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HEI/Erik Aru: Nick Turner, CEO of consulting company Global Business Network that is helping the Estonian Development Fund to compile the Estonian Growth Vision, talked to HEI, how and why should you look into future.

Please describe, what it is you actually do?

Fundamentally we're about helping people make better decisions today in the light of future uncertainty. Our philosophy about thinking about strategy is based on the premise that human beings are really bad in thinking about the future, as we are not hardwired to do that very well. Because, usually we look at the current situation or the recent past and basically extrapolate it forward. And we tend to have somewhat linear forecasts - that's the way we think about the world

And that obviosly is bad?

Sadly the world very, very rarely actually evolves into that direction. Typically organizations, whether they are governments, third sector organizations or multinational corporations, tend to tie their strategies to a single future view. And there are some advantages to that - it gives clarity. But there are also some dangers, because when the future evolves in a very different way, if big discontinuities come along, it can upset your strategy. We have got cases where people have actually gone out of business because they have got things badly wrong.

And in last 2-3 years with the financial crisis, the whole concept that the future is uncertain is a big part of conversations. Although my concern is that people have very short time memories and as soon as better times are come back, they tend to forget the pain of the past and focus on the good times going forward

And what do you do in Estonia?

We are fortunate enough to have been chosen to partner with Development Fund to help them think about Estonian growth vision for the next ten years. That's why we're working here in Estonia, using scenarios initially to help Estonians think from "outside in" perspective how future will evolve.

Scenarios have been used in Estonia before. What do you do differently?

That's true. Criticism we heard from people who were involved, is that they were quite self-referential, quite internally focused rather than thinking broadly, more from macro angle, externally what might happen in the world, and were bit too narrow. We're big believers that you have to think divergently about what might happen before you think convergently what you should do. And we think that thinking like that allows you too have a very different conversation.

Typically when you're in a strategy meeting, you tend to begin your sentences with words "I know", "I believe" or "I predict". When we have scenario-based conversation, it starts with words "let's imagine", "what if" - it's a very different conversation. It gives you creativity and freedom to explore the unmentionable, the un-talked-about, and in many instances start to really understand a broader set of drivers and uncertainties. So you can start, instead of beginning from what you already know about past, to build in a set of future uncertainties, which can then lead to divergent, challenging, plausible stories about the future. They're not predictions, but stories - they can be quite data-rich - but they really are about helping you to rehearse the future.

And how many of these stories do you create?

Typically we develop four scenarios. If you do only one scenario, it's really a forecast. When you do two, it will be up-down, good-bad, it tends to lack dimensions. Three can be up-down-middle. If you have got four, it typically adds another dimension. But more than four gets quite confusing and hard to hold in your head.

And once you have your four scenarios, you take them one by one and think - if this was the future, why would we care? How would we successful? What are the threats? And start to think about the key implications. You can think about that in a macro perspective, in a national perspective, in an industry perspective, in an organizational perspective depending on your starting point in the strategy process

So, the scenarios are ready, what happens then?

If you have done the scenarios, the different futures, ultimately you have to take a view how you want to move forward. There are ways of plotting different strategies and different options against different scenarios, it's really about understanding risk. It doesn't free you from making difficult decisions but hopefully you make these decisions in a much more enlightened state of mind having thought through what might happen. Plus you can start developing contingency plans.

A very simple analogy is when you drive a car and see a sign saying "Children crossing". And when you drive a 100 yards a kid runs to the street, you are actually quicker to brake, because you've seen the sign, you've rehearsed that in your mind and then it actually happens - and hopefully you have slowed down, so it's not just a last minute panic reaction.

What we find is that the way human beings make decisions is looking at data, but also with intuition. So I think scenarios are really good for putting color around your data, informing your intuition and giving you the confidence to make difficult decisions. We often find in strategy making process that you may have a beautiful-looking document but it doesn't really affect people to change their behavior. In many ways when using scenarios we try to connect people also emotionally as well as intellectually.

But how do you do it?

The way we do it, is very much a co-creation process. We try to avoid the case where a group of consultants goes away and writes scenarios, come back and say - here they are! Because me showing you my scenarios is about as interesting as me showing you my holiday pictures - you weren't there, it doesn't resonate with you, it might hold your attention for a couple of seconds, but it's not like experiencing the whole process of creating scenarios.

