‘What if …?’ – a key strategy and risk question
We use hypothetical scenarios when considering the impact of driving forces and trends in our non-profit operating environment. Scenario planning is a systematic tool for thinking creatively about possible complex and uncertain futures (Wilson et al, 2000).
Different types or styles of scenario can be devised depending on the nature of your organisation and its business needs. The charts below suggest just some of these:
For non-profit organisations, scenario planning involves projecting the implications and consequences of driving forces and critical uncertainties affecting our member or client base. Judgments are then made by discriminating between implausible, possible, plausible, and probable scenarios, before settling on the preferred strategic responses and priorities. (See Strategic Archery). Forecasting is therefore a key aspect of strategic planning – including what could go wrong (risk management).
A simplified scenario planning process is illustrated in the animated GIF immediately below. The chart which then follows is a modified version of my Strategic Archery chart published in 2020 – now titled Scenario Archery.
Backcasting is a related discipline, which takes the strategic outcome we are seeking and reverse engineers all of the dependencies and processes required to move from our current state into that desired future state. This ‘prospective hindsight‘ (theory of change) can be affected by various biases e.g. availability bias, stability bias, social bias, and optimism, amongst others, so caution is required.
Forecasting and backcasting are not the only ways the ‘What if?‘ question can be used by non-profit directors and managers.
We have previously explored the usefulness of the ‘What? So What? and Now What?’ reflective practice approach, and identified these questions with past (hindsight), present (insight), and future (foresight) perspectives. Asking the ‘What if …?‘ question can helpfully augment our thinking in each of these modes.
The chart below and the header image above suggest that ‘What if?‘ questions can be useful when we are monitoring and evaluating data about past and present developments and performance, as well as when deliberating on options for future policy or action.
Observation and hypothesis are foundational stages when analysing ‘current state’ issues and circumstances. We form a thesis, or theory, about what causal and contributory factors are at work in shaping our environment (consistent with ‘sense-making schemas‘ or ‘frames’ we have developed), and then employ hypothesis, analysis, and synthesis to shape possible responses which we are willing to commit resources and energy to initiate.
Having a shared understanding of the terminology used to describe the stages of critical thinking used in decision-making is important. It enhances the effectiveness of those processes when there are agreed deliberative processes and standards (e.g. standards of evidence relied on, and standards of behaviour when involved in seeking consensus). The definitions provided in the following chart are therefore offered with that aim in mind.
Hypothetical and real risks
Whenever we undertake a risk analysis or ask ‘What could go wrong?’ we are thinking hypothetically. Such thinking is often expressed in the form of ‘What if?‘ questions when considering strategic proposals or operational measures e.g.
- What if this or that happened as a consequence of our actions?
- What if our assumptions about the reliability of a third-party service are not supported during the service period?
- What if we failed to identify potential risks arising from our proposed intervention or initiative?
- What if a recent trend in service failures is an early sign of a system failure?
- And so on …
‘Gray Rhino’ and ‘Black Swan’ scenarios are harder to identify. (See Scenario Archery chart above).
A ‘gray rhino‘ situation is a “highly probable, high impact yet neglected threat … grey rhinos are not random surprises, but occur after a series of warnings and visible evidence,” according to Michele Wucker, the US author who popularised the term.
Nassim Nicholas Taleb popularised the ‘black swan theory’ when his book The Black Swan: The Impact of the Highly Improbable was published in 2008. Black swan events are random, unexpected, but high-impact events. The ‘black’ in the name implies that all such events are negative, however, that is not always the case. Unexpected but high-impact positive events can also occur. Given their implausibility, they may never be correctly identified in your scenario planning, so a key to handling them is to maintain effective monitoring and rapid response systems to mitigate or take advantage of them if and when they occur.
The prudent director is willing to ask ‘What if?’ questions whenever internal or external events (including board reports) set off warning signals, or whenever a new initiative is proposed, as well as during regular (e.g. annual) updates to strategic and risk management plans. When these questions are posed constructively, they are supportive of good governance.
Reference: Wilson, Ian & Chapuy, Pierre & Lafourcade, Bernard & Jouvenel, Hugues & Heijden, Kees & Medina-Vásquez, Javier Enrique & Masini, Eleonora & Coates, Joseph & Ayres, Robert. Scenario planning. Technological Forecasting and Social Change, 65, (2000).
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