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The Art of Strategic The Art of Strategic ConversationConversation
Testing strategies via Scenario Planning Testing strategies via Scenario Planning
Adrian SaidAdrian Said
SatisfyCustomer
Needs
SatisfyCustomer
Needs
IntegratedOrganization
Effort
IntegratedOrganization
Effort
Focus onLong-Term
Success
Focus onLong-Term
Success
Corporate Strategic PlanningCorporate Strategic Planning
Strategic Thinking FrameworkStrategic Thinking FrameworkThe approach adopted for this WorkshopThe approach adopted for this Workshop
Environmental Scanning
Strategy Formulation
Strategy Implementation
Evaluation and Control Fe
edb
ack
Stage 1
Stage 2
Stage 3
Stage 4
The Strategic Planning ProcessThe Strategic Planning Process
Translating the mission
into specific
long-range and short-
range performanc
e objectives
Crafting a strategy to achieve the performanc
e objectives
Implementing and
executing the
strategy
Evaluating performanc
e, reviewing
the situation,
and initiating corrective
adjustments
Defining the
business and
developing a vision
Revise as needed
Improve/change as
needed
Improve/change as
needed
Recycle to tasks 1,2,3, or 4 as needed
Revise as needed
Corporate Strategic PlanningCorporate Strategic Planning
External AppraisalExternal Appraisal
Threats andOpportunities in
Environment
Threats andOpportunities in
Environment
Key Success
Factors
Key Success
Factors
Internal AppraisalInternal Appraisal
Strenghts andWeaknesses of
Organisation
Strenghts andWeaknesses of
Organisation
DistinctiveCompetencies
DistinctiveCompetencies
Creation ofStrategy
Evaluation andChoice ofStrategy
Implementation of Strategy
1
2
3
4
Strategic Thinking FrameworkStrategic Thinking FrameworkThe approach adopted for this WorkshopThe approach adopted for this Workshop
Industry Key Success Factors
Industry Key Success Factors
StrategyStrategyCompetitive Advantage
Competitive Advantage
Organizational CapabilitiesOrganizational Capabilities
RESOURCES
Intangible
Physical
Financial
Intangible
Reputation
Technology
Culture
Human
Specialized Skills & Knowledge
Communicative & Interactive abilities
Motivation
DESCRIBING THE ENVIRONMENT
CV
Media
PeopleBusinesses
Strategic Partners EconomicEnvironment
Regulatory
Environment
SocialEnvironment
TechnologicalEnvironment
PoliticalEnvironment
Customers
Economic
Public Deficit/Fiscal/Monetary policy
Employment
Investment level
Tourist arrivals
Inflation
Disposable income
Rate of interest
FDI
DESCRIBING THE ENVIRONMENT
Political
EU
Direction/Stability = VISION
Government fees
Privatisation
Industrial Policy
Welfare State
Education
DESCRIBING THE ENVIRONMENT
Social
Working mothers
Increased female participation
Ageing population
Shorter working weeks
University student intake
DESCRIBING THE ENVIRONMENT
Technology
Working from home (remote technology)
E-commerce/M-commerce
Substitutes
Convergence of technologies
DESCRIBING THE ENVIRONMENT
The Competitive Environment
SUPPLIER POWER
Factors determining power of supplier relative to producers same as those determining power of producers relative to buyers - see “Buyer Power” box.
SUPPLIER POWER
Factors determining power of supplier relative to producers same as those determining power of producers relative to buyers - see “Buyer Power” box.
INDUSTRY RIVALRY• concentration • diversity of competitors• product differentiation• excess capacity & exit barriers• cost conditions
INDUSTRY RIVALRY• concentration • diversity of competitors• product differentiation• excess capacity & exit barriers• cost conditions
THREAT OF ENTRY• economies of scale• absolute cost advantage• capital requirements• product differentiation• access to distribution
channels• governmental and legal
barriers• retaliation by established
producers
THREAT OF ENTRY• economies of scale• absolute cost advantage• capital requirements• product differentiation• access to distribution
channels• governmental and legal
barriers• retaliation by established
producers
THREAT OF SUBSTITUTES• buyer propensity to
substitute• relative price performance
of substitute
THREAT OF SUBSTITUTES• buyer propensity to
substitute• relative price performance
of substitute
BUYER POWER
Price sensitivity• cost of product relative to total costs• product differentiation• competition between buyers
Bargaining Power• size and concentration of buyers relative to
suppliers• buyers’ switching costs• buyers’ information• buyers’ ability to backward integrate
BUYER POWER
Price sensitivity• cost of product relative to total costs• product differentiation• competition between buyers
Bargaining Power• size and concentration of buyers relative to
suppliers• buyers’ switching costs• buyers’ information• buyers’ ability to backward integrate
The Competitive Environment
SUPPLIER POWERFactors determining power of supplier relative to producers same as those determining power of producers relative to buyers
RANKING: HIGH MEDIUM LOW
THREAT OF SUBSTITUTES
RANKING: HIGH MEDIUM LOW
The Competitive Environment
BUYER POWERIs the buyer in a position to dictate?
