expectations (aggregated) theory, based on scenario research

New research techniques have been developed to allow investigation of long-term global trends. They are based on the theory that expectations intimately effect the macro-outcomes of aggregated individual actions. A knowledge of these expectations may be used as a guide to future actions, and hence to future outcomes overall. To allow this knowledge to be obtained, the qualitative techniques - a combination of focus groups with scenario forecasting - were developed as part of a programme of research lasting more than half a decade; and tested against more than 20 groups containing managers from a wide range of organisations. Subsequent quantitative work - using semantic differentials to map the importance of the 162 dimensions discovered at the qualitative stage - has been tested by a survey with respondents from more than 150 organisations.; as has the extension of the process, by a comparison of the quantitative results with the qualitative ones, which plots the likely direction of change as well as the current position of expectations.

The author is a senior lecturer in the Centre for Strategy and Policy, at the Open University Business School, of which he was the first Head and director of its presidential level MBA programme. He is the author of a number of books, including an MBA text-book on long-range planning, 'Marketing Strategy: The Challenge of the External Environment' (Sage), and a description of future developments, 'Future Revolutions' (Orion). In addition, he is in charge of the Open University’s 'Future Observatory' (the successor to its Millennium Project) - which is also the British focus of the American Committee of the United Nations University's project - and chairman of the Strategic Planning Society's special interest group. He has been advisor on long-range planning to a number of organisations and governments.

This article describes a viable set of techniques which allow managers to make more meaningful measurements of relevant long-range trends, even in an otherwise uncertain macro-environment, and hence offer a real possibility of effective intervention in their external environments. The techniques were developed as part of the Open University’s (OU) ‘Millennium Project’, working with more than a thousand large organisations and government departments. The ‘Millennium Project'[i]’, overall, attempted to improve the accuracy of long-range forecasting. The qualitative research in the earlier stages of this project included depth interviews (with senior managers from 50 large organisations), computer conferences (contributed to, over two years, by 400 participants from The Strategic Planning Society and the Demos thinktank, as well as our own students) and (industry) sector scenarios (produced by 200 OU management students). Based on the experience gained, new research techniques[ii] , derived from a combination of scenario-planning and focus-groups, were developed; and these are described in this paper.

The origin of this sophisticated package of techniques for larger organisations (including governments) lies, paradoxically, in our work in developing simpler techniques for smaller organisations[iii]. As part of this overall development work, we have found an increasing need to develop more specific research techniques for identifying the key forces for change emerging in the external environment; techniques which are - accordingly - of interest to the larger organisations. As one result, we have been attempting to develop new, formal research techniques which may be used for this purpose[iv]. This paper reports our progress to date - with some new techniques which appear to successfully produce both qualitative and quantitative results in terms of identifying macro-environmental (global) trends.

As already indicated, the specific techniques involved 'emerged' from earlier stages of the Millennium Project,. In particular, the simplified methods of scenario forecasting, developed for use with our students[v], were developed into the specific ‘focus group’ approach during workshop sessions with these students. The key theoretical underlying assumptions behind the latest stages of the research, however, are derived from our hypothesis of ‘Aggregated Expectations’[vi]. This clearly has its indirect origins in the, macro-economic, ‘rational expectations hypothesis’[vii]. In its present form, however, it directly results from observations of the workings of the focus groups which provide the basis for the qualitative research overall. Whilst the individual members of these groups freely discussed their own wishes for future developments, and the philosophies behind them, they readily accepted that the actual outcomes would be decided by the wider world. Accordingly, they - as members of the groups - universally based their ‘predictions’ upon their expectations as to what the population as a whole would decide; as the hypothesis states. Even so, their expectations were arrived at subjectively; and did not result from rational economic calculations (as the ‘rational expectations hypothesis’ would suggest). The core concept of our hypothesis is that:

The future outcome of a (macro) issue - economic or political - will be largely determined by the expectations of those, in the population affected, whose aggregated individual decisions will shape that outcome.

The corollary is that changing the expectations of this population will change the (macro) outcome.

TIn general, the outcome will be decided by many individual decisions[viii], such that no one such single decision will unduly affect the overall aggregate decision.

The outcome will not be unduly constrained by any resource scarcity, or bottle-neck[ix].

