Using Scenario Analysis for Enterprise Architecture
- Straightforward Scenario Development
- Starting Point
- Forces in Scenario Development
- Events in Scenario Development
What is Scenario Analysis?
Scenarios are not a method of predicting the future. They are plausible futures. We use them to explore the future. To confront our assumptions. To identify what we are uncertain about and the depth of our uncertainty. Good scenarios help us widen perspectives and address dilemmas.
We cannot predict the future. Our worst forecasts are based on simple linear projection. We develop scenarios considering choices, events and forces.
Central to scenario analysis is the question. Or your dilemma. Dilemmas are complex and conflicted issues. Usually with opposing tensions between needs and desires, between drives and motivations, and between stakeholders. Dilemmas are the type of problems enterprise architects and enterprise architecture deal with.
We look at scenarios in two ways - what gets us to a plausible future and what do we have to do to be prepared for the plausible future. This distinction is important.
To explain, we'll use a couple of quick and simple scenarios. Consider a significant initiative in your organization. We can quickly identify three plausible futures.
- What does your organization look like if it succeeds?
- What if it stumbles and only delivers partially?
- What if it fails?
Using the scenario to explore how a future happens we will look at what takes us to success, a stumble or a failure. This analysis is useful to someone responsible for the journey.
The other scenario analysis is to explore the impact of these initiatives. For example, if we stumble, what does that mean for another initiative? What options are realistically available? This type of analysis has narrow use for the change owner. However it is very valuable for everyone else.
When we explore architecture alternatives and roadmaps we'll see this type of analysis is critical in future proofing.
Scenario analysis is used mostly in the EA use cases of architecture to support Portfolio and architecture to support strategy. Digital transformation initiatives lend themselves to scenario analysis.
What is an Architecture Roadmap?
We use scenarios to help us develop dynamic architecture roadmaps.
Always distinguish a roadmap from a plan. A roadmap helps you understand the paths to a destination. An architecture roadmap contains decision points. Points where your organization can change direction and still capture measurable benefits.
The perfect roadmap:
… includes options and value statements associated with each work package. Value stated in terms of business capability, market reach and limitations …
… and provides awareness of existing roadblocks. Including why they are roadblocks and implications of addressing them head on or continuing to detour…
The perfect roadmap guides us through future decisions. It helps us react to success, difficulty, and any unexpected opportunities and threats. A great architecture roadmap enables enterprise agility.
What is an Architecture Alternative?
Use architecture alternatives as a method of problem solving. Any question can be addressed by different choices. Different future states are optimized for different concerns. You are surrounded by architecture alternatives.
We use architecture alternatives to consider different paths or different futures.
I trust you can see the synergy between scenario analysis and architecture alternatives. What takes us to an alternative? Which alternatives is a better fit in a different scenario?
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How to do Scenario Analysis
A scenario is a plausible future. To develop a scenario never simply extrapolate the present. Just select a trendline and extend it forward. Scenarios are not an extension of the present. Nor, are they a prediction.
They are plausible futures. We use them to explore the future. To confront our assumptions. To identify what we are uncertain about and the depth of our uncertainty. Good scenarios help us widen perspectives and address dilemmas.
Scenario analysis is backwards looking, exploring how we get to a plausible future, or forward looking, given we got here, how are we prepared to go forward.
Straightforward Scenario Development
We use a straightforward approach that is based on for elements:
- the starting point
- forces
- events
- choices
The key to scenario analysis is develop a plausible future.
At every stage cull implausible. Always explore your assumptions about what makes a potential future implausible. Always be clear what assumptions and expectations cause you to consider a potential future implausible.
Also, avoid unnecessary precision. As an example, don’t look for things like the 2010 eruption of the Eyjafjallajokull volcano, or the 2021 LA Port logjam. Instead look at supply chain disruption. For example, is your future supply chain stable, occasionally disrupted or regularly disrupted supply chain? Does it face sudden disruption or slow degradation?
Starting Point
You always start with an issue, or a dilemma.
Dilemmas are complex and conflicted issues. Usually with opposing tensions between needs and desires, between drives and motivations, and between stakeholders. Dilemmas are the type of problems enterprise architects and enterprise architecture deal with.
Your issue will allow you to identify drivers, events and choices. In the method below we’ll talk about developing a scenario using one approach. When we develop scenarios, we are more pragmatic and will mix drivers, events, and choices
Forces in Scenario Analysis
We use STEEP (Society, Technology, Economic, Environment& Ecology, and Politics & Law) and PESTEL (Political, Economic, Sociological, Technological, Legal and Environmental) to help think of forces.
Select forces with:
- Relevance to your starting dilemma
- Which will have a meaningful impact on the future
Pair forces and push a negative and positive development. This gives us four impacts to analyze
Events in Scenario Development
In terms of the dilemma, consider events that will impact your dilemma. Events happen to us.
