Uncertainty and resilienceAn overview of the two forest related foresight projects

www.iiasa.ac.at

Tools for Forest-Related Foresight WorkSeminar 30.3.2012

Advanced Systems Analysis Program

Leena Ilmola & Olli Lehtonen, John Casti

Decision Maker’s Challenge

Uncertainty is increasing, but decisions have to be made daily

Two strategies:Try to collect more information, invest in anticipation systemsAccept uncertainty and invest in resilience

Game Changers & 7 Shocks

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Global economic system 2030?

Forest industry

Game Changers

Com. technology

Life Science

Food & drink

Digitalization

G T N

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m u l a t o r

Structural scenariosPlanning for uncertainty

Planning for uncertainty

Tools for attribution theory

Ind. Ecosystem simulation

Planning for uncertainty

Olli LehtonenMarkkuTykkyläinen

2010-2011

2011-2012

7 SHOCKS AND FINLAND

7 Shocks and Finland

Question: How will Finland succeed in the world of surprises?What are the special requirements the global economic system will set for Finland as a small open national economy?What kind of technology/business portfolio will increase organizations resilience?

Participating organizations have chosen 7 shocks to be studied. 1. The European Monetary Union breaks down2. Nokia’s headquarters moves from Finland 3. China is in severe trouble4. Pulp and paper industry leaves the country5. The price of energy drops by 90%6. Internet crashes become common and unpredictable7. Weather patterns cause severe damage in Europe

Concrete results in 4 months: a portfolio of actions that will increase the resilience of the national economy

7 Shocks Process

A long list of shocks

Choice of the 7 most relevant shocks

Shock scenarios: Drivers of development, disturbance and enabling drivers, systems model, 3-layer impact on economy

Global Trade Network Simulations

Shock/Finland specific system description

Portfolio process (a WEB dialogue)1. Generation of success actions per shock2. Assessment of actions 3. Computation of portfolios

ANALYSISAnalysis of the 7 shocks and their implicationsAnalysis workshop: -Stress test of the current strategy/structure > strengths- Important ways to increase resilience- Prioritization of actions (current/new)

Pulp and Paper Industry leaves the country

GAME CHANGERS AND PPI

Aims and research questions

What are the global Game Changers of the forest industry?What kind of portfolio has the highest resilience in the world driven by Game Changers?What are the core elements of resilient strategy and resilient sustainable competitive advantage?

Collection and assessment of ideas for Game Changers

Clusters of high impact and low probability

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Step 4 computing - Action classification

actionsIn all Eff. portfolios (Core)In some Eff. portfolios (ContingenIn no Eff. portfolios (Exterior)

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Utility in GC environment A

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Actins Portfolio

Core actions that are included in all efficient portfolios They are core of the strategy!

Potential strategies deriven from uncertainty

ALTERNATIVE STRATEGIES FOR FAST PRODUCTION The success is based on fast adaptation. Drivers: fast changing customer needs, regulation or volatility in raw material supply.

MICROUNITS Key success factors are customized product and service concepts and closeness ("fitting" or customer’s own raw material). Multipurpose or dedicated production unit on customers their site. Drivers: new technology (3D printing), energy price, recycling regulation and volatility of the global economy.

SPECIALIZATION FOR NEW AREAS Biomass is used for new areas, (such as furniture/decoration production), where the success comes from design, fast adaptation to customer needs and trends, lightness and durability of the structure. Drivers: new technology, fast changing customer needs, recyclability

SCALE FREE PORTFOLIOS The orchestration of different sources, different size units and a flexible network of production (product& service partners) is the source of profitable business. Drivers: Volatility of the global economy, new technologies, fast adaptation. Increasing ROI expectations of investors, fast investments.

LOCALIZED PRODUCTION The success is based on efficient adaptation on local needs. The source of corporate success is portfolio management. Drivers are high transportation cost (price of energy or regulation), different supply of raw materials and very different local conditions.

NEW PRODUCT LINES, PAPER IS A SIDE PRODUCT The profitable business comes from different products, paper is only one of side products of the process. The main production line; energy, production of bio-components or techno-materials Drivers: demand of paper, energy price, demand for bio-components, energy efficient building, regulation

TECHNOPRODUCTS The efficient management of a portfolio of fragmented technology based products (ereaseable paper, nanopaper). Innovation pace is high and r&d investments drive the business. Joint development with customers for different needs. Drivers: new technology, diversification of customer needs, profit requirements, energy price is high

NICHE PRODUCTS Profits come from niches, such as super luxury products, furniture, tapestry or technology products. Drivers: changing customer demand, low profitability of the mass market

Simple example strategies providing high resilience…

EFFICIENCY RESILIENCEBALANCE