short hills, nj, jan 20 2003 slide 1 © 2003, ulrich goluke all rights reserved scenario planning in...

Scenario Planning in Strategy [email protected]

Short Hills, NJ, Jan 20 2003Slide 1

© 2003, Ulrich GolukeAll Rights Reserved

Scenario Planning inStrategy Development

Short Hills, NJ, Jan. 20, 2003

Ulrich Goluke

[email protected]://www.blue-way.net

. . . tomorrow is not just another day

blue-way.net




Why another tool?When are scenarios appropriate?Stories of the FutureHow are they done?The upsideSo what?Embedding scenario skillsExample “Biotech”Links & resources

Questions and discussion throughout

Plan for the morning




0%

20%

40%

60%

80%

100%

1700 1850 now 2050 2100

???

Service

Manufacturing

Agriculture

Time spent Meaning constrainedMaterial constrained

Why another tool?




0%

20%

40%

60%

80%

100%

1700 1850 now 2050 2100

???

Service

Manufacturing

Agriculture

Time spent Meaning constrainedMaterial constrained

Make & Sell

Rudimentarycommerce

Sense & Respond

Shape & Anticipate

Why another tool?




Why another tool?

Make & Sell

Quality &Efficiency &Logistics

Rudimentarycommerce

Being there!Shape & Anticipate

SensemakingContext creation

Sense & Respond

Perspectivesas Variables




•Four levels of uncertainty– Clear enough future– Alternate futures– A range of futures– True ambiguity

Harvard Business Review, Strategy under Uncertainty, Nov-Dec 97

When are scenarios appropriate?




• Clear enough future– A single forecast precise

enough for determining strategy

– “Traditional” strategy toolkit

– e.g. Strategy against low cost airline entrant





• Alternate Futures– A few discrete outcomes

that define the future

– Decision analysis– Option valuation models– Game theory

– e.g. Capacity, siting strategies





• A Range of Futures– No “natural” outcome

– Latent-demand research– Technology forecasting– Scenario Planning

– e.g. Entering emerging markets





• True Ambiguity– No basis to forecast the future

– Analogies and pattern recognition– Non-linear dynamic models– Scenario stories

– e.g. disruptive change & technologies





•Four levels of uncertainty– Clear enough future– Alternate futures

– A range of futures– True ambiguity

Scenario Planning Space





Predetermined

Uncertain

now

No. ofDecisionElements

TIMEVALUE =Current ProfitFinding theright strategyProfit PotentialCreating the rightstrategy process

Hope orDespairForecast

Scenario

Planning

Space





“A good [business] model tells a good story … A business model is a story of how an enterprise works. Like all good stories, a business model relies on the basics of character, motivation, and plot.”

What management is, Joan Magretta, Free Press, 2002

Stories of the Future




Macro Uncertaintycaptured as

Scenario Stories

Business Model:Story of the Enterprise

NovelOptions

Option Risk Evaluation:strategicfinancial

competitiveoperational

BusinessPlanning

“influencingthe world”





• … are novel, challenging & consistent stories about the future

• … in order to increase the future success of decisions taken today

• Scenarios





Understand & respect the individualtalk to them, more formally, interview them

In a group:Develop the two most important and most

uncertain driversWhy two?List the Givens

How are they done? Method




In a group: Arrange the two drivers as axis

Trust

Gummy Bears


Calibrate the axisDefine the endpoints:Units & timehorizon




In four groups: Sketch a first story

From the center (now) to the edge of each quadrant

Trust

Gummy Bears


Together: Present, explain, discuss




In four groups, for each quadrant:Causality, not ChronologyTimelineActorsEventsDilemmasTensions, GivensTitleKeep the eyes on the futureMaintain Positve Energy

Together: Present, explain, discuss, improve

Trust

Gummy Bears





Cardinal Sins:

Trust

Gummy Bears

Least common denominator (including to much)

Novel, plausible, challenging - hitting only 2 out of 3

Owning only part of the space

Fight ‘reasonableness’Fight ‘the discount rate

mentality’Fight the ‘fear of the

participants of big issues’





Cardinal Pleasures:

Trust

Gummy Bears

MysteryVisualsMusic, RhythmCharacterNew Language


CharacterMotivationPlot




… is like learning to ride a bicycle:

