1. Scenario PlanningMake better strategic decisions when faced with uncertainty and changeExtracts from MBA dissertation - Colin Campbell

2. Change and Uncertainty Business uncertainty has increased dramatically Porter (1985)Turbulent organisational environment means that traditional strategic planning tools such as PEST are too simplistic- Burt el al. (2006)Many business environments are no longer stableSurvival of long established businesses being questionedHistory shows extreme challenges British Motor Cycle Industry in the 1960'sIBM in the 1980'sNokia and Blackberry in recent years 3. Scenarios can help Scenarios present a range of longer term views of an organisation's external environment based on Industry structuresCompetitive forcesEnvironmental factorsTrendsEach scenario attempts to tell a plausible story Equips an organisation to take strategic decisions now which positions it well for the range of possible futures Cornelius et al. (2005)Alters mental modelsChanges assumptions about how the world worksOvercomes heuristics and biases in management decision making 4. Impact of Innovation External changes especially innovation can de-rail a strategyRealized Strategy versus Intended Strategy - Mintzberg (1994) 5. Scenarios - A Different ApproachForecasting versus Scenario Planning - The Management Centre (2012) 6. Creating Scenarios The Process 1. Identify major focal issue 2. Discuss the key forces in local environment 3. Discuss the main driving forces 4. Rank by importance or uncertainty 5. Determine the axes of crucial uncertainties 6. Turn forces and factors into scenario narratives 7. How does issue look under each of the scenarios 8. Identify events to track which scenario is closest as future unfolds Schwartz(1991) & Ringland(2002) 7. Axes of Uncertainty Two or three key forces used to create a visual map representing the axes of uncertainty Forces and factors turned into narratives which describe how we get from here to there What events need to happenWhat people and things characterise scenariosPlausible assumptions about each scenario variableInternally consistent views of future industry structureGive each scenario a name to encourage dialogue 8. Examples ICLRingland (2002) 9. Examples ATOSATOS Consulting (2009) 10. Examples CiscoCisco (2010) 11. Building Strategies from Scenarios Factoring Scenarios into the competitive strategy of the organisation Feed scenarios back to those consultedDiscuss strategic optionsAgree the implementation planPublicise the scenarios Ringland (2002) 12. Building Strategies from Scenarios Robust Strategies Options which work across the range of scenariosPosition organisation to exploit all future opportunitiesPrepare for threatsPoised for opportunityProbably requires extra cost to cover options 13. Building Strategies from Scenarios Focussed Strategies Pick a most probable or best case scenarioCan the organisation bring about a scenario?Things to considerFirst mover advantage Initial competitive position Attitude to risk Numeric models for formalising strategy evaluation can be usedeg. Wright & Cairns (2011) Potential to highlight best performing strategy 14. Building Strategies from Scenarios Develop Early Warning Indicators Keep options open until outcomes of external events and forces is more clearConduct Horizon Scanning to spot change as it arises Schultz (2006) Trends and drivers can come from a wide and diverse set of sources Spotting trends early has potential to deliver significant competitive advantage when combined with Scenario Planning Create change Control circumstances Conscious choices Avoid being swept along by circumstances 15. Building Strategies from Scenarios Strategic Conversations Major decision making should remain a continual process.Scenarios create language and structure for shared interpretations of the worldLeads to joint actionOften best achieved through informal activities and debate at all levels in an organisationsPromotes balanced viewpoint and avoids group-think Van der Heijden et al. (2002) 16. Benefits of Scenario Planning Improved Decision Making Human reasoning does not necessarily fit with optimal judgements Lack of information, human emotional state Mental shortcuts leading to systematic biases and bounded rationality Eysenck & Keyne (2000), Kahneman & Tversky (1996) Mental models drive people to be satisfied with limited interpretation of situations Chermack (2004) Scenarios can help overcome these pre-dispositions and change mental models to improve decision quality 17. Cognitive Biases & Decision MakingMeissner & Wulf (2013) 18. Benefits of Scenario Planning Improved Organisation Learning Strategy development process follows the learning loopVan der Heijden (1996) Scenario planning fits this adaptive process by allowing for reflection and identification of new patterns 19. Benefits of Scenario Planning Scenario Planning delivers Organization Performance and Change through Dialogue, Conversation, Quality and EngagementLearningDecision MakingMental ModelsLeadership SupportChermack (2011) 20. Three Month Market Study Two internet surveys Strategic Decision Making 100 respondents Scenario Planning 61 respondentsThree companies with Scenario Planning experience interviewed Four Scenario Planning consultants interviewed 21. Companies Interviewed UK Government's advisory body on natural environmentLeading International Law CompanyTrain Rolling Stock Leasing Company 22. Survey 1 Strategic Business Decision Making Businesses typically look 2 to 5 years ahead when making decisions around strategy (74% of respondents) 3 years is the most common time period (37%) Brainstorming & SWOT are the favoured techniques for decision making Most important factors for effective long term decision making were Detailed understanding of current competitive forcesStrong direction from company leadersInvolve as many relevant stakeholders as possible 23. Survey 2 Scenario Planning Scenario Planning timeframes 64% of respondents have used scenario planning to look more than 15 years ahead80% more than 5 years ahead31% see an immediate impact from scenario planning51% see an impact within 1 yearMost important key factors for a successful scenario planning exercise were Participants heavily involved Detailed understanding of current business environmentStakeholder involvement 24. Survey 2 Scenario Planning Respondents believe Scenario Planning is most effective at altering how people thinkMost desirable outcome of a Scenario Planning exercise Promotes regular discussionProvides basis for review of current plans 25. Conclusions from Interviews Scenario Planning is most effective at Altering how people think Adding to organisational knowledgeWide stakeholder involvement is a key factor for better long term decision making Senior management involvement in Scenario Planning is key to the success of the exercise 26. Principal Question Asked By Study How can scenario planning help businesses make better decisions when faced with uncertainty? Conclusions Involving a wide range of stakeholders broadens minds and ensures wide range of opinions representedHelps change how people think by diminishing many of the biases involved in day to day decision makingEnhances learning by stimulating strategic conversations throughout the organisationCreates a framework and common language where organisations can evaluate strategic options and maintain vigilence for signs of change within decision making horizon 27. Contact For more details on this study you can contact me at colin@ mobilebeacon.com 28. Bibliography Atos Consulting (2009) Telecom Companies in 2015: Trends and scenarios, Available at http://www.be.atosconsulting.com/NR/rdonlyres/796D11B6-1214-43EE-88F8-120088703612/0/AtosConsulting_Whitepaper_Telecom_Companies_in_2015_uk.pdf [accessed at 1st June 2013] Burt, G., Wright, G., Bradfield, R., Cairns, G., Van Der Heijden, K. 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