using scenario planning as a strategic...

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upBusiness Forecasting and Analytics Forum

March 1-2 • San Francisco, CA

Using Scenario Planningas a Strategic Tool

Enhancing your organization’s competitive position and the

ability to adapt to an increasingly complex environment

March 1, 11:00am

View presentation online at:

https://jpkgroupsummits.com/attendee1

Vivian Corneillet – Citrix

Vivian Corneillet is a transformational finance leader with 15+ years progressiveexperience across cloud/SaaS/software, healthcare, and hardware/manufacturing

industries for leading companies including Citrix, Johnson & Johnson, and Intel. At Citrix, acloud company with market-leading solutions that help IT and service providers buildclouds, leveraging virtualization and networking technologies to deliver cloud services

worldwide, Vivian has been appointed to high impact roles in planning, business modeling,pricing, business analysis, and M&A for perpetual and subscription businesses with $2B+annual revenue. She has led strategic planning and complex business modeling for Citrix

transitioning to a hybrid (on-premises and SaaS) business model.

Using Scenario Planning

As a Strategic Tool

Financial Forecasting, Analytics and Transformation Summit – San Francisco (March 1-2, 2016)

Vivian Corneillet

Agenda

Q&AScenario Planning

Intro & Icebreaking

2

Intro / Bio

Citrix

J&J

Intel

3

Use data to describe yourself

4

Scenario Planning History in Brief

1940s

1970s

Now

The Shell Story

• Leadership team: Jimmy

Davison, Ted Newland, Henk

Alkema, Pierre Wack

• Developed plausible scenarios

of future oil supply and pricing

• Greatly improved competitive

position in the industry during

the oil crisis in late 1973

5

Increasing Complex World

Companies operate in a increasingly complex world:

Business environments are more diverse, dynamic, and interconnected than ever-and far less predictable.

“

”6

Oil prices surged in

1973, which

increased the cost of

goods and lowered

spending

Are You Ready? Is Another Downturn Due?

Iraq invaded Kuwait

in 1990, spiking oil

prices and

accelerating a

downturn that had

already started

The Great Recession

stemmed from a

subprime mortgage

crisis

The Fed increased

interest rates to

control inflation,

hurting firms that

relied on credit

The dotcom stock

bubble burst in 2000;

global markets fell

after 9/11

We are

Here

1970 1980 1990 2000 2010

Source: Fortune Magazine

7

Corporate Perspective On The Future

2.4%

40% 30% 20%

Source: Competing for the Future

8

Traditional PlanningThe Future is More or Less of “the Same”

9

Price of Crude Oil

Apr ‘14: $100

Jun ‘14: $105

Dec ‘14: $73

ConocoPhillips

is the first major

U.S. Oil company to

slash Its exploratory

budget for 2015

Mar ‘15: $67

China lowers its GDP

Growth to 7%

In a WSJ survey of 10

banks’ predictions, not

one predicts that oil will

drop below $50 a barrel

Oct ‘15: $51

Chevron cuts its 2016

budget by ¼ and says it

will lay off thousands

Dec ‘15: $36

the ruble hits a 2015 low

vs. the dollar as oil’s export

price continues to fallJan ‘16: $29

Source: Fortune Magazine

10

Scenario PlanningInvestigate a Broader Range of Futures and be Prepared for the Unpredictable

Key Benefits

• Can be applied to complex, dynamic,

highly uncertain planning

environments

• Break the habit, and open minds to

previously inconceivable or

imperceptible developments

• Provide vital links between

organizational processes

• Expect surprise and prepare for

transformative changes

Wide-angle to capture the big picture

and then zoom in on the details

11

Scenarios: Definition & Purposes

Main Purposes

• Anticipating and understanding risk

• Discovering strategic options which decision

makers were previously unaware

Scenarios are descriptions of alternative futures which are plausible and

internally consistent. Scenarios are qualitative and quantitative descriptions of future

environments which highlight key uncertainties.

