Strategy and Ghost Stories




Two Types of Bias

When we say someone is “biased,” often we mean that his stance is showing, that we know his view on some matter (and usually that we disagree with it). This sense of “bias” has to do with WHAT we think. Interpretations must be made from some point of view. Meaning does not exist in a vacuum. To make sense of facts we must first interpret them, and the way we interpret them is not separate from what we already believe. This is our frame, an underlying structure of belief regarding a situation, determining how we see it.



Sometimes when we refer to “bias,” we’re more referring to HOW we think. We reason using time-saving tricks, what psychologists call “heuristics.” We use them because they tend to work well, but in some settings, they lead us astray. Where they warp our use of information, more data will not drive better decision making. Such “cognitive biases” are our instincts backfiring, which means our instincts can’t tell us when they might be misleading us (Lovallo & Sibony, 2010).


The Pull of Narratives

We make sense of things in the form of stories. Once locked into one, once things “gel” for us, we do not readily explore alternative narratives; in fact, we often selectively interpret newer data so that we don’t have to (Dawes, 2001). When we find a narrative that “connects the dots” we cling to it, even if what it leaves out is more important than what it contains (Taleb, 2007). As Pennington and Hastie (1991) found, a cohesive narrative is likely more persuasive to jurors than the quality of the evidence itself. Lawyers then can almost be seen as “dueling storytellers.”

In business this is akin to the idea of “scenarios,” developed by Herman Kahn as stories about the future, told as though by someone FROM the future (Schwartz, 1991). In the early 1970s, Pierre Wack leveraged this idea and helped develop the practice of scenario planning at Royal Dutch/Shell. This is the use of stories about plausible possible futures to strategically reframe decisions, plans, and actions.



As Wack (1985) notes, the point was to offer an alternative to traditional forecasting, which often assumes the world will largely be the same in the future. Scenarios leverage analysis and storytelling to challenge the assumptions of decision makers. As he puts it, they should be “more than water on a stone.” By using scenarios to draw in the participation of decision makers, and then, with them, creating a reference set of multiple strategies and outcomes, we can help expand their mental models and avoid having decisions anchored to too few narratives.

Scenario planning leverages the pull of narratives and uses this fact against itself. It’s like fighting fire with fire, bias with bias. It’s “counter-narratizing.” By challenging assumptions, fleshing out alternative narratives, and probing our frame, we can partially offset BOTH types of bias discussed above.


Writing the Ghost Story

Our prevailing narrative, whatever it is, frames the situation for us. This is sometimes called the “ghost scenario.” If scenarios are stories about the future, the ghost scenario is the assumed future in which the existing strategy would be successful; but it’s only one of many possible futures. There is always then at least one ghost scenario, replete with its underlying—and typically unaccounted for—assumptions.



Whatever it is, the ghost story is woven largely unconsciously. We perceive in given ways and so notice certain things and not others, and sometimes misinterpret. This unconscious process of “naming and framing” makes certain aspects salient as issues, which then suggests what we will do in response (Schön & Rein, 1995). When we ignore this process of “problem setting,” we often end up solving things that won’t create much value. The problems we frame should be high-value things we can do something about.

Assumptions are what we take for granted, and yet, once exposed, can be hard to justify (Evans, 2012). The “givens” must be challenged. Assumptions might be about how we got here, the current state of affairs, or assumed futures. Either way, assuming something must be a certain way often comes with a large opportunity cost. Whatever is being assumed, it is important to discuss both the likelihood and risk if wrong.



If, like a fish in water, we cannot expose the prevailing frame, then we cannot step out of it and explore alternatives. Its underlying assumptions will “haunt” us unawares. The best way to counter the pull of a narrative, the pull of the ghost scenario, is to first identify what assumptions are being made. Do some activities to surface and capture them. Write them down. Even considering a simple 2 x 2 shows four potential scenarios (Wack, 1985); and, often, certain cells in the matrix will lead to many others.



Some might object, stressing that the situation “is what it is.” And yet, the same “situation” can be framed in multiple ways. It can be thought of as a STORY about what is wrong and what needs fixing (Schön & Rein, 1995). Our thinking about the future grounds our decisions made now. By writing our ghost story and generating alternatives, we fight groupthink and trigger reframes. It’s common that the initial frame will have been too small; but it can be suboptimal in a variety of ways (adapted from Andreas, 2006).




Changing the Frame

To reframe is to “reperceive” a situation with different assumptions, creating different possibilities and value-adding options. Gather a diverse group of people with conflicting perspectives and let them debate. If vigorous debate cannot happen, if it is not a psychologically safe environment, then there will be a disagreement deficit and accompanying opportunity cost (Komisar, 2010). Start doing some exercises and asking questions.



By exposing our assumptions, we begin to reveal the frame. This helps us capture the ghost scenario and get it down on paper. Once we’ve fleshed it out, how likely is it really? We can then start creating alternative scenarios; and, by fleshing THEM out and seeing how the “dots” can “connect” in other ways, we will begin to trigger reframes. After creating alternative scenarios, we then walk our ideas or assumptions through them.

How might these alternative futures change our thinking? Starting in the here and now, we surfaced assumptions we were making both about what got us here, what is true now, and what we would like to achieve in the future. We then “chunk up” to explore wider contexts, generate alternative scenarios, and, using them as a lens, see how they might alter how we see the here and now (Normann, 2001; Ramírez & Wilkinson, 2016).



Managers or stakeholders might not want to admit problems, but this doesn’t mean they’re not there. They are hidden in the stories we tell, the way we narratize how we’ve arrived where we are, in the way we even conceive of the situation, of what we think is “wrong” and what needs “fixing.” It’s all a STORY and, as Terry Pratchett said, “Change the story, change the world.” By unpacking the ghost story and surfacing assumptions, we can strategically explore our framing, which is one of the most impactful things we can do.





References

Dawes, R. (2001). Everyday irrationality: How pseudo-scientists, lunatics, and the rest of us systematically fail to think rationally. Boulder, CO: Westview.

Evans, J. (2012). Strategic planning: Managing assumptions, risks and impediments. Vistage. Retrieved from: https://www.vistage.com/research-center/business-growth-strategy/managing-assumptions-risks-and-impediments-in-strategic-planning/.

Komisar, R. (2010). Kleiner Perkins’ Randy Komisar: ‘Balance out biases.’ McKinsey Quarterly. Retrieved from: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-we-do-it-three-executives-reflect-on-strategic-decision-making.

Lovallo, D. & Sibony, O. (2010). The case for behavioral strategy. McKinsey Quarterly. Retrieved from: https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-case-for-behavioral-strategy.

Normann, R. (2001). Reframing business: When the map changes the landscape. Chichester: Wiley.

Pennington, N. & Hastie, R. (1989). A cognitive theory of juror decision making: The story model. Cardozo Law Review, Vol. 13, 519-557.

Ramírez, R. & Wilkinson, A. (2016). Strategic reframing: The Oxford Scenario Planning Approach. Oxford: Oxford University Press.

Schön, D. & Rein, M. (1995). Frame reflection: Toward the resolution of intractable policy controversies. New York: Basic Books.

Schwartz, P. (1991). The art of the long view: Planning for the future in an uncertain world. New York: Currency Doubleday.

Taleb, N. (2007). Black swan: The impact of the highly improbable. New York: Random House.

Wack, P. (1985). Scenarios: Uncharted waters ahead. Harvard Business Review. Retrieved from: https://hbr.org/1985/09/scenarios-uncharted-waters-ahead.

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