system and vice versa.
Systems thinking principles are used to develop “systems maps”, diagrammatic representations of parts of a system and the relationships between them that will reveal the driving forces or dynamics of the system. Reading the map helps determine the system’s patterns of behaviour, test various business strategies and promote discussion of the possible implications of decisions before they are implemented. An example of such a map, for workforce planning, is shown in salibafigure2.
Scenario development: a multi-sphered crystal ball
For many of us, dealing with the issues of today takes up every available minute. Organisational performance suffers because there is not enough time to explore what developments may be unfolding that will affect the business in the present and the future. No one can predict or forecast the future with any accuracy.
The best that can be done is to understand what possible futures might eventuate and be prepared for whatever occurs. One way to do this is to adopt the process of scenario development. This is an approach which was developed and used very successfully by Royal Dutch Shell in dealing with the oil crisis of the 1970s. Scenario development provides a framework for decision-makers to understand how current trends and forces can interplay with one another and unfold to create possible different futures.
It is important to recognise that these scenarios describe different possible future worlds for a business, rather than different outcomes in the same world. They allow decision-makers to consider what choices they can make today about tomorrow, with an understanding of the implications of those alternatives. The future orientation of scenarios provides the platform for people to rehearse tomorrow, today. By “visiting the future”, decision-makers can challenge their own perceptions, stretch their thinking. Organisations can use scenarios to develop products and services based on the emerging future, offering a pull strategy as opposed to a push strategy.
Computer simulation models: an electronic crystal ball
Creating systems maps and scenarios helps us to understand the complexity of the real world. However even using these tools, the number of variables and complexity of the relationships between them are beyond the capability of the human brain. So how can decision-makers make sensible decisions quickly for today and tomorrow, if they want to take into account the complex dynamics of the business?
One approach is to develop computer simulation models of the unique dynamics of the organisation and its business. These models are the manager’s version of the pilot’s flight simulator. Like the pilot, decision-makers can test their decision-making skills, beliefs and ideas about the business by simulating new strategies and policies before they are actually implemented. The computer accelerates time so that the long-term impact of a decision or a policy or a strategy can be seen and understood. Comparing the results from different simulations allows decision-makers to learn about the subtleties of the business and which changes will have the greatest impact.
Simulation exercises undertaken with groups of people are especially powerful.
Collective development of new ideas and insight helps to stretch the minds of participants, and the computer testing of ideas in real-time leads to discussion and further insight. As the future unfolds, decision-makers are better prepared to make decisions because they have been able to rehearse the future. This approach complements forecasting techniques found in spreadsheets and in large econometric models. The aim here is to understand the dynamics of structural forces and how changes in one element can affect others, to have an overall effect on the business. Using systems thinking and scenarios also allows management teams to model some of the softer processes, such as perception, motivation, values and beliefs. Forecasting cannot provide such insights. The processes which I have described represent the front-end of an organisation’s work in strategic development. The back end is the crafting of strategy and an operation plan.
Strategy Development
All of the front end tools and processes are designed to challenge, shape and enhance the way decision-makers see the world. With their mental frameworks updated, they can make more informed decisions. Strategy is a conceptual framework that defines the nature and direction of an industry or an organisation. Ideally, this framework represents the shared thinking, beliefs and assumptions of a group of decision-makers with input from a range of other people.
Strategy provides a reference point from which everyone within an organisation is able to make sense of dynamics inside and outside the business. Whether it is during times of turbulence and high uncertainty, growth or recession, the strategy becomes a useful reference point from which decision-makers can assess their alignment with the changing business environment and determine whether or not they need to reinvent the business or re-arrange goals.
After completing a strategy, decision-makers and others in an organisation can focus on operational plans. There are two important elements to this work. The first is communicating the strategy throughout the organisation, so there is a shared understanding of what it means for different areas of the organisation. Secondly, the development of operational plans needs to be coordinated so that duplication is eliminated and synergy of activities is maximised.
Conclusion
The success of decision-makers in dealing with increased complexity will depend on how they extend their ability to address current and future problems. Use of these and other tools of “the learning organisation” will help decision-makers to reduce doubt at the same time as they increase their speed of response. Rehearsing the future is a powerful way to improve corporate performance when complex and difficult issues arise, as they will. Better still, it offers unlimited opportunities to open up new directions that may not otherwise have been considered.
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Applied Futures 
