Scenario Planning Process By T Garrett

Scenarios are possible views of the world, described in narrative form (stories) that provide a context in which managers can make decisions. By seeing a range of possible worlds, decisions will be better informed, and a strategy based on this knowledge and insight will be more likely to succeed. Scenarios do not predict the future, but they do illuminate the drivers of change: understanding them can only help managers to take greater control of their situation. Gill Ringland Scenarios in Business, 2002 What are Scenarios

Scenarios strengthen a manager’s strategic management tool box: traditional methods focus on the past scenario planning focuses on the future Combining both the past and the future makes thinking about strategy stronger and promotes: responsiveness flexibility competitive advantage Why Scenarios?

Scenarios allow a shared view of the future to be developed, and then Provide the opportunity for an organisation to consider how it wants to position itself in that future. Why Scenarios?

Why Scenarios? (Range of usefulness) Distance into “the future” Uncertainty Predictability F S H Forecasting Scenario Planning “Hoping” t U Adapted from K. van der Heijden Why Scenarios? (Range of usefulness)

Imagine you are back in your senior executive group meeting Imagine you are back in your senior executive group meeting. Fortunas, the clairvoyant, has left, promising to return soon with a detailed report on her findings. As a group, you are now considering what you think will be the most important, but uncertain, external forces (drivers of change) that will affect your institution over the next 10 years. What are the top 3 drivers of external change on your list? Your Turn!

The Scenario Planning Process Identify the focal question Environmental scanning – internal and external Selecting drivers of change and ranking Building the scenario matrix Developing the scenarios Presenting the scenarios Considering the strategic implications The Scenario Planning Process

The Scenario Planning Process Identify the focal question Environmental scanning – internal and external Selecting drivers of change and ranking Building the scenario matrix Developing the scenarios Presenting the scenarios Considering the strategic implications The Scenario Planning Process

Identify a focal area or issue – such as a decision or question that is critical to the future of your unit now. Useful foci often emerge from major challenges of today, or from questions such as “what one question would you ask a real psychic?” Choose a “horizon year” as the distance into the future that the scenarios will extend (at least 10 years): allows suspension of disbelief (the “that won’t happen” reaction); will you be in the same job you are in today in 10 years? The Focal Question

The Scenarion Planning Process Identify the focal question Environmental scanning – internal and external Selecting drivers of change and ranking Building the scenario matrix Developing the scenarios Presenting the scenarios Considering the strategic implications The Scenarion Planning Process

“Inventions have long since reached their limit, and I see no hope for future development”: Roman engineer Sextus Julius Frontinus, 1st Century AD “Heavier than air flying machines are not possible”: Lord Kelvin, President of the Royal Society, 1895 “I think there is a world market for maybe 5 computers”: Thomas Watson, Chairman of IBM, 1943 “Space flight is hokum”: Astronomer Royal, 1956 “Stocks have reached what looks like a permanently high plateau”: Irving Fisher, Professor of Economics, Yale University, 1929 Things Change!

“We don’t like their sound, and guitar music is on the way out”: Decca Recording Co. rejecting The Beatles, 1962. “640K [of RAM] ought to be enough for anybody”: Bill Gates, 1981 “The fact that conflicts with other countries [producing civilian casualties] have been conducted away from the U.S. homeland can be considered one of the more fortunate aspects of the American experience”: Quadrennial Defense Review (QDR) for the US Dept of Defence, 2001 Things Change!

What seems to be happening? Inputs Strategy Outputs Analysis Interpretation “what might we need to do?” “what will we do?” “how will we do it?” “what’s really happening?” “what seems to be happening?” things happening Foresight What seems to be happening?

What is Really happening? Interpretation Foresight “Deep” Drivers of Change (System Dynamics/Structure) What’s Really Happening? What is Really happening?

