The mind of a fox: Scenario Planning in Action
Clem Sunter

Ended: March 1, 2015

In brief, a hedgehog is a person who believes that life revolves around one big idea, one ultimate truth and that if only we can get at that idea or truth, everything else will come right. Once programmed or hooked on an idea, or even worse an ideology, a hedgehog cannot shake it off. Alternatives are irrelevant. As opposed to searching for a hypothesis which most closely fits the facts, a hedgehog will shoehorn the facts into something which will support his ideology, however much the arguments have to be distorted.
A fox, in contrast to a hedgehog, is someone who believes that life is all about knowing many things. Foxes are people who embrace uncertainty and believe that experience – doing things – is an essential source of knowledge. Action sorts out the sheep from the goats! Moreover, like good golfers know that an excellent sub-par round is only built up one shot at a time, foxes depend upon an incremental approach to change the status quo. Life very rarely confronts you with life-changing experiences. Rather, the transformation of your prospects is the result of many small steps taken one at a time, with little knowledge in advance of what the next step will be until it presents itself. Hence, foxes understand that it is a waste of time trying to delineate an exact path into the long-term future. Crossroads upon crossroads upon crossroads await you. You take the turning you like at the time, and you never look over your shoulder.
to his obsession for detail and never-say-die approach to problem-solving: “Once you begin to break down a problem into little bits and tackle each one you find a solution.”
One point which is constantly missed by management text books and business school courses is that 80 per cent of the success of world-class companies is due to excellence in implementation and delivery under a variety of conditions. They are simply brilliant at reaching their goals even when things crop up which they were not registering on their radar screens. At the most, 20 per cent of their success is attributable to the quality of their original plans or the conceptual part of the management process that the majority of management gurus write big tomes about.
What is more, mistakes are not just golden opportunities for learning; they are, in fact, sometimes the only opportunity for learning something truly new and making progress. In 1928, Alexander Fleming discovered penicillin accidentally when he saw that a bit of mould, which had fallen from a culture plate in his laboratory, had destroyed bacteria around it. Basically, he won the Nobel Prize, and a knighthood into the bargain, for a mistake which he had the intelligence to follow up on.
Tiger Woods, for a different reason, can also be nominated as a philosophical fox. He is a student of what the Japanese call Kaizen – a striving for continual improvement to the extreme point of testing something until it breaks and then analysing why it broke. The results are thereafter assimilated into future designs and applications.
The last story does raise an important pair of guidelines for budding entrepreneurs. First, study the rules of the game of the industry you intend going into very carefully. Does it provide a real opportunity of making money? Or could you be condemned to a life of slogging your guts out trying to get blood out of a stone? So many people do this, it’s not funny. Second, ask yourself whether you have a natural ability to succeed in that sector. The last thing you want to do is stumble in because you, or your parents or your friends, thought it was a good idea at the time. It’s no good being a gunslinger with a slow hand in a game where you’re quick or you’re dead. It may sound very obvious but at the outset the question is: “Am I in the right game – for me?”
the “four-way test” read out at the beginning of Rotary Club functions concerning the things we think, say or do is a good start: (1) Is it the truth? (2) Is it fair to all concerned? (3) Will it build goodwill and better friendships? and (4) Will it be beneficial to all concerned?
Anybody banking on commodity prices in real terms rising to assist such a process is in for disappointment, because the world has a permanent surplus of commodities – that is another rule of the game.
America has to optimise between two rules of the game – the globalisation one and the injustice one. But this is precisely what foxes are about. They don’t pursue any one rule of the game as an ideology to the utter exclusion of all the others. Hedgehogs do!
This reasoning leads to the enunciation of three of the most important unwritten rules of the game: (1) virtually all decisions about the future involve a judgement of risk versus reward, because life is a risky business, (2) in most situations decision makers must take into account the reasoning and state of mind of other decision makers, and (3) even where there is conflict of interest, the outcome must be beneficial to both parties for the decision to stick. These three rules apply as much to companies as they do to individuals. Game theory, which was originally developed in a book entitled The Theory of Games and Economic Behaviour by John von Neumann and Oskar Morgenstern and published in 1944, expands on these rules. Let us begin with a diagram that we have christened “curves of pleasure and pain”:
Nonetheless, it is worth re-emphasising that no company is an island, as is assumed in many a strategic plan. You have to play scenarios on the responses of the competition to any action you intend to take – before taking it. For example, if you decide to merge with another company to become a larger entity, then two of your competitors may decide to combine into an even larger one. Vicious and virtuous circles also display the same feedback principle, this time with your customers. Hike your prices too much and your customers disappear so that you have to hike them even more to maintain your revenue. Lower your prices and you may attract more customers than you anticipated, in which case you can lower them even more. As Isaac Newton said, for every action there is a reaction. Hence, there is no point in waltzing into a boardroom with a proposal, entering into negotiations on a contract or presenting a sales pitch to potential customers unless you’ve worked through the range of reactions which are outside your control. The penalty, should you not do this homework, may be an undignified exit with arms flailing and a bruised ego. Not worthy of a fox.
message of how to view change as an opportunity rather than a threat. Scenarios are stories about possible futures. Many hedgehogs in business confuse the term “scenario” with a forecast or prediction of a single future. Nothing could be further from the truth. Scenarios are, in fact, multiple pathways into a future that is unknown. While constrained by the rules of the game and driven by the key uncertainties, they should evoke the same feelings as a really good novel. Each scenario must have a simple, vivid theme which is logically consistent in itself, but differs materially from the other scenarios in the set. It must have a compelling title which enters the common vocabulary of the audience being addressed. The title should conjure up the image of the scenario without the need for the text to be read. There must not be too many scenarios, as the human mind is only capable of thinking in three dimensions. For this reason and because a prime objective of scenario work is to reduce the complex to the easily understandable, we advocate two or three scenarios (four at the very outside) for any particular situation. Only pure mathematicians can think in four or more dimensions!