There are several things I'd recommend to any organization doing scenarios. First thing is sponsorship. Really important is to get the right level sponsorship - somebody who actually has the power to make decisions, can make sure you get the right stakeholders. With the right sponsor you can get the right stakeholders involved.

What kind of stakeholders are the right ones?

In terms of types of people you want to get involved, we talk about three types of people. One is key stakeholders - people like sponsor who are actually responsible for making decisions. Two is knowledge-holders - people who have specific expertise on the topic you're talking about. And the third group is what we call the creative and the curious - who are not necessarily holders of formal power, but they are people who perhaps think differently, are maybe younger, and really give a different perspective how they see the world evolving and the issues affecting a particular organization.
The other element that is very important is time, which is often the hardest element to achieve. Coming from investment banking, the scarcest resource there was time. And it takes time for peoples' perceptions about the future to change. So building in time for the process is also incredibly important. And that's where you start to get that sort of an emotional connection.

The best way to describe it might be as follows. Typically we are in a workshop environment, where you have people working in groups and occasionally it involves allocating a group to a specific scenario, and sometimes it creates a thing called scenario envy. People start saying - hang on, I don't want to work on that scenario! This one is much more positive, it's more likely to happen and so on. But when a group has worked for half an hour on a scenario, going through the details, the logic, they start to say - actually, this really might happen. And after a couple of hours they start saying - this is the one. Because it takes time for people to change their perspective and get the sense of the logic, and the flow, and the plausibility how the future may unfold in a different way. And that's where you start to get that emotional connection, not just the intellectual connection.

But where do you start? You come to a company, a country you know something about but not very much - where do you start?

The first part is to do some preliminary research to understand what really are the key drivers that shape the particular future you're focused on through things that are what we call predetermined - there are not many these days, but things like demographics that are pretty much preprogrammed for next x number of years. But also you're most interested in thinking about what are the key uncertainties - things that are really unclear how they are going to play out, but also have a really big impact on the topic in hand.

Typically we reach out to our network, to be able to get that exposure to their different thinking and the experience they have, as well as talking to internal experts, managers, to get a really good sense of the key issues that are at stake. We also use that as a input into the workshop process to co-create scenarios.

We have different methodologies to create scenarios. The one that we use most frequently is a deductive approach which we have kind of a reverse engineered out of the Shell experience. There are actually eight steps of thinking about scenarios to wound all the key uncertainties into a two by two framework, a matrix if you will, which is built around the key critical uncertainties. And based on those you have a logic of the future as defined by those adjacent axis. That is a really powerful methodology that allows you to think quite divergently about the future.

With whom have you been speaking in Estonia?

We have spoken to a number of our external experts but we've also spoken to a number of people that the Development Fund have hooked us up with. So from GBN perspective we use people like Peter Schwartz who is one of our founders, and very knowledgeable about working with different nations - for example he has a 20 year relationship with the government of Singapore. We've spoken to people like Crawford Beveridge, who is part of our network. He is a very senior executive for Sun Microsystems now but before he used to run Scottish Enterprise which is a regional development fund in Scotland. We've spoken to people like Eammon Kelly, who was my predecessor as CEO of GBN, also worked for Scottish Enterprise, but has also worked with countries around the world. Professor Peter Webber, who is professor of political economy at UC Berkeley, who works very closely with US government and also consults with us on Middle East. Mia de Kuijper, who works at Duisenburg School of Finance in Amsterdam, and has worked at Shell.

Within Estonia we have spoken to politicians and business leaders, academics, like Marju Lauristin, minister of defence Jaak Aaviksoo and Sten Tamkivi from Skype. A really interesting mix of people.

If you start building scenarios, it's probably possible to create something like 15-20 of those. How do you choose which ones make the final cut?

There are multiple ways. Shell would typically use what we call an inductive method where they would go to a country house and drink tea and start to coalesce around certain stories about future. That is actually quite hard to do, you have to be quite skilled at building scenarios to do that.

Then there's another method, where you identify what we call the official future. Every individual, every organization has an official future - it's basically the future you assume is going to happen. Sometimes it's sort of explicit and you can read it in strategy report or a plan, sometimes it's implicit, you have to reverse engineer it from an annual report. Typically that sort of plan or the model around it tends to work for a certain period of time, but when it fails, it fails big.

