Slide1: An Introduction to Scenario Planning Rohit Talwar – FastFuture rohit@fastfuture.com www.fastfuture.com +44 (0)20 7435 3570 +44 (0)7973 405 145


Agenda: Agenda Open the Door and Let the Future in The future – what does it hold, why should we care, how can we study it? Using the ‘driving force’ approach to scenario planning to create fast insights into alternative futures Accelerated Scenario Planning Exercise Defining the Driving Forces – Identifying the driving forces shaping our environment Crafting Scenarios Assessing the Scenarios - implications and options for our customers and the industry Assessing the implications How well do our current strategies stand up to these scenarios What will stay the same, what will need to change? Markets, Products, People, Processes, Infrastructure, Finances, Knowledge Management, Innovation Closing discussion – how do we apply these tools in our day jobs?


Our Clients: Our Clients Panasonic


Our Services: Our Services Analysis of Future Trends, Drivers & Shocks / Technology Watch Accelerated Scenario Planning & Future Mapping Identification of Opportunities for Innovation and Strategic Investment Strategy Creation & Development of Implementation Roadmaps Design & Facilitation of Innovation, Incubation & Venturing Programmes Expert Consultations & Futures Think Tanks Personal Futuring for Leaders and Leadership Teams Public Speaking, In-Company Briefings, Seminars and Workshops


The Challenge - Developing Strategies in an Uncertain World: The Challenge - Developing Strategies in an Uncertain World What factors should include when bidding for and planning long term projects? How do we cope with risk and uncertainty? How do we select the right indicators to track? How do we identify key trends and developments? How do we spot the potential for major discontinuities? How do we plan, operate and survive in a turbulent and fast-changing world? How do we handle those not playing by ‘our rules'?


Slide6: Time Periods for Viewing the Future Near Term Future - Up to one year from now Short Term Future - One - five years from now Mid-Term Future - Five - twenty years from now Long Range Future - Twenty - fifty years from now Far Future - fifty plus years from now Source Earl Joseph


7 Attitudes Toward the Future: 7 Attitudes Toward the Future Providential / Fatalistic - what will be will be Conventional - tomorrow will be much like today Pessimism - decline from past ‘Golden Age’ Discontinuity - the future will be nothing like the present Optimism - faith in progress / technology cures all Unknowable - futile to attempt to go beyond the present Futurist - tempered optimism / the future is rich with possibility resulting from human planning and action Source Prof. Howard F. Didsbury Jr


8 Dimensions in Most Futures: 8 Dimensions in Most Futures Physical Environment including health Socio-Cultural Legal, Moral and Ethical Political Economic Military, Defence and Security Science and Technology The Commercial World


Forecasting Methods: Forecasting Methods Genius Forecasting History Trend projection (Extrapolation, Growth Curves) Correlation Causal Methods Polling / Scanning Technology Forecasting Scenarios Delphi Studies Morphological Models Relevance Trees Mission flow diagrams Technology Assessment Trend Impact Analysis Cross-Impact Analysis Systems Approach Simulation Cycles (e.g. Kondratieff) Social Indicators Chaos Theory Source Prof. Howard F. Didsbury Jr


The CIA’s Global Scenarios: The CIA’s Global Scenarios Inclusive Globalisation A virtuous circle develops, enabling a majority of the World’s people to benefit from globalisation. Conflict is minimal within and among states benefiting from globalisation. Pernicious Globalisation Global elites thrive, but the majority of the world’s population fails to benefit from globalisation. Internal conflicts increase, fuelled by frustrated expectations, inequities, and communal tensions Regional Competition Regional identities sharpen in Europe, Asia, and the Americas, driven by growing political resistance to US economic hegemony. Military conflict among and within the three major regions does not materialize, but internal conflicts increase among the countries left behind. Post-Polar World US domestic preoccupation increases as its economy stagnates. Economic and political tensions with Europe grow, and US-European alliance deteriorates. Instability in Latin America and Asia force those regions to also turn inward. Given the priorities of Asia, the Americas and Europe, countries outside those regions are marginalized, with virtually no sources of political or financial support. CIA Global Trends 2015


