Scenario selection and refinement

The findings illustrate how over-confident estimations of future conditions may hinder forward learning in the organization by generating inaccurate understandings of the business environment and fostering perceptions in some organizational members that the SP process is based on unrealistic premises and thus of limited value.

Our study identified several factors may impede the learning process during this stage. Particularly salient are: 1) functional bias of scenarios and 2) power and politics

Functional bias of scenarios. The study found that scenarios themselves acted as a learning barrier by affecting how and which environmental information was communicated through the SP process. As the information is analyzed, interpreted and integrated within the frame of an operationally heavy process, information that could not be driven to fit such frame was excluded. Several interviewees expressed concerns that the financial (mathematical) and operational nature of the SP process frustrated exploratory learning about new environmental developments because, as the director of the SP process acknowledged, scenarios were only included “if they could materialize in numbers”. This hinders consideration of new strategic opportunities when the future market size and potential outcomes of investment are difficult to quantify, thus preventing exploratory learning.

Analysis of the final SP documentation and presentations given to strategic decision makers provided additional evidence of this learning barrier. Only 6 pages of the 50-page final presentation to Executive Management in 2012 contained scenarios and information about new environmental issues; three of those six pages were in the appendix. These findings indicate that the functional bias of scenarios acts as a learning barrier by filtering out information which cannot be quantified, thereby limiting the information which can be fed forward through the SP process.

Power and politics. Our study showed political power as a potential barrier that prevented individual level insights from being transmitted to the group level and institutionalized throughout the organization. In the eyes of the informants, the SP process was limited by its inability to generate enough explorative learning and adequately challenge

assumptions and strategy. This dissatisfaction triggered several attempts for change, but the lack of bargaining power of these actors prevented the inclusion of new learning possibilities beyond the localized areas where these actors had influence. In some instances, efforts were blocked by powerful individuals by eliminating options and rivals, setting the agenda of the scenario process, or exerting influence over final presentations.

For instance, many informants questioned the financial emphasis of scenarios but these actors lacked the bargaining power to change the SP process. Since the SP team leader was anchored in the production side of the organization, a focus towards production capabilities and risks was deemed natural and value adding. Similarly, transforming scenarios into impact over profit and losses was needed in order to increase confidence in the numbers and long term targets to be communicated externally, and thus deemed necessary from the CFO’s perspective.

We found that individuals directly involved in the SP process had learned experientially that the process was operationally heavy and too granular. With the exception of one informant, the rest of the informants directly involved in the SP process described it as extremely operational and acknowledged they had concluded from their involvement with the process that scenario construction in particular could be made more efficient and less time consuming. For example, one director expressed the view that “the process does not have to be that huge”, while two other directors felt the process could be made more valuable for strategizing by challenging assumptions about organizational strategies and focusing more on strategic perspectives than production capacity. However, participants acknowledged that the SP process’ main focus and deliverables had remained essentially unchanged for years despite individuals attempting to adapt SP processes to make the process more exploratory and less detailed; for instance by developing an alternative model “with more high level estimates and much less detail to make the process more value driven” (Director).

Furthermore, the study found that power and political dynamics acted as learning barriers by preventing insights about ways to improve SP processes from transitioning from individual to group levels (interpreting) and from group to organizational levels (integrating).

Interviewees explained that although several attempts had been made to change the SP process to generate more explorative learning and challenge assumptions and strategy, these attempts had been blocked by managers further up the organizational hierarchy. As one director explained when discussing the history of SP at NZ:

“Historically, the ownership of the process…who is doing what... has been a result of old battles in the organization about having influence because you are sitting on very interesting information. It is also about being promoted; who is having the discussion with executive management; it is a question of influence …”

Consequently, although learning was generated at the individual level, the lack of bargaining power of the lower and middle managers involved in the SP process prevented the learning from transitioning to the group level and up the organizational hierarchy. The learning was consequently biased in favor of a heavy production orientation of the SP process, which resulted in scenarios and discussions of them being focused on implications for production capacity rather than forward looking strategic considerations.

Additionally, during Stage 2, the power of the CEO/CFO and some members of the executive management team to influence the selection and development of scenarios affect learning by filtering the content of the scenarios and determining which scenarios are transmitted up the organizational hierarchy to senior decision makers. As powerful individuals attach value to particular scenarios and sponsor the forward feeding process in the learning system, it affects the language and cognitive maps adopted by others in the organization (Daft & Weick, 1984). In this way, we find empirical evidence of organizational learning being hampered by power and politics (Lawrence et al., 2005).