For stability, you need a certain speedAt some point, the training wheels

need to go


Creating Scenarios…




•Buy-in

•People

•Workshops

•Output

•Miscellaneous

How are they done? Process




•Selling– Clarity, clarity, clarity

•Interviews– Open ended, qualitative

questions– Ask about expectations

•Updates, Newsletter, Website

Process: Buy-in




•Core Team– 4 facilitators– Project director (facilitates also

plenary)– Writer / Editor– Person for Logistics– Person for Design / Production

Process: People




•Core Team Meetings– 1 day of workshop = 1 day of

preparation– During workshop once a day– During project, once every 6

weeks

Process: People




•Experts / Oracles / Provocateurs– Don’t pay honorarium– Insist on them being there the

whole workshop– Get right personality profile

Process: People




– 3 full days– Prepare detailed plan for each day– Remain flexible / Time for

reflection– Dinner conversation on day “0”

about passion, “stick-holders”– Entertainment for one evening– Visit location before– Be alert to cultural sensitivities

Process: Workshops




•Interview analysis– Confidentiality– Transcripts– Content analysis– Light structure / Work in progress– Summary presentation– Used only as input for 1st

workshop

Process: Output




•Record of each workshop– Pictures of all flips– Use chronological structure– Very light editing– Produce within 10 days of

workshop– Only for those present at workshop

Process: Output




•Book– Design must match purpose– Editor has “editorial control”– 2-3 months after last workshops– Give every participant the

opportunity to see / comment before release

Process: Output




•Slides– Prepare slide show you would use– Develop 2 to 3 times as many

slides so that participants can pick & choose

Process: Output




•“Nuggets”– Keep your participants happy

•Manage the confidentiality / public boundary very well

•Offer process / facilitation help with the private follow-on work

•Celebrate when it’s done

Process: Miscellaneous




Macro Uncertainty captured as

Foresight Stories

The Self

New Possibilities

Evaluation

Process: Public / Private




• As we move towards “sense & respond” and “shape & anticipate”,by giving context & sense,

you design the playing field.

The Upside




1 talk to those who shun you: scenarios allow you to engage outsiders in constructive conversations that they would otherwise not participate in. Why? Because you are shaping the future, rather than arguing about the present.

2 get inside the strategic conversations: similarly, scenarios allow you ‘to get to tables’ from which you may have been excluded because of your lack of credibility.

3 sing from the same sheet: scenarios are one of the better mechanisms to align your workforce, your management and your board towards a common purpose. And don’t forget your supply and distribution chain – all the way to the end consumer!

So what?




4 tell a convincing story: since scenarios are rigorously researched and carefully constructed stories you have a rich communication tool. You may wish to break it down into ‘powerpoint-type’ sound bites, but the real value of the tool is to engage others in open debate. You will always win, because you know more detail, and you have all the ‘red threads’ necessary to convince.

5 design the playing field: make your scenarios public: you force the market and all stakeholders to react to your views. If you find it strange to make strategic insight public, consider this: In order to gain sustainable competitive advantage, you need to continuously align your company with the market. Scenarios ‘merely’ capture the macro uncertainties of emerging and future markets. The ‘Self’ always remains private.

So what?




6 be ahead of the pack: don’t worry that you won’t be able to predict the future. No one can. But you have a far better understanding of what might be than your competitors, your regulators and even your customers.

7 rehearse: far too many resources are spent on worrying about the question: will it happen? Use your – always – limited resources to answer a different question: what would you do if it did happen?

8 improve your strategy: you can use the set of scenarios to challenge and improve your strategy, at whatever level of the company you choose (see next slides)

And always remember that the average lifetime of a Fortune 500 company is a mere 40 years.

So what?




Future 1 Future 2 Future 3

Action 1

Action 2

…

Action n

So what?

++ + —

+ — ++

+ ± +

-- -- ++

put

put

call

robust

“Adapters”

“actions” are functions of where they are done. They can be plans, policies,resource allocation and investment decisions

“Shapers”




Courtesy of Paul de Ruijter

TransactionalSpace

The World out there…

The Self

So what?




• Shell went from 0 to 60 to 10 people

• “Median” is 3 to 5 full time, supplemented by juniors / interns

• Savvy ‘consumer’ / task master of the process

Embedding scenario skills




The Stone Age did not end because of a lack of stones.

“Chance only favors the prepared mind,”said Louis Pasteur.

Two reminders:




Links:

Global Business NetworkAdam Kahane / Joe JaworskiCentre for Scenario Planning and Future StudiesSociety for Organizational LearningBCC and other consultancieswww.blue-way.netwww.blue-way.net/resources

short hills, nj, jan 20 2003 slide 1 © 2003, ulrich goluke all rights reserved scenario planning in...

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