Mindsets, Worldviews, Metaphors, Myths Events System Structure News Items Recurring Themes Underlying “Drivers” “Core” Human Intelligences Mindsets, Worldviews, Metaphors, Myths Copyright © 2001 Joseph Voros Patterns, Trends Mental Models Thinking Systems Levels of Structure

Mindsets, Worldviews, Metaphors, Myths Events News Items Recurring Themes Underlying “Drivers” “Core” Human Intelligences Mindsets, Worldviews, Metaphors, Myths Copyright © 2001 Joseph Voros Levels of Structure

What is REALLY happening? The Interpretation step means the Prospection step is better informed (in this case, the scenarios you will develop). So, look beneath the events, news items, themes and trends for the deep drivers of change. What is REALLY happening?

Major Drivers of Change Political Economic Environmental Social Technological Major Drivers of Change

Major Drivers of Change Globalisation Cheap travel & instant transfer of information/communications, trans-national commerce, student diversity Economics Massification of education Percentage of population in post-compulsory education rising Rising funding costs to government Technology Internet, online instruction, e-commerce, cost and complexity of science The ‘knowledge project’ itself is changing From dualist objectivism to participatory worldviews Major Drivers of Change

The Scenario Planning process Identify the focal question Environmental scanning – internal and external Selecting drivers of change and ranking Building the scenario matrix Developing the scenarios Presenting the scenarios Considering the strategic implications The Scenario Planning process

The Impact / Uncertainty Classification Low Moderate High Mod The Impact / Uncertainty Classification

“Low” means we are reasonably certain that it will play out or continue in ways that are fairly well understood eg. population “High” means that we have no clear idea which of a number of plausible ways it might go eg. government legislation and policy “Mod” means “somewhere in between”  What is Uncertainty?

The Scenario Planning Process Identify the focal question Environmental scanning – internal and external Selecting drivers of change and ranking Building the scenario matrix Developing the scenarios Presenting the scenarios Considering the strategic implications The Scenario Planning Process

The Impact / Uncertainty Classification Low Moderate High Mod Critical Scenario Drivers Important Scenario Drivers Critical Planning Issues Important Planning Issues Monitor & re-assess Monitor The Impact / Uncertainty Classification

Building the Scenario Matrix High Impact, Low Uncertainty = “predetermined elements (or trends)” should be present in every scenario High Impact, High Uncertainty = “critical uncertainty” choose the two most uncertain of these to create the scenario matrix And the “blue drivers”? include in your scenarios if you like, & if it makes sense to, particularly if you think that they will be significant in the future. Building the Scenario Matrix

Take your 3 key internal issues (the clairvoyant questions) and your 3 most important but uncertain drivers of external change. Plot them on your impact-uncertainty matrix. Pick two from the upper right hand corner. Your Turn!

Building the Scenario Matrix Choose two drivers that are most uncertain and most critical in terms of impact on your organisation. Critical Uncertainty 1 Critical Uncertainty 2 Building the Scenario Matrix

Builsing the Scenario Matrix World 2 World 1 World 3 World 4 Critical Uncertainty 1 Critical Uncertainty 2 Builsing the Scenario Matrix

The Scenario Planning Process Identify the focal question Environmental scanning – internal and external Selecting drivers of change and ranking Building the scenario matrix Developing the scenarios Presenting the scenarios Considering the strategic implications The Scenario Planning Process

Developing the Scenarios In a scenario workshop, small groups would ‘flesh out’ each world. The requirements for this step are to suspend disbelief, trust your intuition, look for plausibility, surprises and novel elements. Scenarios must be internally consistent and plausible – they have to make sense to the people creating them, and to the people in the organisation who will read them. Developing the Scenarios

Your Turn! Build your scenario matrix…. and Consider what your worlds might look like…. Your Turn!

Developing the Scenarios What is the world like in your scenario in 2026? How did your world develop? Stand in 2013 and look back over the major events that have occurred; list the events. Developing the timeline in 5 year intervals saves time, but you can also simply prepare a list of the events you think created your world.  Would your organisation exist in 2026? What do you look like? Are you physical or virtual? Global? Specialist? Major characteristics of your customers? What do staff do? Title of Scenario Be creative! Imagine a title that describes the essence of your world, and that is memorable. Narrative – the scenario story Write up a paragraph or two to describe your world (skip this if you are running out of time).   Presentation Decide how you will present your scenario to the rest of the group. You’ll have about five minutes, so focus on the key elements of your world as they relate to tertiary institutions. Developing the Scenarios

