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Scenario Planning 
MBA in Executive Format 
Stockholm School of Economics 
Robin Teigland 
robin.teigland@hhs.se 
www.know...
Who am I? (LinkedIn Inmaps) 
Swedish 
Industry 
SSE 
Exec Ed 
Research 
Wharton 
Stanford 
McKinsey 
vonorange.com
3 
Learning Objectives 
 To experience the process and challenges of 
scenario planning and its strengths and 
weaknesses...
4 
Schedule 
 Tuesday morning 
 Lecture: Introduction to scenario planning 
 Groupwork: UPS Case 
 Group presentations...
If the rate of change on the 
outside (of an organization) 
exceeds the rate of change on 
the inside, the end is near.......
Increasing pace of change 
 From 1920s to 2010s 
 Average lifespan of S&P 500 company fell from 67 
years to 15 years 
...
“Old” Film from 2008 
Did You Know: Shift Happens 
URL: http://www.youtube.com/watch?v=cL9Wu2kWwSY&feature=search 
1. What...
8 
Kurzweil
10 jobs that did not exist 5 years ago 
1. iOS developer 
2. Android developer 
3. Zumba instructor 
4. Social media assis...
People 
• “Net generation” 
• 24x7 “mobile” workforce 
• Knowledge via MOOCs 
• Sharing not consuming 
• Sustainability 
T...
Opportunities in weak signals 
Domain Opportunities in 
Periphery 
Who Saw It Who Missed It 
Technological Digital revolut...
13 
Why do organizations get 
blindsided, i.e., miss the signals?
Why do organizations get blindsided? 
1. Reactive leadership 
 Narrowed focus on current business 
 Lack of curiosity ab...
Why think about the future? 
All our knowledge is about the past, but all 
our decisions are about the future. 
What we do...
16 
“I think there’s a world market for 
maybe five computers.” 
Thomas Watson, Chairman of 
IBM, 1943 
“There is no reaso...
17 
So, how can we prepare for the future?
From controlling risk to navigating 
uncertainty 
18 
Schoemaker: http://www.youtube.com/watch?v=6aLvCVL6bGw
19 
How can we look into the future? 
 Forecast 
 How we think the future will be 
 Vision 
 How we want the future to...
Ranges of usefulness 
Distance into “the future” 
Uncertainty 
Predictability 
F S H 
Forecasting Scenario planning “Hopin...
Scenario planning 
 It is a method of preparing for the future 
regardless of what happens. 
 But not a vehicle for pred...
Types of futures 
 Possible - “might” happen (future knowledge) 
 Plausible – “could” happen (current knowledge) 
 Prob...
Types of futures 
Time 
Today 
Possible 
Plausible 
“Wildcard” 
Scenario 
Probable 
Preferable 
Conway 2003
24
UPS Case – Prepare 10 min presentation 
 What are the strengths and weaknesses of scenario 
planning? 
 What is your eva...
26 
Why scenario planning? 
 Expands strategic thinking 
 More possible futures imagined and analyzed 
 Uncovers inevit...
27 
Schedule 
 Tuesday morning 
 Lecture: Introduction to scenario planning 
 Groupwork: UPS Case 
 Group presentation...
How to conduct scenario planning? 
 Stage 1: Orientation - what is key focal issue? 
 Important long-range consequences ...
Short Scenario Planning Exercise (2 hours) 
29 
Stage End Product Time Total 
1. Orientation • Big question and time dimen...
Preparation during lunch hour? 
Individually… 
 Review readings and course slides 
In your group… 
 Choose an organizati...
Stage 1: “Big Question” 
 Broad yet strategic query serving as anchor for 
scenarios 
 Critical to future of unit/organi...
Examples of the “Big Question” 
 Should we introduce a completely new product or 
service? 
 Should we retain our curren...
How to conduct scenario planning? 
 Stage 1: Orientation - what is key focal issue? 
 Important long-range consequences ...
Stage 2: Building blocks for scenarios 
Drivers of change 
Basic trends Key uncertainties 
Rules of interaction 
Multiple ...
