The conventions of enterprise management, especially as they affect the commercialization of new ideas, are built to reflect what we've learned from experience. And experience is a great teacher with a really big flaw: it's backward looking.

It's exactly the backward look that can make us blind to opportunities in nontraditional operating environments. Looking forward is no simple task either, especially in this age of permanent uncertainty. One response has been resurgent interest in scenario planning.

Scenario planning is a concept with as many meanings as there are people who practice it. Conventionally, it's used mainly for risk management and risk avoidance. Kevin McDermott of Collective Intelligence and Peter Kennedy of Future Strategy Group, in a much discussed article for InnovationManagement, argue that scenario planning can be lifted out of its conventional uses in risk management and employed instead to spot nontraditional possibilities and avoid "opportunity blindness".

The risk in the conventional approach is that the outcome of scenario-planning may, whatever efforts to the contrary, represent a consensus view developed in an echo chamber of like-minded people asking similar kinds of questions from similar perspectives.

That risk is highest when a single assumption about the future emerges as dominant-especially when the assumption is unconscious or unexpressed. Economic historians refer to these unexpressed assumptions as "path dependence", the backward-looking habit of assuming the future will be a revised edition of the present and that, therefore, what makes sense now will, with some tweaks, make sense later.

A good way of thwarting the tendency to path dependence is to include multiple possible futures in the scenario-planning design. Imagining multiple futures obliges planners to stress test organizational tactics for the likelihood of success or failure in any future, deflecting planners from the best-guess impulse.

McDermott and Kennedy argue that too many organizations won't invest the time required for the multiple futures approach, opting instead for "strategic flexibility," which in practice often falls short of delivering the strategic confidence to act. Strategic confidence is having the conviction to make choices resilient enough to sustain growth and innovation no matter which tomorrow arrives.

To read the essay on opportunity blindness click here.

The romantic conception of innovative people is that their big ideas show up fully imagined: Newton, apple, boink!, theory of gravity. In a recent article for InnovationMangement magazine Kevin McDermott argues that giving birth to ideas, and raising them to be businesses, is a hard work of imagination—a task he calls discernment.

"In the last century," McDermott argues, "it was enough to be better, faster, cheaper. That's what management teams were rewarded for and that's how the dominant economies got that way." A consequence, he contends, "was that for 100 years our organizational culture dictated that the higher one went in authority the further removed from the actual work of that organization one became."

Using examples drawn from his client work McDermott contends that involving senior staff in the communications function deepens the invention process. If he's right it may alter our expectation of what senior managers do in the 21^st Century corporation. But making that alteration will place a premium on rigor in explaining themselves.

"By becoming deeply involved in the expression of new ideas," says McDermott, "senior executives become active players in the invention process. They bring a decisive commercial impulse to the shaping of new ideas—an impulse lacking when communications is reduced to 'messaging'. They bring explicit strategic ambition to knowledge transfer and turn ideas into financial models."

To read McDermott's article, "Notes on discernment", click here.

The Lodestar Collaborative has launched its Resilient Governance^tm initiative with a suite of tools to help organizations sustain growth while managing the inevitability of surprise.

The partners in the Lodestar JV—Board Advisory Services, Collective Intelligence and the Futures Strategy Group—are currently in conversation with organizations whom the partners describe as "sick of cost cutting and eager to talk about growth."

"The forces of change affecting individual businesses are so much larger than the general economy," said Anne Simmons, CEO of Board Advisory Services. "Near-term economic conditions have to be managed, of course, but so do regulatory change, political movements and all kinds of global trends that shape the operating environment. But those conditions are evolving all the time," says Simmons, "often in ways no one sees coming."

Lodestar's Resilient Governance process begins with an outside-in assessment of where an organization sees itself relative to the forces for change gathering on its horizon—market risk, financial uncertainty, the talent pipeline, among other forces. The hinge of the Resilient Governance process is Lodestar's distinctive scenario-planning approach, which gives clients powerful insights into alternative business environments.

"The objective is to help clients imagine their businesses in a variety of operating environments," explained Peter Kennedy of the Futures Strategy Group, "not to bet on a most-likely future. We've found it a powerful way of creating and stress testing the resiliency of business plans."

The work has profound implications for an organization's governance processes, said Kennedy, from leadership development to enterprise-risk management to innovation strategy.

"What we've noticed in our client work," said Kevin McDermott of Collective Intelligence, "is that executives naturally pursue order but they can be so absorbed in the capable day-to-day running of a business that they don't lift their gaze up over the horizon—what we've termed 'the tyranny of the present'."

The tyranny of the present, McDermott argues, can obscure dangers that may result from the choices senior executives make today, producing deplorable surprises in the future—and not necessarily the long-term future.

To help clients manage near-term uncertainty the Lodestar partners have devised customizable scenarios that depict distinct—yet plausible—recession-recovery conditions for 2010 to 2012.

"The short-term scenarios help executives identify resilient courses of action that anticipate change and disruption," said Peter Kennedy. "They prepare clients to implement contingent actions in anticipation of future shocks so they're ready to thrive in whatever future arrives, good or bad."

In September Collective Intelligence again teamed with Futures Strategy Group and Board Advisory Services for part two of a scenario-planning event hosted by the Institute for Internal Auditors in New York.

Building on the introductory session conducted for the IIA last January, the three firms took IIA members through a multi-scenario analysis to help them think practically about nontraditional risks in a range of business environments.