“”

Source: Uncharted Waters Ahead

12

Scenario Planning

Some People Say …

• Scenarios are really about predicting the

future

A Better Way to Say It

• Scenarios structure the future and offer

a means of thinking about different

worlds

• Scenario planning focuses on predicting

outcomes

• Scenario planning focuses on

understanding the forces that would

eventually compel an outcome

• Scenario planning is more about figures • Scenario planning is more about insight

(pathways into the future)

13

Scenario Planning Process

• Create a team

• Determine goals and purpose

• Identify a focal issue

Orientation1

• Examine driving forces

• Learn what you do not know and gather

qualitative and quantitative data

Exploration2

• Identify 2 critical uncertainties (2x2 matrix)

• Develop stories for scenarios and define

how it will feel to live in those contexts

Scenarios3

• Ask how you might respond in any / all of

the scenarios and prioritize options

• Tailor strategy for one / multiple scenarios

Connection4

• Develop early indicators / metrics

• Monitor on which direction the future may

be heading and adjust strategy

Indication5

14

Case Study: Scenario Development (ElectricIQ)Orientation

1

Source: Scenario Planning: Lessons from the Field

Purpose:

Gain insights as to the relative

attractiveness/risk of the market for

retrofitting existing

infrastructure in western Europe

and North America vs. focusing on

new construction in China, India,

eastern Europe and Latin America.

Goal:

Develop a better understanding of

the growth of the markets for

smart grid technology in different

geographies, the risk profiles of

each market and the ease of

access to such markets.

Focal Issue: demand for renewable energy sources

15

“Outside-In” Approach

Contextual

Industrial

Internal

Internal

• Offerings

• Operations

• Assets

• Costs

• Financial structure

• Branding

Industrial

• Industry developments

• Market segmentation

• Customer needs

• Competition landscape

Contextual

• Economic shift

• Social mix

• Technology advancement

• Environmental change

• Political dynamics

• Global affairs

Source: Global Business Network

Exploration2

16

Case Study: Scenario Development (ElectricIQ)


Cost of doing

business

(Mandate)

Do it or die

(Necessity)

Steady as she goes

(“S” Curve)

Better be the best

(Mkt-Driven)

Mandate

Subsidized

Early Adopter Mass Market

AdoptionPublic Policy

Public Opinion

Scenarios3

Exploration2

Drivers

climate change data | technical viability | price

Drivers

subsidies | regulations | taxes

Quantitative

Data

Expert

Opinion

Other

Sources

17



Cost of doing

business

(Mandate)

Do it or die

(Necessity)

Steady as she goes

(“S” Curve)

Better be the best

(Mkt-Driven)

Mandate

Subsidized


AdoptionPublic Policy

Public Opinion

Scenarios3

18



Cost of doing

business

(Mandate)

Mandate

Subsidized


Adoption

• Governmental action leads to hard

mandates for adoption

• Little support if provided and

adoption becomes a “cost of doing

business”

• Pubic opinion is not a major driver –

consumers will not pay more for

green solutions unless forced to do

so through taxation or mandate

Public Policy

Public Opinion

Scenarios3

19



• Demand for smart grid systems

follows a traditional adoption cycle of

early adopters leading the way at high

prices

• As the market scales and prices drop,

mass market adoption takes off

before flattening out as maturity is

reached

• Little effective public policy or

incentives are provided/needed

Scenarios3

Cost of doing

business

(Mandate)

Steady as she goes

(“S” Curve)

(“S” Curve)

Mandate

Subsidized


Adoption

Public Policy

Public Opinion

20



Cost of doing

business

(Mandate)

Do it or die

(Necessity)

Steady as she goes

(“S” Curve)

Better be the best

(Mkt-Driven)

Mandate

Subsidized


Adoption

• Public opinion swings rapidly to green

solutions and dramatically changes

customer buying patterns

• Products not seen as being green are

shunned in the marketplace

• Governments mandate adoption of

environmentally friendly technologies

for new construction and remediation

for all existing construction

Public Policy

Public Opinion

Scenarios3

21



• Public opinion moves to green and

consumers are willing to pay extra for

the best green products

• Governments offer some incentives

• Adoption is balanced btw market

innovation and gov. encouragement

• Being green becomes a source of

competitive advantage

Scenarios3

Cost of doing

business

(Mandate)

Do it or die

(Necessity)

Steady as she goes

(“S” Curve)

Better be the best

(Mkt-Driven)

Mandate

Subsidized


Adoption

Public Policy

Public Opinion

22



Cost of doing

business

(Mandate)

Do it or die

(Necessity)

Steady as she goes

(“S” Curve)

Better be the best

(Mkt-Driven)

Mandate

Subsidized


Adoption

• Governmental action leads to hard

mandates for adoption

• Little support if provided and adoption

becomes a “cost of doing business”

