Quote of the day “Almost no one expected what was coming. It’s not fair to blame us for not predicting the unthinkable.” Daniel H. Mudd, former CEO of Fannie May quoted in the NY Times Sunday, October 5, 2008 © 2013 University of Notre Dame. All rights reserved. This PowerPoint presentation may not be duplicated, distributed or excerpted without the University’s advance written consent.

© 2013 University of Notre Dame. All rights reserved.

1.To gain an awareness of scenarios and how they can be useful for helping leaders anticipate uncertain change and its consequences 2.To explore real world examples of how organizations cope with and capitalize on complexity 3.To understand some of the shortcomings of the method and how to mitigate these risks of scenario mis-use © 2013 University of Notre Dame. All rights reserved.

Baseline Forecasts Expected Scenario Past Present © 2013 University of Notre Dame. All rights reserved.

Expected Scenario “The most likely future, isn’t” Herman Kahn © 2013 University of Notre Dame. All rights reserved.

Is your forecast robust past Thanksgiving? Level of Turkey Satisfaction Trend Extrapolation: The Turkey Problem Source: Nassim Talem, 2010 © 2013 University of Notre Dame. All rights reserved..

It requires evidence - forces us to be evidence- based It forces us to identify driving forces and have clarity on the indicators It projects current trends, based on the best available data to project the most likely “surprise-free” future scenario It serves as a starting point for consideration of the impacts of uncertain disruptions and development of alternative scenarios If the probability of the expected future occurring is low, why is a baseline forecast important? © 2013 University of Notre Dame. All rights reserved..

A 2010 study based on 1500 face-to-face CEO interviews What CEO’s are Saying About Complexity and Uncertainty © 2013 University of Notre Dame. All rights reserved..

Source: Capitalizing on Complexity, IBM 2010 What CEO’s are Saying About Complexity and Uncertainty Organizations are experiencing significant upheaval Changes in the new economic environment are large-scale, substantial and drastically different. More volatile Deeper/faster cycles, more risk More uncertain Less predictable More complex Multifaceted, interconnected Structurally different Sustained change © 2013 University of Notre Dame. All rights reserved..

Source: Capitalizing on Complexity, IBM 2010 What CEO’s are Saying About Complexity and Uncertainty © 2013 University of Notre Dame. All rights reserved..

Source: Capitalizing on Complexity, IBM 2010 What CEO’s are Saying About Complexity and Uncertainty The Complexity Gap While eight out of ten CEOs anticipate significant complexity ahead, less than half feel prepared to handle it. 30% Complexity gap © 2013 University of Notre Dame. All rights reserved..

How CEOs can capitalize on complexity Source: Capitalizing on Complexity, IBM 2010 © 2013 University of Notre Dame. All rights reserved..

How CEOs can capitalize on complexity Source: Capitalizing on Complexity, IBM 2010 © 2013 University of Notre Dame. All rights reserved..

Uncertainty Reduction Theory Berger and Calabrese (1976) Two ways in which we reduce our uncertainty Retroactive Explanation - (We take our experiences and apply meaning) Proactive Prediction - (We apply our understanding of situations/individuals to prepare “best practice”) © 2013 University of Notre Dame. All rights reserved.

Framework Forecasting Three simple questions What is going to happen? – Expected Scenario What might happen instead? – Alternative Scenarios What do you want to happen? – Preferred Scenario(s) Three simple questions What is going to happen? – Expected Scenario What might happen instead? – Alternative Scenarios What do you want to happen? – Preferred Scenario(s) Adapted From: “Framework Forecasting”, Peter Bishop Limit of Plausibility Alternative Scenario Preferred Scenario Baseline Forecasts Expected Scenario Past Present Alternative Scenario Alternative Scenario  Disruption © 2013 University of Notre Dame. All rights reserved..

The Power of Scenarios Scenarios Process Expands Your Thinking Provides a Method for “Thinking the Unthinkable” Challenge Conventional Wisdom & Cognitive Proximity Scenarios create “Memories of the Future” To “experience” the disruption in advance i.e. – “flight simulator” Leverage “Intuition” Enable Companies to “Wind Tunnel Test” Strategies Vulnerability Analysis, Gap Analysis Identify “Signposts” as early indicators © 2013 University of Notre Dame. All rights reserved..

17 Scenarios “The person who writes scenarios must be a good story teller” Why? Does this add value? obal_scenarios/scenarios_videos/video/ Shell Scenarios Video © 2013 University of Notre Dame. All rights reserved..

18 Scenarios “Nearly always, if the scenario development has been conducted well, the results will be disturbing” Why is this so? How can this be useful for business? © 2013 University of Notre Dame. All rights reserved..

The Saber-Toothed Tiger Problem Specialist Generalist © 2013 University of Notre Dame. All rights reserved..

20 Scenarios How can leaders use scenarios without abdicating leadership? “Give me a one-handed economist…” Harry Truman © 2013 University of Notre Dame. All rights reserved..

Steer a course between the false certainty of a single forecast and the confused paralysis that often strikes in trouble times. Scenarios and Abdication of Leadership Set forth a goal that is “Robust under different Scenarios” © 2013 University of Notre Dame. All rights reserved.

Scenario Development “Double Uncertainty Matrix” [Global Business Network] “Alt Futures” [Institute For The Future] “Aspirational Futures” [Institute for Alternative Futures] Deductive Method Inductive Methods © 2013 University of Notre Dame. All rights reserved.

Foresight Forecast Team Assignment (75 points) Due ________________ Assignment is Posted on _____ Upcoming Deliverables: First Draft Due _____________ Peer Reviews Due _______________ Final Papers Due _______________ In-Class Presentations on __________________ Foresight End of Semester Event on ________________ © 2013 University of Notre Dame. All rights reserved.

 Read: 20/20 Foresight, Chapter 1  Scan websites of foresight thought leaders:  Institute for the Future ▪  Institute for Alternative Futures ▪  Global Business Network ▪  Scanning Post 3 Due _____________ © 2013 University of Notre Dame. All rights reserved.