Participants in the September event spent the bulk of the day in structured breakout groups brainstorming around richly imagined "worlds"—scenarios, that is, for 2025. The product of their work was a reimagined audit function appropriate to each scenario. A plenary session at the end of the day compared ideas from multiple scenarios, and left only the strongest, most versatile ideas standing. Participants went home with real-world recommendations for their organizations.

Participant feedback was overwhelmingly positive. Said one IIA member, there was profit in "looking into the future first, then back to the present to come up with strategies. It was a lot of fun, as well as an education. The speakers were excellent."

Participants were engaged by "the whole concept of contemplating different and even hard-to-imagine scenarios." In particular, "ideas related to managing the workforce of a future world that works remotely—and how to influence management—were enlightening." That sentiment was echoed by another participant who remarked that "everything discussed was so relevant to the real world... It forced the participants to really think in a short period of time." Said another, the day was "an opportunity to think intellectually and creatively about our collective future. Very thought provoking."

Kevin McDermott, the founder of Collective Intelligence, served double duty as the day's luncheon speaker. He addressed the day's main theme that traditional controls are insufficient for managing non-traditional risk.

"Our big idea," McDermott told the group, "is that for managing non-traditional risks traditional control functions may well create a false sense of rigor. Historically they've been designed to measure the present and make choices about the future by making reference to the past. That might not work in the face of a Category 5 hurricane that blows up unexpectedly from over the horizon—which happens all the time."

It's great to have new ideas, McDermott argued, but an organization needs the strategic confidence to privilege some ideas above others.

"Strategic confidence," said McDermott, "is not perfect knowledge. It's confidence that an organization can respond to dramatic change in its operating environment that it could not have predicted by extrapolating from the past."

Collective Intelligence founder Kevin McDermott addressed the 8th International Conference on Knowledge, Culture and Change in Organisations on August 6^th. His subject: what's gone wrong with knowledge management and how to fix it.

The Conference, an annual summit on social and economic change, was held at Cambridge University. Collective Intelligence is not a knowledge-management consultancy but KM is among the firm's core capabilities.

"For a while now," says McDermott, "I've noticed that in client conversations I am careful to avoid speaking the words 'knowledge management'. I can never be sure if the people I'm talking to didn't invest lots of money building 'knowledge capability' and now wish they hadn't."

McDermott had three large points to make. One, talk about "knowledge management" is nearly always talk about technology; the knowledge-creation ROI is assumed. Two, knowledge mangers overestimate the market's desire for social-networking tools. Three, the user experience doesn't appear to matter much.

What these have in common, McDermott argued, is a failure to make explicit the link between an organization's strategy and what it spends on knowledge management.

McDermott told the conference that in the past decade organizations, especially big organizations, set out to build knowledge-management "systems" at a moment in time when managers were spellbound by information technologies. IT, he contended, "promised—well, promised everything. The consequence has been that big-company KM systems often became elaborated data-mining processes."

Making the business case has been tough for KM advocates. McDermott thinks that's because the discipline has so often had only generally defined links to strategy. Knowledge managers, he believes, can take lessons from established corporate-control functions like audit and compliance.

"A control function," says McDermott, "is, at bottom, an intelligence-gathering job, one in which practitioners are—or should be—constantly asking themselves, 'Am I looking at the right things? Am I asking rich questions?'"

Making explicit the why behind collecting a byte of data—to act with strategic intent—is what McDermott calls the "the intelligence agenda", a to-do list naming where an organization needs to be smart if it is to attain its objectives.

"The intelligence agenda," McDermott told the Cambridge conference, "is the business case for knowledge management."

Five years ago the Sarbanes-Oxley Act set in motion a string of unintended consequences for public companies. Among them: internal auditors are acquiring extraordinary opportunity to participate in the strategic direction of their organizations. And it is now evident to auditors that conventional risk and compliance models will be insufficient for managing the nontraditional risks guaranteed to characterize the next 15 years.

On January 11th, 2008 Collective Intelligence combined with The Futures Strategy Group and Board Advisory Services in an unprecedented one-day session hosted by the Institute of Internal Auditors at Madison Square Garden in New York. Attendees learned to cultivate a clear line of sight on the cross impacts of multiple categories of risk from anywhere in their organizations—a horizontal view of decision making intended to tear down the walls between siloed functions.

The intense one-day event was framed by an adaptation of the alternative-futures planning model created by the Futures Strategy Group. Collective Intelligence, a frequent partner of FSG, helped lead participants through the scenario-planning work and provided the practical tools of capturing organizational knowledge and putting it to work. Throughout the day Board Advisory Services, which built its reputation on a horizontal view of risk management, kept the expert audience on track toward an integrated view of governance, risk and compliance in a post-SOX world.

"Our deliverable today," CI's Kevin McDermott told the crowd in his introductory remarks, "is not interesting conversation. If that's all you get we've failed. Our deliverable is to send you out of here with an altered idea of your jobs, your organizations and the strategic choices before you."

The attendees were enthusiastic in their response. Here's just some of what they had to say afterward:

"Forward thinking is a necessary competency. Not only thinking of current risk, but risk that may arise in the future... The breakout groups offered a different perception of risk... The concept of thinking of all disciplines that impact risk fro consideration in the thought process... The set up of this workshop requires full engagement, interaction... It made me think globally... Learning how to apply current issues and demographics, etc to strategic planning... The scenario breakout was far more interesting than what I expected. I enjoyed the interaction of my peers and the guidance provided by Kevin McDermott."

For more on the application of futures-strategy to non-traditional risk click here.