36 
PESTEL – A closer look 
 Political 
 Global, regional, and national political 
development (administration, politica...
Some search tips 
 Global scenarios for 2025 
 Shell International Limited 
 U.S. National Intelligence Council 
 Worl...
Stage 2: Driving forces 
For the timeframe of your focal issue… 
 Brainstorm list of PESTEL trends that could impact foca...
How to conduct scenario planning? 
 Stage 1: Orientation - what is key focal issue? 
 Important long-range consequences ...
Stage 3: Build scenario framework 
 Test 4-5 most Critical Uncertainties in pairs in scenario 
framework 
 Must be very ...
When writing scenario narratives… 
Plausible, consistent stories describing the path and 
environment towards the End Stat...
44
How to conduct scenario planning? 
 Stage 1: Orientation - what is key focal issue? 
 Important long-range consequences ...
Strategic implications 
 What are the main opportunities and threats that 
each scenario poses for your organization? 
 ...
51
How to conduct scenario planning? 
 Stage 1: Orientation - what is key focal issue? 
 Important long-range consequences ...
Prepare a max 10 min presentation 
Some elements to include… 
 Key focal issue and time horizon 
 Critical uncertainties...
Sources and readings 
 A Note on Scenario Planning, Harvard Business School. 
 Strategic Planning at UPS, Harvard Busine...
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Crash Course in Scenario Planning

Slides from my one day module on scenario planning at SSE for the Exec MBA program in Dec 2014

Crash Course in Scenario Planning

  1. 1. Scenario Planning MBA in Executive Format Stockholm School of Economics Robin Teigland robin.teigland@hhs.se www.knowledgenetworking.org www.slideshare.net/eteigland Robinteigland December 2014
  2. 2. Who am I? (LinkedIn Inmaps) Swedish Industry SSE Exec Ed Research Wharton Stanford McKinsey vonorange.com
  3. 3. 3 Learning Objectives  To experience the process and challenges of scenario planning and its strengths and weaknesses as a technique for assessing and anticipating the future  To gain an understanding of political, economic, sociological, technological, environmental, and legal trends and their interrelationships
  4. 4. 4 Schedule  Tuesday morning  Lecture: Introduction to scenario planning  Groupwork: UPS Case  Group presentations and discussions  Tuesday afternoon  Groupwork: Scenario planning  Group presentations and discussions
  5. 5. If the rate of change on the outside (of an organization) exceeds the rate of change on the inside, the end is near.... -Jack Welch
  6. 6. Increasing pace of change  From 1920s to 2010s  Average lifespan of S&P 500 company fell from 67 years to 15 years  From 2000 to 2010  40% of companies on Fortune 500 list replaced  Predictions  In next few years, 70% of Fortune 1000 companies replaced  By 2020, >75% of S&P 500 companies we do not know today  By 2025, >45% of Fortune 500 from emerging markets Fast Company, McKinsey & Inc
  7. 7. “Old” Film from 2008 Did You Know: Shift Happens URL: http://www.youtube.com/watch?v=cL9Wu2kWwSY&feature=search 1. What trends do you recognize? 2. How are these trends affecting you and your organization? 3. What leadership challenges do these trends lead to?
