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🧭 Understanding why we make predictions with Pierre Wack

🧭 Understanding why we make predictions with Pierre Wack
Photo by Daniel Gonzalez / Unsplash

One of the most critical videos you can watch about managing uncertainty is one of the very few recorded interventions of the brilliant Pierre WACK. He was one of the (mostly) unknown heroes who single-handedly reinvented the business forecast discipline in the eighties with his scenario-planning approach.

What do you need to take away from this video?

If you’ve run any business operation for a few months, you would have soon realized that business plans are useless. Rigidly forecasting what will 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 have 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 a part planning, relying on the known knowns and known unknowns in the market, and it’s a 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 of how they will unfold. On average, this educated prediction will be 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. ; )