Slide11: Scenarios - A Definition “The precise definition of ‘scenario’ is: a tool for ordering one’s perceptions about alternative future environments in which one’s decisions might be played out. Alternatively: a set of organised ways for us to dream effectively about our own future.” Peter Schwartz, The Art of The Long View (Doubleday Currency, 1992) p4


Slide12: An Effective Scenario Tells a story about possible future changes in a particular ‘system’, domain, environment, society, etc. Engages the imagination Is written in the past or present tense - as if the forecasted trends and events had already happened Helps clarify the causes and consequences of key developments Challenges our current thought processes and assumptions about the future Enables us to define and assess a range of alternative policies, strategies and actions Is seen as relevant and an important element of the strategic process


Scenarios Challenge us to ‘Rehearse the Future’: Scenarios Challenge us to ‘Rehearse the Future’ Peter Schwartz, The Art of The Long View Engaging the Future - “using scenarios is rehearsing the future. You run through the simulated events as if you were already living them. You train yourself to recognize which drama is unfolding. That helps you avoid unpleasant surprises and you know how to act.” (p.200) Role Playing - “by the end of the session, managers (at Shell) understood the implications of each possible future, because they had literally rehearsed them” (p.205) Challenging Beliefs - “that was the reason for creating the scenarios in the first place” (p.202) Changing Behaviour - “the test is not whether you got future right... The real test is whether anyone changed his behaviour because he saw the future differently. And did he change his behaviuor in the right direction?”(p.214)


Scenario Planning may be Valuable but...: Scenario Planning may be Valuable but... We don’t have enough time We haven’t got the budget We’re not convinced Our people are very cynical We have a long term plan We are too busy with current projects We are a numbers organisation …So is there a way we can prove the value quickly?


How Can Accelerated Scenarios Help?: How Can Accelerated Scenarios Help? To introduce and help ‘sell’ the value of future thinking To help shape strategy and drive fundamental change To ‘open the door and let the future in’ - and thus help overcome resistance to change To help focus teams on their goals at the start of key projects To surface and sense check assumptions


Applying Accelerated Scenario Techniques: Applying Accelerated Scenario Techniques BellSouth - Understand impact of the ‘New Economy’ Thames Water Utilities - Introducing and Assessing the Concept Environment Agency - Management Team Development Yellow Pages - Development of Business Blueprint Capture Thinking on Fast Forward programme Chloride - Senior Management Development ‘Short Sharp Shock’ to Drive Growth East of Scotland Water - Initiation of Business Review Orange - Knowledge Sharing and Innovation Programme Launch


Slide17: An Example Scenario - Britain 2006 Britain today is a thriving economy that has recovered well from the recession of 2001-2. Although its about turn on the single currency remains a source of tension with its European partners, Britain remains a major influence in the 40 member EU. The economy has experienced continuous growth over the the last three years and a significant transformation in employment patterns. London in particular has responded well to the continued migration of financial services operations to Frankfurt, Yorkshire and the Internet. The capital is now the centre of Europe’s multimedia industry - with over 2 million of its working population now involved in Internet / multimedia related businesses. The general level of Internet usage in Britain has risen dramatically over the last three years as a result of the joint venture between BT&T, Microsoft and Amazon.Com to provide free PC’s to every home and office. Take up has been particularly strong amongst the wave of new businesses created on the back of the re-elected Labour government’s innovative programme to create a million new businesses in the five year period 2003 - 2008. Of the 600,000 new businesses created so far, many have been in the fields of new media, professional services, construction related trades and the booming fields of personal development, coaching and therapy. The need to create these new businesses was driven by the construction boom and continual trend towards Globalisation and the shift of production and service jobs to lower cost countries in Eastern Europe and Asia. The population has become almost immune to the regular terrorists attacks on infrastructure and essential services. The Government continues in its attempt to create a coherent homeland security policy and approach spanning all of the key Departments involved in Defence and Security. The politics of Whitehall continue to hamper real progress. The shift in Defence policy towards combating terrorism continues but effectiveness is hampered by lengthy procurement cycles and the extra administrative overhead created by the latest ‘quality, value and effectiveness’ targets and reporting requirements. The tensions between Britain and the USA continue despite efforts by President Hilary Clinton to heal the rifts that developed during the conflicts in Iraq, Saudi Arabia and Kashmir and in the subsequent peace stabilisation efforts.