  8. 8. 8 Kurzweil
  9. 9. 10 jobs that did not exist 5 years ago 1. iOS developer 2. Android developer 3. Zumba instructor 4. Social media assistant 5. Data scientist 6. UI/UX designer 7. Big data architect 8. Beachbody coach 9. Cloud service specialist 10.Digital marketing specialist 9 http://www.dn.se/ekonomi/tio-jobb-som-inte-fanns-for-fem-ar-sedan/
  10. 10. People • “Net generation” • 24x7 “mobile” workforce • Knowledge via MOOCs • Sharing not consuming • Sustainability Technology • Broadband access • The Cloud • Mobile phones • Internet of Things • Big Data • 3D printing • Robotics/AI • VR/AR Open Source • Software • Hardware • Physibles Numerous weak signals Finance • Microlending/microfinance • Crowdfunding/equity/P2P • Non-fiat cryptocurrencies • Mobile money/payments
  11. 11. Opportunities in weak signals Domain Opportunities in Periphery Who Saw It Who Missed It Technological Digital revolution Apple and iPod Music industry White LED lighting LED companies Light bulb manufacturers Open-source software Linux, IBM Microsoft and Sun Microsystems CD-ROM encyclopedias Microsoft Encyclopedia Britannica Rapid spread of GSM Nokia Iridium Economic Overnight package delivery FedEx, UPS USPS, United Airlines Search engine potential Google Microsoft Discount point-to-point airlines Southwest, Ryanair and EasyJet United, Delta, Lufthansa Societal Sports and New Age drinks Snapple, Gatorade Coke, Pepsi (initially) Popularity of reality shows Reality show producers Game shows Age compression and demand for more sophisticated dolls Bratz Mattel (Barbie) Political Generic AIDS drugs in Africa Indian pharmaceutical companies Major global pharma companies Social discontent in Venezuela Hugo Chavez Establishment (PDVSA) Role of “exurbs” in changing George Bush and Karl Rove John Kerry US voter patterns Schoemaker: http://www.youtube.com/watch?v=6aLvCVL6bGw
  12. 12. 13 Why do organizations get blindsided, i.e., miss the signals?
  13. 13. Why do organizations get blindsided? 1. Reactive leadership  Narrowed focus on current business  Lack of curiosity about the periphery 2. Strategic planning process  Inside out rather than outside-in  Fear of cannibalization 3. Inward looking culture  No willingness to listen to scouts 4. Limited information sharing  Across organizational boundaries 5. Organizational configuration  Limited windows on the larger world Schoemaker
  14. 14. Why think about the future? All our knowledge is about the past, but all our decisions are about the future. What we don’t know we don’t know What we know we don’t know What we know Most of what we need to know to make good decisions today is outside our comprehension: we don’t even know it’s there.
  15. 15. 16 “I think there’s a world market for maybe five computers.” Thomas Watson, Chairman of IBM, 1943 “There is no reason anyone would want a computer in their home.” Ken Olson, President, Chairman and Founder of Digital Equipment Corporation, 1977 “Heavier-than-air flying machines are impossible.” Lord Kelvin, President, Royal Society, 1895
  16. 16. 17 So, how can we prepare for the future?
  17. 17. From controlling risk to navigating uncertainty 18 Schoemaker: http://www.youtube.com/watch?v=6aLvCVL6bGw
  18. 18. 19 How can we look into the future?  Forecast  How we think the future will be  Vision  How we want the future to be  Scenario  What the future can be ? ? ? ? ……. Scenarios: More pictures of the future
  19. 19. Ranges of usefulness Distance into “the future” Uncertainty Predictability F S H Forecasting Scenario planning “Hoping” t U Adapted from K. van der Heijden
  20. 20. Scenario planning  It is a method of preparing for the future regardless of what happens.  But not a vehicle for predicting the future.  It helps make sense of an uncertain future and enable better decisions.  Also, a tool for collective learning in organization 21
  21. 21. Types of futures  Possible - “might” happen (future knowledge)  Plausible – “could” happen (current knowledge)  Probable - “likely to” happen (current trends)  Preferable - “want to” happen (value judgments) Conway 2003
  22. 22. Types of futures Time Today Possible Plausible “Wildcard” Scenario Probable Preferable Conway 2003
  23. 23. 24
  24. 24. UPS Case – Prepare 10 min presentation  What are the strengths and weaknesses of scenario planning?  What is your evaluation of UPS’s 1997 scenario planning exercise? Its Horizon 2017 planning exercise? How do the two efforts compare?  What are the other key elements of UPS’s approach to strategic planning? In particular, what is your evaluation of the UPS Charter? The Centennial Plan? The Strategy Road Map?  Why was John McDevitt put in charge of “strategic integration?” Should he remain in that role?  How does UPS’s strategic planning process compare with the approach at your organization? 25