Like forces select events with relevance and impact. Especially events that you are both confident and uncertain about. Events will branch potential futures.
Choices in Scenario Development
While events happen to us, we make choices. We often find it helpful to consider potential choices after an event.
It is usually more useful to explore bookend choices rather than hedged choices. All-in to a cloud vendor, all-in to multiple cloud vendors or purely on-premise. This approach allows to isolate impacts.
When building a plausible future you will need to limit the number of futures. Using the cloud and on-premise example, you may find there is little distinction between the number of cloud vendors to your issue.
While the eventual cloud-vendor is an important choice. Which might not be material to the scenario analysis.
Scenario development uses merger and acquisition patterns, as well as system acquisition patterns as guides.
Continually look for potential futures you can drop. If the choice, event, or pushed driver isn’t impacting your dilemma, drop the potential future. When you drop a potential future keep track of what is not impacting your future.
You will start building a branching tree of plausible futures.
The image below shows five potential futures.
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Using Scenarios with Enterprise Architecture
Below is a scenario analysis example. Starting with the same diagram with the forces, events, and choices filled in.
The scenario analysis example starts with a question about a Digital Transformation. IT spend was growing significantly faster than revenue. Digital transformations require IT spend. We had worries about the pace of IT spending growth and return. Digital transformation is IT-dependent so we had a significant force. Pushing this force, we end up with two paths—get the spend under control and don’t. Not getting the spend under control left us with plausible future #1.
The future has more branches when spend is under control.
For events, we looked at whether the organization would make an acquisition. We could see three paths from this event. No acquisition happened, which gave us scenario #2.
Regional and Global acquisitions led to significant choices about the products and services. We could:
- choose to refactor all customer products (Scenario 3)
- isolate the acquisition customer products (Scenario 4)
- switch to the acquisition’s customer products (Scenario 5)
Five distinct plausible futures within our planning horizon.
- IT spend is out of control
- IT spend is in control and no acquisition is made
- IT spend is in control, a regional or global acquisition is made, and we refactor all customer products
- IT spend is in control, a regional acquisition is made, and we isolate the region’s customer products
- IT spend is in control, a global acquisition is made, and we switch to the acquisition’s product portfolio
Using Scenarios with Architecture Alternatives
When you have a force that is leading to an undesirable future, you need to address it. Failing to address a fundamental force makes the rest of your analysis and recommendation questionable.
In the example, we had a fundamental force–IT spend. We brought spend in as a cornerstone concern. All architecture analysis and target development were tested against spending. We found the sustained influencers of IT spend and took them on in the Target.
Events and Choices require considering dependency and influence.
The table below looks at your default action based on whether an architecture alternative works or fails in a scenario.
| Base Action | |
| Alternative works in all Scenarios | Up-mark alternative. |
| Alternative works in some Scenarios | Avoid this alternative before the future branches. If you can't delay the alternative, you should modify the expected value of the goal to consider the uncertainty of receiving any benefits. You may need to consider probability of the Scenario, and potentially use the Alternative’s value in assessing desirability of the Scenario. |
| Alternative fails in some Scenarios | Down-mark alternative and avoid this alternative before the future branches. When you can't delay the alternative, you should modify the expected value of the goal to accommodate the uncertainty of receiving benefits. You may need to consider probability of the Scenario and potentially use the alternative’s cost and uncertainty in assessing desirability of the Scenario. |
| Alternative fails in all scenarios | Eliminate the alternative. Stop considering this alternative. |
| Alternative improves freedom to select future Choices | Up mark alternative Improving the freedom to make a choice is usually based on removing the effort or uncertainty of a choice. Stay aware that work to improve flexibility does not necessarily increase value. |
In practice, you need to consider the value of an alternative when you consider improves and degrades in place of ‘works’ and ‘fails.’
Using Scenarios with Architecture Roadmaps
There are three important tools for creating your roadmap:
- transition architecture,
- enabling choice,
- deferred decision-making.
The example scenarios #3, 4, and 5 completely overhaul your organization's approach to your existing products. If a roadmap relies on a re-factoring decision, it's risky. It would be better to include a transition architecture that sets the stage for running multiple product families, replacing products, and making refactoring easier.
Exploring these issues with your stakeholders is the root of architecture trade-off. Exploring these issues exposes your stakeholders to uncertainty and delivers outstanding value during roadmap creation.
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Conclusion
Scenarios are not a method of predicting the future. Scenarios represent plausible futures.
We use scenario analysis to explore the future. All scenario analysis starts with a question.
We can perform scenario analysis forwards and backwards. Backwards helps us understand what gets us to a plausible future. We use this to make active choices to reach more preferable futures.
Forwards uses the future as a jumping off point. It considered what we do next & whether our choices enable us in a plausible future.
We recommend developing your skills and including scenario analysis in your enterprise architecture toolkit.
If you are looking for help we look forward to speaking.
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