2 min read

Understanding why we make predictions with Pierre Wack

pierre wack - icopilots
pierre wack – icopilots

Doing the work I do, I’m one of the few professions right now that is not in healthcare and yet is currently swamped with work. This means, that Part 3. in my series on Covid-19 on how to adapt to uncertain times, will take a bit of time before I can really get into it. That being said, to prepare you for this article and also put once again in context my article on the post-Covid-19 crisis predictions, I wanted to share one of the most critical videos you can watch about managing uncertainty.

It is one of the very few videos of the brilliant Pierre WACK who is one of the (mostly) unknown heroes who pretty much single-handedly reinvented the business forecast discipline in the 80s with his strategy of scenario planning.

What do you need to take away from this video?

If you’ve run any form of business operation for a few months, you would have soon realized how business plans are useless. Rigidly forecasting what’s going to happen for the next 5 years in any market-driven activity is an illusion that even bankers don’t entertain seriously anymore. But what is the alternative? Rewrite your business plan every month? What’s the point then?

So the obvious alternative is to embark full steam into the opposite mindset. Let’s plan nothing and just adapt and react with agility to what the market throws at us « as entrepreneurs do ». This has even been formally theorized as a complete model and called  « effectuation ». It is quite successful in many innovation circles (including one of my very good friends in France who is a brilliant evangelist of this approach).

In my experience though, scenario planning has been what worked best to deliver real-life results in the market for my industrial customers all over Europe.  And Pierre WACK has certainly been the most important virtual mentor I had to play this game since 2007.

Scenarios can be successful in structuring uncertainty only when … they change the decision maker’s assumptions about how the world works and compel him to change his image of reality. This is different—and more—than simply designing good scenarios.Pierre WACK, 1985

For me, scenario planning is a tremendous tool because it’s an extremely practical in-between approach. It’s part planning relying on the known knowns and known unknowns in the market. And it’s part agile adaptation to the unknown knowns and even more to the unknown unknowns flying in our collective face.

It reduces the complexity of anticipating and working ahead of the market curve by narrowing the focus on key system predictors, mapping them out, and having a temporary prediction on how they will unfold. This educated prediction will be on average more reliable because you mapped clearly the underlying forces at play. But you don’t live or die by them, they are only fair assumptions that you certainly know as only « assumptions ».

And when reality checks in and proves you wrong, it’s OK. You have been preparing for that and can work on scenario B which was already anticipating you being wrong at this juncture. Or as I was writing in my Covid-19 predictions article… « This is the essence of strategy. Having a plan because you understand it’s rather useless, except for mapping the key junctures you need to monitor going forward. »

Hopefully, it makes even more sense now… And for those who have been following me for quite a while, it also illustrates why we use reverse innovation pipeline strategies or talk fruit flies genetics as key tools of our practice. ; )