The separate individual decisions, and hence the overall aggregated outcome, will on average be swayed by the individual expectations[x] of this population, as well as specifically by individual needs and/or wants; and the latter can be assumed to be random in nature, cancelling out when aggregated[xi].

Overall, then, the research techniques, described here, are intended to observe these expectations and, hence, to more accurately predict global futures.

One key research element, reported here as the final stage of our qualitative research on global futures, was the framework derived from the techniques we have developed for ‘simpler’ scenario forecasting. This work, which reduces the level of complexity involved in creating scenarios so that they can be used by smaller organisations[xii], originated with the work of Shell Oil[xiii], and indeed the initial stages of our own development work were conducted in conjunction with management from that organisation. In the context ~~[xiv]~~ of this work the process now comprises five main steps - all to be followed sequentially by the managers wishing to investigate the future of their organisations[xv]:

In the new form of qualitative global research, specifically reported here, only the first two steps are undertaken exclusively by our participants and the last two are undertaken exclusively by ourselves. In the case of step 3 there is an overlap. Following this framework, and compared with the scenario planning processes we have previously reported, the main changes needed to meet the different environmental management needs of very large organisations and governments are::

The simple technique we use for the first stage of our scenario work, now described as ‘self-documenting focus groups’, is based upon the one we developed, in workshops with our students, for general usage by all our focus groups, not just those which are involved in our (global) scenario work.

Six to eight managers/professionals[xvi] meet in a conference room - in much the same way as in a normal focus group[xvii]) -, isolated from outside interruptions. At the start of the session, in order to avoid undue bias, the participants are deliberately given a very short briefing, with the bare minimum of information. This takes place whilst they are standing - the first major difference from traditional focus groups - in front of the bare wall they are going to use; chairs are deliberately not provided. In essence, apart from introducing the basic principles of using Post-It-Notes as the vehicle for discussion (and record), only the basic question - which is the starting point, is introduced. In the case of our global scenario work, with more than 20 such groups (containing more than 200 participants, in total, from a wide range of organisations) we said little more than "We want you to describe the future of the world in thirty years time." In practice - despite the initial surprise of the participants - this proved quite sufficient for them to then engage in free-form debate. Most groups are producing a flow of relevant ideas within five minutes and - in our experience - none take more than ten minutes to become fully involved in the debate.

The issues they then identify, the 'drivers' for global change in the case of our own scenario groups, are written, with a thick magic marker so they can be read from a distance, on separate Post-It Notes. These Post-It Notes are, at least in theory, randomly placed on the wall. In practice, we have found that even at this early stage participants want to cluster them in groups - another difference - which seem to make sense. The only requirement - which is why Post-It Notes are ideal for this approach - is that there is no bar to taking them off again and moving them to a new cluster. Thus, the first major difference from conventional focus groups is that this new approach forces a degree of structure on the participants. On the other hand, this structure is determined by them - and usually proves to offer a valuable insight into the underlying relationships.

As in any form of ‘brainstorming’[xviii], to which the process is also indirectly related, the initial ideas typically stimulate others. It is, indeed, important that everyone is positively encouraged to add their own Post-It Notes to those on the wall. This is a second difference, in that the quietest members of the group can, and do, participate without intervention by the facilitator/moderator[xix]. The role of the facilitator is, indeed, much less problematic than is the case for conventional focus groups; and the skills needed by them are also less critical. The participants only have to add a note to the wall to make their point, which most people seem to find easier than entering into a conversation!

The result is a very powerful form of creative interaction within the group, which is applicable to a wide range of situations (but is especially powerful in the context of these global scenario groups). In view of the short time available for such groups to work together, just one or two hours, it also offers a very obvious context for those who are coming to the process for the first time. Since the workings are largely self-evident, participants very quickly come to understand exactly what is involved.

As the initial flow of ideas slows down, participants can easily be introduced to the next stage, with rather more ease than in a traditional focus group[xx], though many of the groups may well move on of their own volition. The key fact is that the facilitator can progress the group through the stages of the research especially easily; and without undue intervention - again requiring less skill. In addition, as the record of the previous discussions is retained - on the wall - the participants rarely need to be reminded of where they have been.

