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Roman Vakulchuk: Strategic Forecasting vs. Scenario Planning

«Strategic forecasting fails to predict any radical change either in political or economic domains. The advantage of scenario planning is that this method makes decision-makers better prepared for a new reality», – Roman Vakulchuk, a senior researcher at the Norwegian Institute of International Affairs (NUPI), former employee of the Shell Oil Company (Royal Dutch Shell), a trainer on scenario planning, said in the interview to CABAR.asia.

Русский – Interview is translated from Russian language.

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Can we try to draw a scenario of future events, make a forecast for many years ahead and which methods are applied by state and private sector actors for this?

Roman Vakulchuk. Photo: cabar.asia

We all know it is very difficult to predict the future and we often fail to do so. However, there is a method that can help be better prepared for the future. There are two types of methods that look into the future.

The first method that has been used for many years worldwide is the so-called strategic forecasting. It analyses events and trends of the past and projects trends into the future based on the events that took place in the past.

However, this type of forecasting has a major weakness – it does not take into account unexpected factors that can intervene in the process and change the situation dramatically. In other words, strategic forecasting helps identify certain trends based on how the situation developed in the past and how it may look like in future. However, it fails to predict any drastic or radical change either in political or economic domains.

In order to be better for the future, a British-Dutch oil company, Royal Dutch Shell, began utilizing a new method that is called scenario planning back in the early 1970s. The employees of Shell started thinking about the factors that could affect the oil market development and company’s activities. They were looking not only at the developments in the past, but also monitored new and emerging events and trends that could lead to profound changes in the future. This method differs from strategic forecasting by identifying, selecting and adding to the analysis new and unknown factors – that are likely to shape the future – through creative brainstorming and a systematic approach.

The model can work well if applied to such unexpected events as, for example, the election of President Donald Trump in the United States. According to strategic forecasting, the victory of President Trump in the elections would be impossible to predict given the history of presidential terms in the United States and presidential candidates; we know from the history that US presidents had always represented the American [political] elites, while Trump represents the business elite. If we used strategic forecasting, we would have never come to the point of predicting this. In turn, the scenario planning method allows to include new and previously unknown political, social and cultural factors that can lead to profound changes with big consequences.

How is the scenario planning method applied in Europe? Are there successful and failed examples of event forecasting in Europe for many years ahead? 

As to the European companies, I have already said it is the oil company Shell. Other oil companies also followed Shell. Representatives of other sectors for example, a German company DHL – express delivery services; General Electric and many other large companies have been using this method since the 1970s. Today this method is often used by governments of various countries.

I would like to make a prominent example of the unpreparedness of some companies for the emergence of new players or products in a market. One of such examples is Kodak, which used to be one of the most successful companies in the world. It was one of the leaders in photography production. The company was successful, however, it failed to look beyond its success and was unprepared for a new reality, in particular, for the emergence of digital cameras. The company thought it was unlikely that the market would accept digital photos. However, the consumers shifted to digital photos and cameras. It led to the bankruptcy of the company several years after digital cameras took over.

What is the scenario planning situation in Central Asian states? Have there been any attempts to take a look into the future?

To answer this question, I should say that the scenario planning method is very complex. It is expensive in terms of financial and human resources and time-consuming. Not all countries have an opportunity to create conditions for running scenario planning regularly. Many developed countries, say, in Europe, have more opportunities for scenario planning and they use them for their benefit.

In terms of international affairs, it is very important for small states to be able to plan their future, to carry out different scenarios and to better anticipate the actions of their neighbours.

If small states can anticipate the actions of big states, they would gain more strategic advantages as well as political and economic benefits from it.
If we apply this model to Central Asia, we will see that the region is under the influence of China and Russia. Unfortunately, almost all Central Asian countries tend to mainly react in their foreign policy to the actions of big neighbours often failing to anticipate what is coming next from big powers.

It means that Central Asian states are often one step behind such countries as China, for example.
Several institutions were established in Kazakhstan recently which focus on studying China. One of them is located in Almaty and is part of the KIMEP university, and the second one is located in Nur-Sultan. This is a great improvement because until recently there has been no institution in Central Asia that would focus entirely on China.

I have also seen a few publications of Kazakh think tanks, which forecast the development of Kazakhstan in 20-30 years. This is a positive step towards the assessment of future events and other countries should also develop and apply this method. As I have already said, this may be very helpful in terms of strategic benefits. If your policy is based on future scenarios, you will be better prepared for new changes in 3-5 years.

What should be done to improve scenario planning for Central Asian states? 

First of all, it would be useful to hold meetings between representatives of the five states. For example, analysts working in ministries, the government or public sector employees responsible for important decision-making could meet each other at regional forums. The meetings are needed to run brainstorming sessions to share ideas, plan adaptation strategies and be better prepared for the future together.

It is also critical to finance research projects in the region. More funds need to be allocated so that local researchers working together with foreign researchers could build scenarios for the region. I would like to get back to China once again given its increasing role and influence. I think it is essential to be one step ahead of China, to better anticipate and understand what should be expected from this country and what actions need to be taken in advance. 

This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project implemented with the financial support of the Foreign Ministry of Norway. The opinions expressed in the article do not reflect the position of the editorial or donor.

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