  25. 25. 26 Why scenario planning?  Expands strategic thinking  More possible futures imagined and analyzed  Uncovers inevitable and near-inevitable scenarios  Promotes motivation and creative thinking  Protects against groupthink  Challenges conventional wisdom  Can be used as a management/ communication tool Holde
  26. 26. 27 Schedule  Tuesday morning  Lecture: Introduction to scenario planning  Groupwork: UPS Case  Group presentations and discussions  Tuesday afternoon  Groupwork: Scenario planning  Group presentations and discussions
  27. 27. How to conduct scenario planning?  Stage 1: Orientation - what is key focal issue?  Important long-range consequences for organization  Stage 2: Exploration - what are the driving forces?  Trends that likely to affect, influence, and shape key focal issue (PESTEL), predetermined trends and uncertainties  Uncertainties that most likely to define or significantly change future ranked by uncertainty and importance  Stage 3: Scenarios - What scenarios build the framework?  2x2 matrix based on two axes of critical uncertainties  Four plausible, alternative scenarios and their characteristics and narratives  Stage 4: Options – What are the robust strategies?  Implications of scenarios for key focal issue and organization  Stage 5: Integration - What are the early warning signals?  Leading indicators and scenarios used to evaluate strategic options 28 Note on Strategic Planning, HBSP
  28. 28. Short Scenario Planning Exercise (2 hours) 29 Stage End Product Time Total 1. Orientation • Big question and time dimension 15 min 15 min 2. Exploration • Driving forces (PESTEL) • Ranking of critical uncertainties 20 min 15 min 35 min 50 min 3. Scenarios Creation • Scenario framework • Characteristics and narratives that describe scenarios 15 min 25 min 65 min 90 min 4. Options Consideration • Strategic implications and potential actions 20 min 110 min 5. Integration • Early warning signals • Actions to communicate results to organization 10 min 120 min Adapted from Note on Strategic Planning, HBSP
  29. 29. Preparation during lunch hour? Individually…  Review readings and course slides In your group…  Choose an organization for the scenario planning exercise  Should be for the organization of one of the group members.  For what part of the organization is this? E.g., whole organization, specific division/unit, geographical location, department?  Start discussing what is the “Big Question” for the organization (Stage 1)?  E.g., new product/service, new market, new business model  What is the time horizon?  Short enough to create probable scenarios but long enough within which important changes will occur  What elements of the current situation are important?  Strategy, competitors, technology? 30
  30. 30. Stage 1: “Big Question”  Broad yet strategic query serving as anchor for scenarios  Critical to future of unit/organization now  Often emerges from today’s major challenges  “What keeps you up at night?”  “What one question would you ask a real psychic?”  Choose “horizon year” as distance into future that scenarios will extend  Short enough that probable, but long enough for impact  The further out – the greater suspension of disbelief (the “that won’t happen” reaction) 31 Conway 2003
  31. 31. Examples of the “Big Question”  Should we introduce a completely new product or service?  Should we retain our current “value proposition”?  Should we integrate our various businesses so they contribute more value to our organization?  Does our R&D need redirecting?  Should we buy a certain competitor?  Should we enter (or exit) a geographical market?  What competences do we need in the future?  How is our competitive advantage affected by developing events? 32
  32. 32. How to conduct scenario planning?  Stage 1: Orientation - what is key focal issue?  Important long-range consequences for organization  Stage 2: Exploration - what are the driving forces?  Trends that likely to affect, influence, and shape key focal issue (PESTEL), predetermined trends and uncertainties  Uncertainties that most likely to define or significantly change future ranked by uncertainty and importance  Stage 3: Scenarios - What scenarios build the framework?  2x2 matrix based on two axes of critical uncertainties  Four plausible, alternative scenarios and their characteristics and narratives  Stage 4: Options – What are the robust strategies?  Implications of scenarios for key focal issue and organization  Stage 5: Integration - What are the early warning signals?  Leading indicators and scenarios used to evaluate strategic options 33 Note on Strategic Planning, HBSP