One aspect which is much more difficult to achieve with conventional focus groups, is to ask the participants to develop the relationships between the various factors - something which may be particularly important, say, for work leading to cluster analysis or (as in our futures research) to establishing the dimensions to be explored in subsequent quantitative work. Thus, in the case of our scenario groups, they were asked to try and arrange the drivers, which had emerged from the first stage, into groups which seemed to make sense to them, where the final aim of this stage was to lead into the creation of the 6 - 8 larger groupings; 'mini-scenarios'. This is where the Post-It Notes are almost essential - they will continue to stick no matter how many times they are moved around. While this clustering process is taking place the participants can continue to add new topics - and more Post-It Notes are added to the wall. In the opposite direction, the few unimportant ones can just as easily be removed by them (to be grouped, if required, as an 'audit trail' on another wall).

As the clusters - in our case the 'mini-scenarios' - start to emerge, the associated Post-It Notes can be stuck to each other rather than individually to the wall; which made it easier to move whole clusters around. One great benefit of using Post-It Notes is that there is no bar to changing your mind. If you want to rearrange the groups - or simply to go back (iterate) to an earlier stage - then you strip them off and put them in their new position.

Needless to say, the highly visual nature of the patterns produced by the various arrangements of the Post-It-Notes is especially effective in stimulating investigation into the relationships between them.

Reverting to the framework which specifically relates to global scenarios, and applying the techniques of self-documenting focus groups:

At this stage, therefore, our participants are asked to try and arrange the global drivers, which emerge from the first stage, into groups which seem to make sense to them.

This is the stage which is completed by all of the groups - and is the main basis for our subsequent analysis.

The outcome, in the case of our ‘simpler scenarios’, is usually between seven and nine logical groupings of drivers. In practice, due to the scope of the research (covering all aspects of society) our global groups tend to produce rather more clusters; typically around 10-12 in number.

This stage is also completed by all of the groups, but is only used as a check on the main work which is undertaken by ourselves.

A final, major advantage of the new, self-documenting focus groups, approach is that the main ‘documentation’ of the results is progressively accumulated as a natural part of the process - in the form of the Post-It-Notes adhering to the wall - by the participants themselves. It is they who decide, in this way, what they want to say; and this requires no interpretation to be useful[xxi]. The process may be tape-recorded, or a video made, but the prime record is the notes on the wall - which may then be most easily photographed to form a permanent record. Following the same line of argument, the analysis, at least at the first level focus group work, has already been started by the participants - in terms of their own clusters and patterns - reducing the need for content analysis[xxii]. In the case of global scenarios, however, it should be noted that this is only a ‘cross-check’ on the central analysis - which starts again with the individual drivers for change.

In our scenario planning theory for smaller organisations, the main action, undertaken by all the participants as the next stage, is to reduce the seven to nine mini-scenarios/groupings detected at the previous stage to just two or three larger scenarios[xxiii]. We have found, however, that the time limitations prevent our global scenario groups from fully completing the later stages of the process in the one session available; which typically cannot last longer than two hours. Thus, in the earlier (global) groups, the rearrangement of the drivers to produce fully-fledged scenarios was incomplete; though, even so, the results were enlightening and useful in suggesting what the final scenarios might have been. In the later groups we achieved the same effect by specifically asking the groups to derive 'scenario titles' separate from the drivers - though clearly influenced by the work they had done on them - and this has now become our standard (global scenarios) approach.

In this 'global' research, therefore, the transformation into the final scenarios (and even the production of the overall 'mini-scenarios') is now undertaken by ourselves rather than the participants. The prime input to this process is all the drivers identified - for instance, by the more than 20 research groups (covering at least 140 organisations) in the original research. Once more using the standard (Post-It-Notes) scenario forecasting technique we have developed[xxiv], all these drivers (from all the groups involved) are progressively clustered - by central staff - into aggregated 'mini-scenarios'; regardless of how they have originally been clustered by the groups. This overall clustering is, however, then compared (cross-checked) with the separate work of the groups - to ensure that it is still meaningful in broad terms. This has generally proved to be the case. It is our experience that there is, in any event, some considerable convergence between the results of most of the groups.

These combined mini-scenarios are then transformed into the final scenarios. In view of the very broad scope of the investigation, covering the whole of society, it has proved necessary to utilise four scenarios - rather than the two we would normally recommend for our more traditional work with smaller organisations. These are again compared with those suggested by the groups, and once more we found that there were no major disagreements between them in our original research.

