short hills, nj, jan 20 2003 slide 1 © 2003, ulrich goluke all rights reserved scenario planning in...
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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
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 2
© 2003, Ulrich GolukeAll Rights Reserved
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
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 3
© 2003, Ulrich GolukeAll Rights Reserved
0%
20%
40%
60%
80%
100%
1700 1850 now 2050 2100
???
Service
Manufacturing
Agriculture
Time spent Meaning constrainedMaterial constrained
Why another tool?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 4
© 2003, Ulrich GolukeAll Rights Reserved
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?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 5
© 2003, Ulrich GolukeAll Rights Reserved
Why another tool?
Make & Sell
Quality &Efficiency &Logistics
Rudimentarycommerce
Being there!Shape & Anticipate
SensemakingContext creation
Sense & Respond
Perspectivesas Variables
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 6
© 2003, Ulrich GolukeAll Rights Reserved
•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?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 7
© 2003, Ulrich GolukeAll Rights Reserved
• Clear enough future– A single forecast precise
enough for determining strategy
– “Traditional” strategy toolkit
– e.g. Strategy against low cost airline entrant
When are scenarios appropriate?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 8
© 2003, Ulrich GolukeAll Rights Reserved
• Alternate Futures– A few discrete outcomes
that define the future
– Decision analysis– Option valuation models– Game theory
– e.g. Capacity, siting strategies
When are scenarios appropriate?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 9
© 2003, Ulrich GolukeAll Rights Reserved
• A Range of Futures– No “natural” outcome
– Latent-demand research– Technology forecasting– Scenario Planning
– e.g. Entering emerging markets
When are scenarios appropriate?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 10
© 2003, Ulrich GolukeAll Rights Reserved
• True Ambiguity– No basis to forecast the future
– Analogies and pattern recognition– Non-linear dynamic models– Scenario stories
– e.g. disruptive change & technologies
When are scenarios appropriate?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 11
© 2003, Ulrich GolukeAll Rights Reserved
•Four levels of uncertainty– Clear enough future– Alternate futures
– A range of futures– True ambiguity
Scenario Planning Space
When are scenarios appropriate?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 12
© 2003, Ulrich GolukeAll Rights Reserved
Predetermined
Uncertain
now
No. ofDecisionElements
TIMEVALUE =Current ProfitFinding theright strategyProfit PotentialCreating the rightstrategy process
Hope orDespairForecast
Scenario
Planning
Space
When are scenarios appropriate?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 13
© 2003, Ulrich GolukeAll Rights Reserved
“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
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 14
© 2003, Ulrich GolukeAll Rights Reserved
Macro Uncertaintycaptured as
Scenario Stories
Business Model:Story of the Enterprise
NovelOptions
Option Risk Evaluation:strategicfinancial
competitiveoperational
BusinessPlanning
“influencingthe world”
Stories of the Future
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 15
© 2003, Ulrich GolukeAll Rights Reserved
• … are novel, challenging & consistent stories about the future
• … in order to increase the future success of decisions taken today
• Scenarios
Stories of the Future
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 16
© 2003, Ulrich GolukeAll Rights Reserved
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
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 17
© 2003, Ulrich GolukeAll Rights Reserved
In a group: Arrange the two drivers as axis
Trust
Gummy Bears
How are they done? Method
Calibrate the axisDefine the endpoints:Units & timehorizon
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 18
© 2003, Ulrich GolukeAll Rights Reserved
In four groups: Sketch a first story
From the center (now) to the edge of each quadrant
Trust
Gummy Bears
How are they done? Method
Together: Present, explain, discuss
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 19
© 2003, Ulrich GolukeAll Rights Reserved
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
How are they done? Method
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 20
© 2003, Ulrich GolukeAll Rights Reserved
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’
How are they done? Method
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 21
© 2003, Ulrich GolukeAll Rights Reserved
Cardinal Pleasures:
Trust
Gummy Bears
MysteryVisualsMusic, RhythmCharacterNew Language
How are they done? Method
CharacterMotivationPlot
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 22
© 2003, Ulrich GolukeAll Rights Reserved
… is like learning to ride a bicycle:
For stability, you need a certain speedAt some point, the training wheels
need to go
How are they done? Method
Creating Scenarios…
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 23
© 2003, Ulrich GolukeAll Rights Reserved
•Buy-in
•People
•Workshops
•Output
•Miscellaneous
How are they done? Process
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 24
© 2003, Ulrich GolukeAll Rights Reserved
•Selling– Clarity, clarity, clarity
•Interviews– Open ended, qualitative
questions– Ask about expectations
•Updates, Newsletter, Website
Process: Buy-in
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 25
© 2003, Ulrich GolukeAll Rights Reserved
•Core Team– 4 facilitators– Project director (facilitates also
plenary)– Writer / Editor– Person for Logistics– Person for Design / Production
Process: People
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 26
© 2003, Ulrich GolukeAll Rights Reserved
•Core Team Meetings– 1 day of workshop = 1 day of
preparation– During workshop once a day– During project, once every 6
weeks
Process: People
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 27
© 2003, Ulrich GolukeAll Rights Reserved
•Experts / Oracles / Provocateurs– Don’t pay honorarium– Insist on them being there the
whole workshop– Get right personality profile
Process: People
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 28
© 2003, Ulrich GolukeAll Rights Reserved
– 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
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 29
© 2003, Ulrich GolukeAll Rights Reserved
•Interview analysis– Confidentiality– Transcripts– Content analysis– Light structure / Work in progress– Summary presentation– Used only as input for 1st
workshop
Process: Output
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 30
© 2003, Ulrich GolukeAll Rights Reserved
•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
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 31
© 2003, Ulrich GolukeAll Rights Reserved
•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
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 32
© 2003, Ulrich GolukeAll Rights Reserved
•Slides– Prepare slide show you would use– Develop 2 to 3 times as many
slides so that participants can pick & choose
Process: Output
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 33
© 2003, Ulrich GolukeAll Rights Reserved
•“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
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 34
© 2003, Ulrich GolukeAll Rights Reserved
Macro Uncertainty captured as
Foresight Stories
The Self
New Possibilities
Evaluation
Process: Public / Private
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 35
© 2003, Ulrich GolukeAll Rights Reserved
• As we move towards “sense & respond” and “shape & anticipate”,by giving context & sense,
you design the playing field.
The Upside
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 36
© 2003, Ulrich GolukeAll Rights Reserved
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?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 37
© 2003, Ulrich GolukeAll Rights Reserved
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?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 38
© 2003, Ulrich GolukeAll Rights Reserved
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?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 39
© 2003, Ulrich GolukeAll Rights Reserved
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”
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 40
© 2003, Ulrich GolukeAll Rights Reserved
Courtesy of Paul de Ruijter
TransactionalSpace
The World out there…
The Self
So what?
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 41
© 2003, Ulrich GolukeAll Rights Reserved
• 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
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 42
© 2003, Ulrich GolukeAll Rights Reserved
The Stone Age did not end because of a lack of stones.
“Chance only favors the prepared mind,”said Louis Pasteur.
Two reminders:
Scenario Planning in Strategy [email protected]
Short Hills, NJ, Jan 20 2003Slide 43
© 2003, Ulrich GolukeAll Rights Reserved
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