Further Development In a real-life project: The first set of scenarios usually needs further development and refinement. Occurs over time, and is designed to make the scenarios understandable to the organisation (to deal with the fact that most staff won’t be directly involved in their development). Further Development

The Scenario Planning Process Identify the focal question Environmental scanning – internal and external Selecting drivers of change and ranking Building the scenario matrix Developing the scenarios Considering the strategic implications The Scenario Planning Process

From Scenarios to Strategy The Scenarios are not the only purpose of the exercise! the resulting “freeing up” of thinking while creating them is! Expanding understanding of what options might be available in the long term: shifts frame of reference 10-20 years out. examining implications for the services provided by your unit in each of the scenario worlds looking to see what your unit would need to do to stay viable From Scenarios to Strategy

From Scenarios to Strategy Main Uses for Scenarios A common language for “strategic conversations” - ongoing future-oriented discussions Risk Assessment - specific decision Strategy Evaluation - existing strategy Strategy Development - new strategy From Scenarios to Strategy

From Scenarios to Strategy Scenarios provide ‘clues’ about what might be important drivers of change in the future, and how those drivers might interact and affect the organisation. Aim is to identify strategies that are robust across all scenarios, given what we know about how the future might develop. Also, to identify ‘early warning indicators’ that events in the scenarios are happening – how will we respond? Within the context of the focal question…. From Scenarios to Strategy

Approaches to Strategy Robust - Perform well over the full range of scenarios considered - “Blue Chip” Flexible - Keep options open and / or wait for as long as possible before committing - “Hedging” Multiple Coverage - Pursue multiple strategies simultaneously until future becomes clear - “Scattergun” Gambling - Select one strategy which works very well, but in only one or two scenarios - “Bet the Farm” Approaches to Strategy

‘Bet the farm’ is the Common Default In the absence of well-developed set of scenarios, single-point forecasting and / or a reluctance to allow uncertainty (ie. the “predict and control” mentality) leads to a (usually unconscious) projection of an “official” future, which is the one assumed to be coming ... This approach is functionally equivalent to (and an unconscious form of) the Gambling / “Bet the Farm” approach ‘Bet the farm’ is the Common Default

From Scenarios to Decision / Strategy The scenarios can help you to imagine the consequences of different choices of decision / strategy in each of the different scenario “worlds” … … without having to live with the consequences of a wrong decision or strategy for the rest of your life! Which of the types of decision / strategy do you want to develop in the real world? From Scenarios to Decision / Strategy

The Scenario Planning Process Identify the focal question Environmental scanning – internal and external Selecting drivers of change and ranking Building the scenario matrix Developing the scenarios Considering the strategic implications AND, ONE MORE!! The Scenario Planning Process

Suddenly the World Changes! “Wild Cards” are low-probability, very-high-impact events that are wide in scope and directly affect the human condition potentially disruptive (negatively and/or positively) intrinsically beyond the control of any single institution, group or individual rapidly moving eg: asteroid impact; stock market collapse; terrorist attack; disrupted water, gas or electricity supply; etc Suddenly the World Changes!

Types of Futures Possible Plausible Probable Preferable Time Scenario “Wildcard” Today Time Types of Futures

Suddenly the World Changes! If you don’t think about Wild Cards before they happen, then all of the value in thinking about them is lost (“horse has bolted / stable door”). If we accept that there will be Wild Cards in the near future, then the only effective defence is to begin to systematically think about them now, and examine their implications. Suddenly the World Changes!

Using Scenario Outputs Does your organisation’s existing strategy stand up to all of the future worlds presented in these scenarios? What rationale would you have for pursuing various strategic options in each scenario? What can you influence? What early indicators will we monitor? After considering the strategic implications of the scenarios, what actions might we recommend? Deciding on an implementation plan. Using Scenario Outputs

Given your scenario worlds, and your brief exploration about how those worlds might have developed over time, And, remembering your focal question, What are the implications of your scenarios for your institution today? Would you still be in business? In what business? Who are your customers and what do they want? Where are the gaps in your knowledge? What do you need to know more about? Your Turn!