In the normal scenario forecasting process, having grouped the factors into two scenarios, the next step is to examine them for consistency. In our global work, in general, this is supplemented - as mentioned above - by the comparison with the groups’ own scenarios. In the case of the original research, however, this test also took the form of a comparison with the published work of a wide range of other futurists. Here too there was a surprising degree of agreement. Though the nature of future developments is often seen to be a controversial issue, one result from the research was therefore that, at least amongst those studying the long-term future, there seems to be a degree of unanimity; a workable consensus. Indeed, one major aspect of our results turned out to be a surprising degree of convergence between the outcomes reported by almost all the various groups - ranging from uninformed generalists to informed futurists - in contradiction to the uncertainty generally reported by the media. It is this convergence, indeed, which we believe goes a long way to underwriting the viability of the techniques.

One added benefit which emerges from the use of relatively large numbers of groups, as we did, is that some ‘wild-cards’ cards, those involving slow hidden processes which are present over long periods but suddenly emerge (as ‘creeping catastrophes’[xxv]), may also be detected

Conventionally the resulting scenarios are then 'written up' in the form most suitable for the target audience; and, indeed, a summary of our initial work was published conventionally[xxvi]; and summaries of the future developments are already scheduled for publication in the same way. In the case of the original material, due to the very wide scope of the investigations, the final ‘report’, of our qualitative research, ran to more than 80,000 words. Accordingly, the publication of the more detailed material has been on the Internet 'World Wide Web' (WWW). All of the original - qualitative - results, together with details of the research techniques, are therefore described in the various parts of the database available, free of charge, through the index on:

A 7,000 word summary is also available at this address. Again, the new results - and our revised interpretations - will be published, as they become available, on the Web at the same address.

The output from such qualitative focus group research is often used to determine the questions for subsequent quantitative research[xxvii]. In particular, it is used to determine the dimensions to be investigated in market segmentation and product positioning[xxviii]. As the requirement for quantifying our futures research was very similar, we chose this approach - in preference to Repertory (Kelly) Grids[xxix] - because of the large number of dimensions involved. Thus, the results of this qualitative research were used to identify the 162 dimensions, the most likely factors (drivers) for change, to be explored in the subsequent quantitative research.

We use rather more traditional marketing research techniques to quantify the results - for example in our initial mail-survey conducted with 300 OUBS students; where each of these 162 factors (questions) is presented in terms of two semantic differentials[xxxi].

Taking the description of this example further, the initial research was based upon a sample of 300 students studying the OUBS course (‘The Challenge of the External Environment’), which examines the long-term developments in the organisational environment. Though the sample should be formally described as a ‘convenience’ sample, we have found[xxxii] that - due to the large numbers of students and the generally representative nature of the organisations from which they come - their responses typically give a sound guide to those of the overall population.

Apart from a limited number of general ‘demographic’ questions, the questionnaire comprises only the 162 questions - one for each of the factors, key events, identified in the qualitative stages of the research. For each of these factors three pieces of information are requested:

The participants are asked whether the event is likely (defined as greater than 50%), between 10% and 50% likely, and less than 10% likely.

For those events which were likely the respondents are asked to choose from a range of likely dates (2000, 2010, 2020, 2030, 2050+) the one they think most likely.

For each factor they are asked to rate its importance, to their organisation, in terms of a seven point (1 to 7, very important) semantic differential.

Although the result may look like an early stage of a conventional Delphi study[xxxiii], and might even be used as such, the dimensions are already derived from the wider population rather than being in the process of being sought from expert opinion.

Despite the complexity of the questionnaire, it proves viable; so 160 responses (53%) were received from our initial survey - in line with our normal response rate - even though the questionnaire was relatively long and complex for a mail survey. Less than ten percent of these were completed incorrectly. Similar results were obtained with a later repeat of the exercise with a similar number of respondents.

Paradoxically, the quantified results suggested that further development required that we revert to the previous stage! Thus, the earlier - ‘qualitative’ - stage of the work involved a similar number of participants. Accordingly, although it must be strictly judged as qualitative research, it is still possible to compare the different sets of results in broad outline. In this context, the key differences between the two can be summarised in terms of :

- the (quantified) individuals are asked to reply, more conservatively, in terms of the future of their own organisation, where the (qualitative) groups are asked to consider the future of the world as a whole.