The first thing we do, is we try tell a story about the official future. You create that story which is familiar to the people in that organization because it's something with which they resonate. You then look within that story for key variables that can take the future into a different direction and you just start to create the scenarios based on diverging ways from the official future. This can be quite a productive way, but it takes a lot of skill and the chances of these being quite different are harder to achieve.
The way we often do, the deductive method, which is about making the framework - out of the hundred plus drivers we identify, we essentially boil it down to two most important uncertainties. That will give interesting third dimensions.

Can you give me an example?

In January 2008 I developed a framework to think about the world after the global financial crisis. One of the uncertainties was the nature of economic growth, the other one was the nature of globalization. We had the world as we know it, as it has been for the last 50 years - Washington consensus, US in the driving seat, they make the rules, free trade. And the world not as we know - multipolar, more countries and cultures set the rules, potentially there's more friction in the system, different way of globalization. And this gives you the 4 scenarios where you start to build interesting, plausible and challenging stories. The deductive framework is kind of easier for others to understand, to digest and to absorb the basic logic of how the scenarios are different.

And where is the world going now in this framework?

I think what we will see, the nature of globalization is less unclear now. I think it is pretty much predetermined now that we will see a much more multipolar world. And that's very interesting to see how that evolves. It isn't about democracies it is now more about autocratic capitalism and government-sponsored capitalism than democratic capitalism driving the agenda. If you look at the economies that are successful now - it's India, it's China, it's the Middle East, Russia of course always has its' own particular challenges and issues - but they are very different governance models than we have in the West. Even in the US or UK we see government intervention has been made necessary by the crisis, and many banks are actually owned by the government which was unthinkable four-five years ago.

Where are you now with scenarios for Estonia?

There is a very interesting question that we have been discussing throughout this project which is - as a country of 1.3 million people, what is the realistic impact that Estonia can have on the world? How do the megatrends like rise of China really impact Estonia? The question was, what is most important - changes on the world level, changes in the Baltic RIM or relations with Russia like some thought. At the end we stayed with Baltic RIM, that I think influences Estonia more than developments in China - but of course these also have their influence.

And with Estonia being on the verge of euro, it has been of course a big part of our discussions here. Some economic policies are dominated by the need to meet the Maastricht criteria, so euro is seen like a magic bullet. In some audiences we spoke to, I think were unrealistic expectations what the euro can achieve. There is a danger that when it arrives it all falls flat, there is sort of a hangover as the realization comes that it isn't the answer. It doesn't alleviate the need to make difficult decisions. In some ways you already have the euro as your money has been so long tied to the euro, in some ways, psychological and reputational, you don't. In one or two scenarios there were some negative impacts of having the euro, particularly in some of the cost advantages that Estonia has had in the EU that may be equalled out as you get the euro and get more assimilated into EU economy.

How much use does such scenario creation usually have?

When done well, it can have quite a dramatic impact on an organization. How we use scenarios typically - one way is to help people to think about strategies from afresh. And right now we're very, very busy because of this big shock, this discontinuity in the economy. Those that are going to survive, they'll say "phew, I'm alive but I really don't want to go through that again." So they try to understand better how the world is evolving so they can be better prepared for these kinds of shocks going forward. And also, whether they can make their strategy more robust, more future-proof, if you will.

So one is the opportunities to actually create new strategies, and new ideas, and think creatively about how the world may unfold and what kind of opportunities and risks that offers to you. Two is taking existing strategies and testing them - kind of wind-tunnel my strategies through different scenarios and kind of see how my strategies perform in light of different circumstances. And what we find is that it does help to create alignment amongst decision-makers and management teams. It gives people confidence to actually make difficult decisions. It can actually unblock sometimes bureaucratic decision roadblocks. It also can start to make explicit things that are much more implicit or hidden. When thinking about economy, it also allows you to better understand what is cyclical and what is structural and that can be pretty useful too.

Nick Turner
Nick Turner is co-president of GBN and a partner of the Monitor Group. As well as runnig the company, he provides strategic consulting services to clients across Europe, the Middle East, and Asia, and runs GBN's operations globally. He joined GBN in 2007, prior to that he worked 11 years for Morgan Stanley where he was managing director and head of of strategy in Europe.

GBN was created in 1987 by workers of the strategy unit of Royal Dutch Shell. Shell is one of the most successful companies in the world when it comes to strategic planning. In December 2000 GBN merged with consulting company Monitor Group that was founded by Harvard Business School professor Michael Porter and his colleagues. By now the group employs 150 consultants in 23 offices in the world. GBN has also its' members' network that includes 150 people from different fields, from scientists to artists and musicians.