Typically, companies looking to develop new products or new ways of thinking engage in a process of scenario planning. Shell is the famous example, where they typically hire a group of people to develop a lot of data and do a lot of analysis and then that becomes part of the business planning process. Your approach, however, seems to be different.
If you look at Shell, there are two characteristics. It was a scenario-planning exercise in which first, they included numbers, and second, it was not a top-down exercise. It was a team that did a lot of studies—and they did them well—but the impact was probably a little bit disappointing. Why? Because it was not produced at the top levels of the company. I think that you can address these two elements with the approach that we have proposed.
There are two types of uncertainty. Let's take chess. When you play chess and you move the queen, you are in an uncertain position—you don't know what the other player is going to do. In the end, though, it doesn't matter so much. Why? Because you know exactly what you don't know. This type of uncertainty is more or less covered by the classic strategy-consulting approach. My role is to push things further in order to cope with the second type of uncertainty, in which you suddenly realize that your opponent might not want to win–-he might want to finish the game as soon as possible in order to go home. Now you're completely lost, because this is something you didn't even know that you didn't know. By definition, you cannot forecast this. We recommend being better prepared if you are unable to make a forecast.
What we propose is a method called “express scenario,” which is a way to address the two points I mentioned about Shell. First, the scenario is produced at the highest level of the company in order to have a greater impact. Second, numbers don't matter. This is the “black swan” concept. A black swan is an event that is completely unlikely to happen, like the Icelandic volcano—and which nobody predicted because it was impossible to even imagine—but whose impact is huge. In the world of black swans, numbers are not relevant. So let’s forget about numbers. Let's build boxes on the basis of concepts and images. Again, the scenario is produced at the top, and there are no numbers. It’s a new product, but in the end it is still about boxes. You have the main box—the vision, the aspiration, the ambition, the one thing you want to achieve—and we recommend surrounding this main box by three or four other scenarios or boxes that will never happen, but because they surround the main ambition they will help you to make better decisions. Scenario planning is just an additional decision tool that you put in your toolbox to be a better CEO.
Could you give an example of a scenario process that you've recently conducted that would illustrate these points—that building several boxes or scenarios around the core vision helps you to further refine the key scenario or vision?
Let's take a French bank that I worked for. Year after year, this bank outsourced more functions to India—starting with data entry, and then data storage, and then accounting, and then a little bit of IT—because it was so efficient and so much cheaper. In the black swan scenario, the CEO of the company in India eventually says, “Hey, I have here all I need to build a bank. I have knowledge, I have skills.” He opens an Indian bank. Then this bank grows and becomes a real bank. And one day he has to go abroad. Where does he go? To France, because he has a good connection there—my client. He opens a branch in France. And at the end of the scenario, of course, he purchases part of my client.
Purchases part of the original bank?
Yes. Okay, it will never happen—but I can tell you that the bank will never forget this scenario. And that’s the goal—to force you to remember a possible future and the impact of a particular dimension, in this case outsourcing. People are forced to remember dimensions that are relevant to the business.
And that helps them to focus on what's most important for the company.
I'll give you another example. The same bank had to hire somebody, and they had narrowed it down to two candidates but couldn’t decide which one to choose. I suggested that they expose the two candidates to the scenarios and see which one was more robust, more ready to cope with this type of approach.
In other words, in the interview process, the two candidates were asked how they would deal with the different scenarios. And the way they responded helped the company decide which person to hire.
Exactly. And the scenario exercise can be applied to all sorts of decisions—buying a new computer system, hiring somebody, opening a subsidiary in another country…And that's why the theory of the box matters so much to me, because I have become convinced that creativity is a very small part of the real challenge. Thirty years ago, I believed that brainstorming was the key. Brainstorming is certainly an element of perception. But my job is even broader than perception—it's induction. How do you develop hypotheses about the world?
If I'm a CEO and I want to introduce a new process along the lines that you describe, can you take me through the steps that I would need to take?
Step number one, the CEO shouldn't think alone. Maybe there are some exceptions, but most of us are not Steve Jobs. The future is built with a team. A vision is solid if it is endorsed by a lot of people.
Step number two, look outside. This is not that easy if you work for a large company, but it’s necessary to look outside to spot what we call megatrends. And step number three, challenge the way you perceive. Why? Because even with perfectly obvious megatrends, you cannot always deduce a strategy. Megatrends don’t necessarily have clear solutions. Philips is in home health now because one particular megatrend, the problem of social security in Europe, was perceived by the CEO of Philips as an opportunity. Someone else might have viewed it differently. We tend to see the world the way we want to, but we need to see the world as it is. We need to challenge the way we think.
And then, in step number four, you design the new box. You say, “The future of BIC is not writing. The future of BIC is disposable plastic products.” Step number four is an ambitious image of something you want to achieve with your company—the Big Thing. Once you have that, you have to apply criteria. In my work, I have never used a single number. Nobody believes me, but it’s true. To achieve the same rigor, I use criteria. In my scenario exercises, I have a list of 12 criteria to evaluate whether a vision is a good one or not.
So you've got your vision. You've got your agreed-upon scenario.
This is the direction that the company has decided to go forward with. What’s next?
What's next is action. And to make a long story short, that is not my area of expertise. My role is about perception. I joined BCG for this reason. To me, creativity is about changing perception, and innovation is about changing reality—and truly successful change includes both. If you change only people's perception, it's a failure. If you develop a brand-new product, but nobody understands it, it's a failure. You need both innovation and creativity.
Let me make one additional point. When you want to really address reality, you have to know a lot about the company you are working with. But when I am working, I don't need to know much about the participants. I know they are human beings, like myself, and I know the basics of thinking. And I can accomplish a lot. But at a certain point, if I want to go a step further, I have to know more about the people and the company, and this is not my specialty.
You're saying that creativity sparks innovation, which is then put into practice. So creativity underlies it all.
Yes. Innovation can happen without creativity. Imagine that you're in a restaurant, and you have the idea of starting another restaurant. This is innovation, because your new restaurant was not there before—but it is not creativity, because you just took someone else's idea. When you change reality without creativity, it’s innovation. And innovation is fine—it's more of the same. But eventually, more of the same is not enough. You need something else—the new box, the new way to look at what's in front of you. This is creativity.
It's a good combination. You need innovation all the time. You need creativity from time to time. Imagine a company where each Monday morning there is an e-mail update of the strategy. What will happen? Nobody will work any more. People will say, “Make up your mind. And when you're ready, we will go back to work.” In order to be workable and profitable, an idea—a vision, a strategy, a box—needs to be frozen, or fixed. You may not touch it. Otherwise you will end up having to go back to the beginning of the conversation. But because the world is not frozen, there is by definition a gap between the frozen idea and the world—and that gap will widen over time. And one day you will need another idea.
In closing, Luc, if you could give CEOs just one piece of advice on how to bring fundamental change to their business, what would it be?
You should never hesitate—and always doubt. A good CEO never hesitates. If somebody comes with a question, you supply the answer. If the customer doesn't pay, do this. If the machine is broken, do that. But that's not enough. The CEO should remember that if he or she is in a position where it's possible not to hesitate, it is because at one point he or she froze an idea or strategy. But again, a frozen thing doesn't last forever. So one day you will need another idea. And this is doubt.
Very good. Thanks very much.