- the individuals are asked to report their own views, while the groups are asked to agree possible futures.

In addition, it is likely that the dynamics of group work - following the reported patterns experienced in more conventional focus groups - open out the overall horizons, the individual ideas are debated in a generally supportive climate - where this group support allows the participants to consider ideas which are rejected (presumably as unrealistic) by the individuals.

For the purposes of comparison, the ‘qualitative’ results are ‘quantified’ by two measures. The first is the number of groups, in our initial work from a total of 16 completing all stages of their work, which include a reference to the topic in their list of drivers. The second is the total number of mentions, where a topic is considered sufficiently important for different aspects to be reported separately.

Our experience, so far, is that in many areas the two sets of results are comparable. For instance, employment was included by 12 groups (with 38 mentions) compared with an importance rating of 5.3 (and a probability of 76%), and global warming was included by 11 groups (with 20 mentions) against an importance rating of 6.0 (and a probability of 80%). There are, though, areas where the two diverge markedly. Thus, in terms of apparent differences in perceived levels of importance, 11 groups included space travel, with 26 mentions, but this was given only a 3.4 importance rating by the individuals; though it did have a probability of 70%. These divergences seem to result from systematic underestimates by the individuals in certain areas. They seem to be less inclined to see the importance of (and likelihood of) events which involve changes in the structures of society, or those that are remote from them (or their organisation).

The comparison of the quantified results with the earlier quantitative ones is important, in that it adds an extra dimension to the results. Thus, the quantified results measure, with greater statistical accuracy, the current position of the individual expectations. On the other hand, the qualitative (focus group) results better indicate what future changes in these positions might be likely when considered by the population as a whole.

Accordingly, to ‘map the future’ - which is the overall aim of the process - both aspects need to be taken into consideration; the quantitative results to plot the current position and the qualitative ones to indicate the direction in which changes may occur.

One further element may be usefully introduced at this stage. This is an expert comparison with the views of suitable experts - ‘professional’ futurists for instance - for a further exploration of the issues which relate to structural factors. Such comparison can help decode the detailed results where, in the case of issues which relate to deep structures, those involved (even in the focus groups) often describe the symptoms rather than the (structural) causes.

The overall project involved the development of two new sets of qualitative research techniques. The first of these, ‘simpler scenarios’, allows this approach to be used as a framework for more general research. The second, ‘self-documenting focus groups’, enables a large number of dimensions to be generated; as input to the subsequent quantitative research which uses well-tried techniques (based on semantic differentials). These results may then be compared with those obtained from the qualitative stages; to map both the current position and the likely direction of change. As initially evidenced by the observed convergence of results, the combination allows the expectations of a large population to be investigated - and, thus, future outcomes to be more accurately predicted.

[i] Now transformed into the ‘Futures Observatory’, being jointly run - once again - with The Strategic Planning Society. Full details can be found on the related Website at: http://oubs.open.ac.uk/future/

[ii] Mercer, D, (1995), "Scenarios Made Easy", Long Range Planning, August

Mercer, D, (1995), "Simpler Scenarios", Management Decision, June

Mercer, D, (1996), "A New Qualitative Technique for Exploring the Future", Marketing Education Group (MEG), August

[iii] Mercer, D, (1995), "Scenarios Made Easy", Long Range Planning, August

Mercer, D, (1995), "Simpler Scenarios", Management Decision, June

[iv] Mercer, D, (1996), "A New Qualitative Technique for Exploring the Future", Marketing Education Group (MEG), August

[v] Mercer, D, (1995), "Scenarios Made Easy", Long Range Planning, August

[vi] Mercer, D, (1997), "A General Hypothesis of Aggregated Expectations", Technological Forecasting and Social Change

[vii] Lucas, R.E, (1973), “Some International Evidence on Output-Inflation Trade-Off”, American Economic Review, 63, 326-334

[viii] Made by the whole population involved, not just by the key economic actors involved - as in the rational expectations hypothesis. Of the factors, which will shape the long-term future, surfaced by our research few prove to be largely susceptible to decisions by individuals or even by small groups of individuals (such as governments). Most depend upon a consensus being achieved within the larger population.