RANKING: HIGH MEDIUM LOW
THREAT OF ENTRY
RANKING: HIGH MEDIUM LOW
RIVALRY
RANKING: HIGH MEDIUM LOW
Overall Industry Competitiveness
Low/Low/Medium/HighMedium/High
Introduction to Scenario PlanningForecasting techniques
Models are often used to anticipate real life:Models are often used to anticipate real life:
Wind tunnels are used to test car shapesWind tunnels are used to test car shapes
Airframe designers use fatigue tests to reveal potential Airframe designers use fatigue tests to reveal potential stresses and cracksstresses and cracks
Mathematical and computer models are used to schedule Mathematical and computer models are used to schedule and allocate resourcesand allocate resources
Production planning for factoriesProduction planning for factoriesAgricultural production modelsAgricultural production modelsHospital meal consumptionHospital meal consumption
Introduction to Scenario PlanningForecasting techniques
Typical Forecasting TechniquesTypical Forecasting Techniques
Econometric modelingEconometric modeling
Delphi MethodDelphi Method
ScenariosScenarios
The Danger in Forecasting is……..
To d a y
Ra ng eo f
Unc e rta intie sTre nd s
Tim ing
Sing le p o int fo re c a st
Y ou get it wr ong!
So urc e : IC L
Introduction to Scenario Planning
Forecasts based on current trends or Forecasts based on current trends or estimated based on history are estimated based on history are dangerous if the environment is dangerous if the environment is
changing rapidly changing rapidly
The emphasis has moved from The emphasis has moved from forecasting to foresightforecasting to foresight
What is Scenario Planning?What is Scenario Planning?
Scenario planning is a particular methodology that allows organizations, and individual units, to develop a clearer understanding of what the future strategic environment might be like.
Scenario planning focuses on key drivers of change which are critical to the future of an organization. The scenario development process allows staff to explore
how those drivers might affect the organization, and to make better informed decisions about how to position the
organization for the future
Method of studyingMethod of studying the most important driving the most important driving forces affecting our futures.forces affecting our futures.
A team processA team process that encourages exchange of that encourages exchange of knowledge and issues important to the futureknowledge and issues important to the future
Purpose:Purpose: To devise strategies to counter adversities To devise strategies to counter adversities and anticipate potential opportunitiesand anticipate potential opportunities
Deliverables:Deliverables: A set of scenarios and a set of A set of scenarios and a set of strategies for each scenariostrategies for each scenario
Examples:Examples: Military, business, environmental study, Military, business, environmental study, politicspolitics
Scenario UtilizationScenario Utilization
Scenarios – A Case StudyScenarios – A Case Study
“In times of rapid change,
an inability to see
an emergent novel reality
by being locked inside obsolete assumptions
often causes strategic failure,
particularly in large,
well-run companies.”
(Pierre Wack, HBR 1980)
Delta case studyDelta case study
A company involved in the blending, bottling, and A company involved in the blending, bottling, and distribution of alcoholic spiritsdistribution of alcoholic spirits
Set in a historic context of long periods of incremental Set in a historic context of long periods of incremental change in the business environmentchange in the business environment
Scenarios – A Case StudyScenarios – A Case Study
Prior to the scenario intervention,Prior to the scenario intervention,
the risks were seen as not seriousthe risks were seen as not serious
if the company kept toif the company kept to
its original strategyits original strategy
Scenarios – A Case StudyScenarios – A Case Study
““Most of our clients come to us for mainly historical Most of our clients come to us for mainly historical reasons. In this business, the crux is ‘word of mouth’.reasons. In this business, the crux is ‘word of mouth’.People need to know who you are.”People need to know who you are.”
““Our investment is geared towards our existing business, Our investment is geared towards our existing business, both quality and throughput. It is not intended to serve both quality and throughput. It is not intended to serve major new business opportunities.”major new business opportunities.”
““The main constraint to expanding our business is the The main constraint to expanding our business is the demand for the type of services we offer.”demand for the type of services we offer.”
““Our facilities are the key. We must continue to spend on Our facilities are the key. We must continue to spend on them.”them.”
Scenarios – A Case StudyScenarios – A Case Study
And the risks of continuing with the currentAnd the risks of continuing with the currentstrategy were minimised.strategy were minimised.