• Pubic opinion is not a major driver –

consumers will not pay more for green

solutions unless forced to do so

through taxation or mandate

• Demand for smart grid systems follows

a traditional adoption cycle of early

adopters leading the way at high

prices

• As the market scales and prices drop,

mass market adoption takes off before

flattening out as maturity is reached

• Little effective public policy or

incentives are provided/needed

• Public opinion swings rapidly to green

solutions and dramatically changes

customer buying patterns

• Products not seen as being green are

shunned in the marketplace

• Governments mandate adoption of

environmentally friendly technologies

for new construction and remediation

for all existing construction

• Public opinion moves to green and

consumers are willing to pay extra for

the best green products

• Governments offer some incentives

• Adoption is balanced btw market

innovation and gov. encouragement

• Being green becomes a source of

competitive advantage

Public Policy

Public Opinion

Scenarios3

23

Scenarios within Strategic Planning

Scenarios

VisionCompetencies

Look for fit between company’s core capabilities and the variety of plausible futures

Connection4

Source: Global Business Network

24

Case Study: Scenario Implication (ElectricIQ)


Do It or Die Better be the Best Cost of Doing Biz Steady as She Goes

Approach to

Innovation

The minimum is not

enough;

must be best to win

Innovative leadership has

real value

Must meet the standards;

little advantage in being

ahead of the curve

Focus on select areas

where there is strong

demand and we have a

capability

Marketing

Strategies

Either be the safe option

(compliant) or the best

option

Must be a leaderPartner with builders and

owners to secure shareBe #1 in select niches

Market Goals Own the high end Acquire share Be the preferred supplier Build share in niches

Financial

GoalsHigh margins Focus on size and scale Low-cost producer Modest growth over time

Connection4

D

BS

C

25

Case Study: Scenario Forecasts (ElectricIQ)


Do It or Die Better be the Best Cost of Doing Biz Steady as She Goes

Market MetricsGDP Growth

Demand: New Constr.

Demand: Remediation

3%

15%

20%

5%

24%

22%

1%

5%

8%

2%

4%

4%

ElectricIQ GrowthExisting Prod

New Prod

Mkt Share

12%

5%

2%

32%

28%

7%

3%

1%

0%

7%

3%

0%

ElectricIQ

Key FinancialsRevenues

Gross Margins

Net Margins

R&D Investment

18%

4%

7%

15%

30%

8%

12%

25%

3%

0%

1%

9%

5%

2%

1%

5%

* Selected metrics expressed as % change from 3-year trend

Indication5

D

BS

C

26

Content Challenges & Tips

Content Challenges

• Failure to take the long & wide view

Tips

• Look beyond next 2-3 years & your own industry

• Too much attention to trends (trapped by the past)

• Failure to look at deeper-level causes

• Have a real strategic conversation

• Explore the underlying drivers of immediate

factors / indicators

• Failure to challenge mindsets • Use of outside facilitators / researchers

• Failure to make scenarios dynamic • Reexamine scenarios based on indicators and

changes

27

Process Challenges & Tips

Process Challenges

• Scenario building takes time and hard work

Tips

• Secure top management support

• Tendency of “inwardly focused”

• Failure to keep on track

• Too many scenarios (paralyzed)

• Ensure enough contribution from outside

• Clearly defined roles and create a dedicated team

• Make it plausible, relevant, and impactful

• Participation vs. actions • Must address decision makers’ deepest concerns

• Failure to link to existing process • Link to organizational processes such as strategy

making, innovation, risk management, public

affairs, and leadership development

28

Appendix

Case Study: Scenario Development (SPS)


Give me choices

Whatever you want

Get me out of here

Ivy league or else

Global Citizen

Academic Elite

Stagnation Revitalization

• Local economy is stagnant

• Little growth in population

• Public school system is weak w.

constant budget cuts

• Global economy is reasonably strong

• Global connections fueled by

technology

• Parents seek for a good academic

grounding for their children

• Education is a viable way to escape

the stagnant local economy

• Local public school systems are

deteriorating

• Parents who can afford a private

education will pay for their children to

attend Summit Path School if

academic results can be demonstrated

• The pool of families who can afford

private education is dwindling

• Choice matters

• Parents want their children to have the

broadest range of opportunities in a

changing world

• Parents are willing to pay a premium

for an education with the breadth and

strength of academic and personal

development programs

• Continued population growth

• Parents are focused on academic

excellence and seek out the best

education for their children and are

willing/able to pay a premium for it.

• Educational achievement becomes the

passport to everything.

Local Economy

Parental Expectations

Scenarios3

32

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