Typical Approaches to Scenario Development: Typical Approaches to Scenario Development Discussion and debate - with or without source data System Change - evaluation of every parameter under different conditions (e.g. treasury model) Driving Force - identification and assessment of the fundamental influencing factors


Slide19: Developing Scenarios Using Driving Forces Gather Data Identify Driving Forces Build Scenarios


Slide20: The Basic Scenario Process 1. Assess the Current Situation 2. Gather the Data 3. Identify the Driving Forces 4. Generate Alternative Scenarios 5. Assess the Implications for your Environment 6. Assess the Implications for your Organisation 7. Define Strategy and Plans 8. Implement and Monitor


Slide21: Example Driving Forces Political DF1 - Britain’s Attitude to the EU Total harmonisation Gradual alignment Growing divergence Fortress Britain DF2 - Political Stability of Europe Technological and Scientific DF1 - Impact of Wireless Technology ‘Remote control for life’ Gradual take up of 3G/4G services Technology slow to deliver Health concerns restrict usage DF2 - Genetic Medicine


Slide22: Example Driving Forces Economic DF1 - Level of Growth Wired’s ‘Long Boom’ Consistent increases Zero growth Unshakable recession DF2 - Economic Health of Japan Physical Environment DF1 - Impact of Environmental Legislation Encourages shift to paperless business Drives up costs Eliminates business sectors Negligible effect on most businesses DF2 - Pollution Levels


Slide23: Example Driving Forces Social and Demographic DF1 - Work - Life Balance 24/7 Society 60 hour working norm Resurgence of 9 to 5 3 Day working week DF2 - Population Growth Commercial & Business DF1 - Prevailing Business Philosophy Short term shareholder returns Long term value creation Socially responsible business Family friendly businesses DF2 - Impact of Globalisation


Slide24: Example Driving Forces Legal, Moral and Ethical DF1 – Personal Identity Identity chip inserts by 2007 Identity cards for all Immigrants forced to carry ID No personal ID’s DF2 – Attitudes to War Military, Defence and Security DF1 – Privatisation & Outsourcing All services brought back in-house Only non-core services outsourced Transport, logistics and property outsourced Everything bar combat outsourced – including peace keeping DF2 – Threat of Terrorism


Slide25: Defining Driving Forces Working in syndicates, you will be allocated a heading (e.g. Political) Define two driving forces within that heading which you think will have a major impact on shaping the environment for your customers over the next 5 years (e.g. extent of regulatory control, political stability) For each driving force define at least four different possible outcomes Write the name of each driving force and the outcome on a separate post-its (you should have at least four post-its per driving force)


Slide26: Defining Scenarios Working in syndicates, select one of the outcomes from each of the driving forces defined earlier - the outcomes chosen do not have to fit together logically Using the set of outcomes as a start point, develop a plausible scenario of what your firm’s ‘state of our world’ report would look like on January 1st 2007 You can present your scenario back in whatever way you think most appropriate - picture, one act play, news report, day in the life, etc.


Assessing the Implications: Assessing the Implications What will there strategic priorities be? How will they do business? What will be their key requirements of suppliers? How will they evaluate supplier performance? What pressures will the industry face? What new entrants might emerge? What will the trends be in size and scope? What capabilities will be critical? Who could be best in class? For Customers For Suppliers


Evaluating The Scenarios : Evaluating The Scenarios How well do our current strategies stand up to your scenario? Target Markets Core Offerings People Processes Team Structures Infrastructure Project Financing Knowledge Management Innovation Stay the Same Change