Posted by: Nicholas Davis | November 5, 2009

Research fun

After 61 days of dropping the ball on this blog, I’m (kinda) back. Given the amount of work on at the moment in both Geneva and Oxford this may be another fly-by-night affair with the narciss-o-sphere, but my pride demands that I at least try to record some random thoughts every now and again on the topic of scenarios, uncertainty and other vaguely interesting topics. For my future self as much as you, to be honest.

So today, as I prepare to jump off to a phone conference, I offer the following question that has been bugging me of late:

  • Are scenarios a useful way to explore an organizational fitness landscape?
    • Is it possible to theoretically show how scenarios might map out both a perceived and real morphology of competitive advantage, given both contextual (wholly external, macro-environmental) and transactional (closer, influence-able) shifts?
    • Can this be systematized, and can one correct for bias in the way the scenario process is performed to get as close to what people might think of as “reality” as possible?
    • Is it possible to link this to any existing or future empirical work in terms of the usefulness of this approach?

Thanks to the wonderful people here at the Said Business School, I have a massive pile of reading that might help me answer these questions, but if you happen to have some insights into complexity theory and could offer some thoughts or ideas, that would be most helpful.

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  1. I think scenarios are interesting most likely because the usually fall outside of the fitness landscape. I am using “scenarios” in the sense of narrative events or cuasaul “what if” situations. This is typically one of the few ways to get out of iterative blindness that a bounded fitness landscape is. I would use scenarios and group discussions to try and expand the limits of the fitness of fitness/unfitness landscape. Islands of low outcome high impact situations are best considered in narrative form rather than using data sets. jsut my thought. Of course this may not be what you were considering with the use of the term scenario. Scenarios be definition are also limited by the imagination and culture blindness to the group creating or using them. Few groups want to see/consider those things which could wipe them out or mean the closure of a line of business. Consider the AIG CDS business and what would have happened if a scenario group in 2005 had presented a case with a fitness landscape indicating correctly to shut the group down. Behavorially it probably wouldn’t have happened and the group and model would have been removed or ignored.

    • Thanks Nick, I appreciate your perspective on this.

      I think we are using the word scenario and concept of the fitness landscape in the same sense, just from slightly viewpoints. In my questions I was implying that there is some externally determined fitness landscape (just as in scenarios we often think of the future as “coming at us”) – and therefore we’re on the same page in terms of extending the limits of what we perceive as that landscape at any one time. You could argue that there are two fitness landscapes – the “real” one that eventually evolves due to external uncertainties, and the “perceived” one that is at the heart of our mental models when designing strategy. The function of scenarios can then characterized as using qualitative methods to help us “reperceive” (to borrow from Wack) the landscape in such a way that gets us closer to reality – even though that reality doesn’t yet exist yet, due to it being in the future.

      Re your AIG example, I agree that even scenarios that correctly display a fault-line in organizations are more often ignored than acted upon, but some cases indicate that simply having gone through the scenario can shorten response times when the earthquake comes, as well as providing a blueprint for action that could be helpful in terms of corrections.

      One final thought – each scenario represents the evolution a different fitness landscape over time, rather than just revealing different points of the same landscape. Therefore the purpose of “strategic options” would be to consider which algorithms or strategies find high-points across multiple possible landscapes defined by critical uncertainties.

  2. This is as applied to methods of software development not necessarily pure business scenarios – but they define a ‘landscape’ between chaos and order – and suggest that a level of ‘self organising complexity’ arises at a minimal governance level.

    Just a random thought…

  3. Thanks Jules! Interesting blog post. Hope you’re doing well!

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