  33. 33. Stage 2: Building blocks for scenarios Drivers of change Basic trends Key uncertainties Rules of interaction Multiple scenarios Schoemaker
  34. 34. 36 PESTEL – A closer look  Political  Global, regional, and national political development (administration, political parties)  Taxation policy  Foreign trade regulations  Labour market politics  Government stability  Socio-cultural  Population demographics  Income distribution  Social mobility  Lifestyle changes  Attitudes to work and leisure  Attitudes to consumerism  Levels of education  Changes in values/attitudes  Education conditions  Work environment conditions  Health conditions  Environmental  Ecology  Pollution conditions  ”Green” energy  Energy conservation  Waste handling  Economic  Business cycles  GNP trends  Interest rates & Exchange rates  Money supply  Inflation  Unemployment  Wage level  Private consumption and disposable income  Public finances  Energy availability and cost  Technological  Government spending on research  Government and industry focus of technological effort  New discoveries/development  Speed of technology transfer  Rates of obsolescence  New patents and products  Legal  Development in price and competitive legislation  Labour market legislation  Product safety and approvals
  35. 35. Some search tips  Global scenarios for 2025  Shell International Limited  U.S. National Intelligence Council  World Economic Forum  Futures studies organizations  Decision Strategies International  Institute for the Future  Kairos Future  McKinsey Global Institute  Other tips  Blogs, wikipedia, slideshare, twitter  Search words: scenario, foresight, trend, trendspotting, trendwatching, future studies, institute for future
  36. 36. Stage 2: Driving forces For the timeframe of your focal issue…  Brainstorm list of PESTEL trends that could impact focal issue  Be specific as well as give a direction for each trend, ie a hypothesis on a direction  Evaluate the identified trends.  How predictable?  Degree of impact on focal issue?  What are the Certain & Important trends?  What are the Critical Uncertainties?  Which 4-5 Critical Uncertainties have the highest uncertainty and highest impact? 39 Hi Hi Lo Lo Uncertainty Impact Certain & Important Critical Uncertainties Adapted from Lindgren & Bandhold 2009
  37. 37. How to conduct scenario planning?  Stage 1: Orientation - what is key focal issue?  Important long-range consequences for organization  Stage 2: Exploration - what are the driving forces?  Trends that likely to affect, influence, and shape key focal issue (PESTEL), predetermined trends and uncertainties  Uncertainties that most likely to define or significantly change future ranked by uncertainty and importance  Stage 3: Scenarios - What scenarios build the framework?  2x2 matrix based on two axes of critical uncertainties  Four plausible, alternative scenarios and their characteristics and narratives  Stage 4: Options – What are the robust strategies?  Implications of scenarios for key focal issue and organization  Stage 5: Integration - What are the early warning signals?  Leading indicators and scenarios used to evaluate strategic options 40 Note on Strategic Planning, HBSP
  38. 38. Stage 3: Build scenario framework  Test 4-5 most Critical Uncertainties in pairs in scenario framework  Must be very low correlation between pair of uncertainties  Develop characteristics for each scenario 41 Uncert B Scenario 1 Scenario 2 Scenario 3 Uncert B Uncert A Scenario 4 Uncert A
  39. 39. When writing scenario narratives… Plausible, consistent stories describing the path and environment towards the End State of the scenario framework.  A story needs a title, beginning, middle, and an end.  The difference in scenarios should be clear and the names are an important part of aligning them to different worlds.  A small set of variables will be identical in all scenarios.  Key variables should be quantified and early indicators listed.  Summarize in scenario table to see if really different 43 Who does what, with whom, when, where and why? Adapted from Ringland 2002
  40. 40. 44