Scenarios – A Case StudyScenarios – A Case Study
““The wider industry is looking for ways to reduceThe wider industry is looking for ways to reducestocks and working capital, but at the same time tostocks and working capital, but at the same time toincrease variety and choice to the market. If we findincrease variety and choice to the market. If we find
some magic formula here we have got it made.”some magic formula here we have got it made.”
““Although we are not any longer a cost centre, we willAlthough we are not any longer a cost centre, we willcontinue to live with the dilemma that if we improve ourcontinue to live with the dilemma that if we improve our
efficiency our customers will expect a lower price.efficiency our customers will expect a lower price.There is no other price standard to look at than ourThere is no other price standard to look at than our
cost. There is no ‘going market rate for the job’. Alsocost. There is no ‘going market rate for the job’. Alsowe are very close to our customers. We will thereforewe are very close to our customers. We will thereforenever be extraordinary profitable. And we can prospernever be extraordinary profitable. And we can prosper
only under the protective arm of the Group.”only under the protective arm of the Group.”
Scenarios – A Case StudyScenarios – A Case Study
““In the 70’s the parent Group bought a foodIn the 70’s the parent Group bought a food
company. This proved a disaster. The company hascompany. This proved a disaster. The company has
been disposed of. But the memory lingers on. Thisbeen disposed of. But the memory lingers on. This
is one thing we will never do again. It is unlikely thatis one thing we will never do again. It is unlikely that
the Group will diversify from spirits.”the Group will diversify from spirits.”
Scenarios – A Case StudyScenarios – A Case Study
The organizational “jolt” invoked by theThe organizational “jolt” invoked by theintervention provided a new understanding.intervention provided a new understanding.
Scenarios – A Case StudyScenarios – A Case Study
The management team came to the realization that the The management team came to the realization that the current configuration of operational activities resulted in current configuration of operational activities resulted in the company absorbing suppliers’ and customers’ riskthe company absorbing suppliers’ and customers’ risk
Supplier risk arose from Delta Co. holding, and paying Supplier risk arose from Delta Co. holding, and paying for, large stocks of empty bottles, labels, packages and for, large stocks of empty bottles, labels, packages and bottle caps.bottle caps.
Customer risk revolved around the fact that customers Customer risk revolved around the fact that customers were requesting orders at short notice and, to were requesting orders at short notice and, to accommodate these, Delta Co. had to regularly amend accommodate these, Delta Co. had to regularly amend production schedules, significantly increasing their production schedules, significantly increasing their operating costs.operating costs.
Scenarios – A Case StudyScenarios – A Case Study
I never thought about this before … I am depressed,we are being stuffed by our customers, we are lockedinto the risk of customers.
Delta Co. gives value, creates value for others, why?
Delta takes a worthless product and creates value inthe process, for little reward.
[Here the participants were reflecting on their experienceand considering the lack of scope Delta Co. had to planproduction - due to short lead-time demands from customers]
Scenarios – A Case StudyScenarios – A Case Study
Further insights from the workshopsFurther insights from the workshops
There was a realization within the team that the industrystructure had moved from three tiers (raw materials, blending and bottling, and brand management) to two tiers (production and customer relationships).
Delta Co. had almost no involvement with external customers and therefore no intelligence about market demand.
This lack of involvement resulted in little internal understanding of the relationship between the brand and customers, and Delta’s role in that relationship
The outcome of the scenario interventionwas to introduce challenge or “jolt” tobusiness-as-usual thinking at Delta Co,
causing a re-conceptualisation of Delta’sbusiness idea
Further insights from the workshopsFurther insights from the workshops
Prior to the intervention, Delta had notexplicitly articulated any major concern(s)regarding the contextual environment and
had indicated that the key managerialissue was simply the desire for a growthin bottling of 25% (to reduce unit cost of
production)..
Further insights from the workshopsFurther insights from the workshops
At the conclusion of the intervention, the response being formulated had moved from a situation of reactive production systems, to cope with uneven demands.
The new focus was in managing the overall supply chain through partnerships with customers and suppliers. Delta’s new business idea achieved:
evenness / predictability in both supply and customer demands
lower unit cost of production..
Further insights from the workshopsFurther insights from the workshops
Determine time frame
Setboundaries
Identifyunpredictable
and Uncontrollable
forces
Formulatescenarios
Expressscenario(story)
Evaluate
Consistency and plausibility check
SimilarScenarios
MergeScenarios
Formulatestrategies
Monitor
Need to restart?Terminate
N Y
N
Y
Start
ApproachApproach
ConclusionConclusion
What are scenarios?
What we ARE NOT trying to do is:• predict the future
What we ARE trying to do is:• engage in an interesting conversation about the
future• explore what might happen and why• challenge some individual and shared mental
models