[ix] The physical resources available to mankind are still growing faster than the demands being made on them; even though uneven distribution of these resources may yet cause problems. More important, the new requirements arising from the coming ‘knowledge society’ make very limited demands upon physical resources. Indeed, the basic economic ‘law of diminishing returns’ is now being reversed; knowledge becomes more valuable the more it is used!

[x] Usually observed by practical marketing research techniques, not predicted by theoretical models.

[xi] This is similar to the forecast errors typically allowed for in rational expectations work, which are also essentially random with a mean value of zero [Shaw, 1987].

[xii] Mercer, D, (1995), "Scenarios Made Easy", Long Range Planning, August

Mercer, D, (1995), "Simpler Scenarios", Management Decision, June

[xiii] Schwartz, Peter, (1991), The Art of the Long View, Doubleday

Wack, Pierre, (1985), “Scenarios: Shooting the Rapids”, Harvard Business Review, Nov/Dec 1985: 139-150

Wack, Pierre, (1985), “Scenarios: Uncharted Waters Ahead”, Harvard Business Review, Sep/Oct 1985: 139-150

[xiv] Mercer, D, (1995), "Scenarios Made Easy", Long Range Planning, August

Mercer, D, (1995), "Simpler Scenarios", Management Decision, June

[xv] Shell, arguably the most successful user of scenarios, uses more than a dozen different approaches, depending upon the specific needs of the planning situation. Even so, they too have usually attempted to simply the process - not least because this allows everyone involved to understand exactly what is happening.

[xvi] We have used senior managers, and professionals, in our own work because we - unusually - have relatively easy access to them, and we assume that - although they represent a large population overall (much larger, for example, than the small group of actors typically described by the rational expectations hypothesis; in terms of the macro-environment they have greater leverage than ordinary members of the wider population.

[xvii] Goldman, A.E. and Susan McDonald (1987), The Group Depth Interview: Principles and Practice, Prentice-Hall

[xviii] Holt, K, (1988), “The Role of User in Product Innovation”, Technovation, Vol. 7, pp. 249-258

[xix] Bellenger, D. N, K.L. Bernhardt and J.L. Goldstucker, (1976), Qualitative Research In Marketing, American Marketing Association

[xx] Wells, W. D, (1974), Group Interviewing, Handbook of Marketing Research (ed. Robert Ferber), McGraw-Hill

[xxi] Krueger, R. A, (1988), Focus Groups: A Practical Guide for Applied Research, Sage

[xxii] Holsti, O. R, (1969), Content Analysis for the Social Sciences and Humanities, Addison-Wesley

[xxiii] Kahane, Adam, (1992), “Scenarios for Energy: Sustainable World vs Global Mercantiluism”, Long Range Planning, Vol. 25, No. 4

[xxiv] Mercer, D, (1995), "Simpler Scenarios", Management Decision, June

[xxv] Steinmuller, K., The Future as Wild Card, 5. Internationale Sommerkademie des Sekretariats für Zukunftsforschung - Gelsenkirchen, (September, 1996)

[xxvi] Mercer, D, (1996), "The Foreseeable Future", Management Decision, May

[xxvii] Wells, W. D, (1974), Group Interviewing, Handbook of Marketing Research (ed. Robert Ferber), McGraw-Hill

[xxviii] Johnson, R. M., Market Segmentation: A Strategic Management Tool, Journal of Marketing Research, 8(February), 13-18 (1971)

[xxix] Sampson, P, (1986), Qualitative Research and Motivation Research, Consumer Market Research Handbook (3rd. ed. R. Worcester and J. Downham), McGraw-Hill

[xxx] Osgood, E.C, G. J. Succi and P.H. Tannenbaum, The Measurement of Meaning, Urbana

[xxxi] Osgood, E.C, G. J. Succi and P.H. Tannenbaum, The Measurement of Meaning, Urbana

[xxxii] Mercer, D, (1996), “Marketing Practices in the 1990s”, Journal of Targeting, Measurement and Analysis for Marketing, Vol 5 No 2

Mercer, D, (1996), “Industry Scenarios - Short Termism Revealed”, Industrial Management and Data Systems, Vol. 96 No.8

[xxxiii] Twiss, B.C, (1980), Managing Technological Innovation, Longman