  41. 41. How to conduct scenario planning?  Stage 1: Orientation - what is key focal issue?  Important long-range consequences for organization  Stage 2: Exploration - what are the driving forces?  Trends that likely to affect, influence, and shape key focal issue (PESTEL), predetermined trends and uncertainties  Uncertainties that most likely to define or significantly change future ranked by uncertainty and importance  Stage 3: Scenarios - What scenarios build the framework?  2x2 matrix based on two axes of critical uncertainties  Four plausible, alternative scenarios and their characteristics and narratives  Stage 4: Options – What are the robust strategies?  Implications of scenarios for key focal issue and organization  Stage 5: Integration - What are the early warning signals?  Leading indicators and scenarios used to evaluate strategic options 45 Note on Strategic Planning, HBSP
  42. 42. Strategic implications  What are the main opportunities and threats that each scenario poses for your organization?  How well prepared are you (or can you be) to seize these opportunities and avert or minimize the threats? 47
  43. 43. 51
  44. 44. How to conduct scenario planning?  Stage 1: Orientation - what is key focal issue?  Important long-range consequences for organization  Stage 2: Exploration - what are the driving forces?  Trends that likely to affect, influence, and shape key focal issue (PESTEL), predetermined trends and uncertainties  Uncertainties that most likely to define or significantly change future ranked by uncertainty and importance  Stage 3: Scenarios - What scenarios build the framework?  2x2 matrix based on two axes of critical uncertainties  Four plausible, alternative scenarios and their characteristics and narratives  Stage 4: Options – What are the robust strategies?  Implications of scenarios for key focal issue and organization  Stage 5: Integration - What are the early warning signals?  Leading indicators and scenarios used to evaluate strategic options 52 Note on Strategic Planning, HBSP
  45. 45. Prepare a max 10 min presentation Some elements to include…  Key focal issue and time horizon  Critical uncertainties that most likely to define or significantly change future ranked by uncertainty and importance  Scenario framework with four scenarios and accompanying narratives  Implications of scenarios for key focal issue and organization  Early warning signals  Next steps – Communication in organization?
  46. 46. Sources and readings  A Note on Scenario Planning, Harvard Business School.  Strategic Planning at UPS, Harvard Business School Case.  Six Rules for Effective Forecasting, Saffo, P. Harvard Business Review, 2012.  The Current State of Scenario Development: An Overview of Techniques, foresight, 2007.  Read about the PESTEL analysis (also known as STEEP, PESTLE, PEST, STEP) framework on the internet, e.g., http://pestel-analysis. com/.  Scenario Planning: The Link between Future and Strategy, Lindgren, M. & Bandhold, H. Palgrave Macmillan.  Eyes Wide Open: Embracing Uncertainty through Scenario Planning, July 22, 2009 in Knowledge@Wharton, https://biblio.ugent.be/publication/1081542/file/1081543.pdf.  Getting into Your Competitor’s Head, H. Courtney, J.T. Horn, & J. Kar, McKinsey Quarterly, 2009, 1, http://bit.ly/ReMZ1X.  The Ambidextrous Organisation, J. Birkinshaw. AIM Report, http://bit.ly/S02Gen.  Scenario-based Strategy Maps, F. Buytendijka, T. Hatch, & P. Michel, Business Horizons, 2010, 53, 335-347, http://bit.ly/Sm5srs.  The Black Swan: The Impact of the highly Improbable, Taleb, N. Random House Publishing Group.  Minitrends: How Innovators & Entrepreneurs Discover & Profit From Business & Technology Trends: Between Megatrends & Microtrends Lie MINITRENDS, Emerging Business Opportunities in the New Economy. Vanston, J. H. & Vanston, C. Technology Futures.  Trends in Connectivity Technologies and Their Socio-economic Impacts, J. Cave, C. Van Oranje, R. Schindler, A. Shehabi, Ph-B. Bruscher, N. Robinson, Final report of the study: Policy Options for the Ubiquitous Internet Society, For DG Information Society and Media, 2009, http://bit.ly/RuEmyk.  Foundations of Futures Studies, History, Purposes, and Knowledge - Volume I, W. Bell. New Jersey: Transaction Publishers.  Anatomy of a Trend. H. Vejlgaard. McGraw-Hill.  The Trend Forecasterʼs Handbook. Martin, R. Laurence King Publishers.  The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economics, Society and Nations. Surowiecki, J. Anchor Books.  Additionally, you should regularly read strategy and future-related articles in publications such as the Wall Street Journal, Business Week, Forbes, Wired, etc., as well as on online sites and blogs such as Mashable, Six Pixels of Separation, etc. I also encourage you to use Twitter applications, such as Tweetdeck or Hootsuite, and groups/online forums such as those on Facebook and LinkedIn, to follow strategy-related topics. 56

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