Our Scenario
Planning Process
November 20, 2009
www.strategicbusinessinsights.com
© 2009 by Strategic Business Insights. All rights reserved.
1
SBI’s 2008/2009 Scenario Engagements
Highlights
For two different International Electronics Companies
• Three scenarios
• Strategic initiatives
• Corresponding roadmaps
For two different departments in a major Consumer Products
Company
• Three planning scenarios for each department (Topics and scenario
names confidential)
For SCARD (Society of Chairman of Academic Radiology
Departments)
• Three planning scenarios
– Socialized Medicine
– Entrepreneurialism
– Freefall
• Strategy Initiatives – to be completed
2
SBI’s 2008/2009 Scenario Engagements
Highlights
For the National Intelligence Council (NIC)
• An “Energy Acceleration” scenario as a companion to ongoing scenario
research related to U.S. Climate Change Mitigation Efforts
For the National Oceanic Atmospheric Administration (NOAA)
• Three scenarios
– Too Little Too Late?
– Green Chaos
– Carbon Junkies
• Policy initiatives
• Corresponding roadmaps
For a North American Telecommunications Company
• Three scenarios -- completed
• Strategic initiatives -- to be completed
• Corresponding roadmaps – to be completed
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SBI’s Scenario Planning Process Leads to
Strategic Roadmaps and Monitoring
0. Strategic Need
10. Implementation
Strategic
Roadmaps
Now
1. Decision Focus
2. Key Decision Factors 8. Strategy Alternatives
4. Axes of Uncertainty
6. Implications
5 Years
This way
Need
Business
Considerations
3. External Forces
2 Years
9. Strategic Choice
7. Sign Posts
5. Scenarios
Competition
No
Yes
Market
This way
No
Yes
Product/
Service
A
B
C
Functional
Requirements
A
B
C
Technologies
1
2
3
Monitoring
System
(Intelligence)
4
Scenario Planning
Milestones
Signposts
4
Why Scenarios?
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The Future is Uncertain!
• In the face of an uncertain future, the best one can do is
–
–
–
–
–
Consider a range of possible developments
Evaluate strategy alternatives
Decide on a course of action
Monitor what actually goes on
Adjust as appropriate
• Scenarios cover a wide variety of issues in a manner that
enhances strategic decisions and sets the stage for effective
monitoring and adjustment
6
Scenarios Are a State-of-the-Art Tool For
Addressing Uncertainty
• Several different scenarios provide a sound basis for incorporating
the uncertainties in the external environment.
• Single point estimates, including most likely cases, fall short.
Scenario B
Scenario A
Single-Point
Forecast
Scenario C
“Envelope of Uncertainty”
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The Challenge Is Making Sense of the Complex
External Environment
Trends and Drivers
Customer Priorities
IT Technology
Work Patterns
Populations Shifts
Sales
Channels
Value Chains
Political
Leaders
Internet
Electronic
Commerce
Education and
Learning
Multinationals
Industrialization
Public Attitudes
Patterns
Use of Media
New Products
Technology
Privacy
Crime and Security
Competitive Structure
Supply Capacity
Healthcare
Change Leader Attitudes
Social Priorities
Cost of Services Sold
Environment
Price
Health of OECD
Economies
Perceptions of Risk
Capital
Corporate Demographics
Customer
Experiences
New Media Techniques
8
The Trick is to Identify the Most Important Forces
and Drivers . . .
Diverse Information
Customer Priorities
Framework
Design/CAD Technology
Work Patterns
High Impact
Low
Uncertainty
Populations Shifts
Value Chains
Industrialization
Patterns
Internet
Electronic
Commerce
Use of Media
Public Attitudes
New Products
Technology
Privacy
Crime and Security
Competitive Structure
Supply Capacity
Education and
Learning
Chip Manufacturers
Political
Leaders
Healthcare
Impact
Sales
Channels
High Impact
High
Uncertainty
Social Priorities
Change Leader Attitudes
Cost of Goods Sold
Environment
Price
Health of OECD
Economies
Perceptions of Risk
Capital
Corporate Demographics
Customer
Experiences
New Media Techniques
Uncertainty
9
And Write Detailed Stories That Describe
Different Futures
Scenarios are written descriptions of
how the future will unfold with emphasis
on the forces and dynamics that are
relevant to the strategic issues. . .
. . . Supported by detailed tabulations
and other supporting materials
Drivers
Scenario A
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Scenario B
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Scenario C
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Scenario A
Scenario B
Scenario C
Economic
Growth
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Trade
Relations
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Market
Structure
•
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Industry
Structure
•
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•
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•
Leading
Competitors
•
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Technological
Change
Supply &
Demand
10
Creating Strategy
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Scenarios Can Add Value in Several Ways
Provide a platform for designing
explicit strategies, action plans, and
monitoring
Provide a basis for drawing out
“strategic implications”
Expand perspectives generally by
illustrating that the future is truly
uncertain
12
Become Immersed in Each Scenario to Discover
Strategic Implications
If I were in
Scenario A,
then ….
Scenario C
Scenario B
Scenario A
What would be the threats
and opportunities?
•
•
What are the business
needs?
•
•
What strategies might help
our business be successful?
What would be the signs?
•
•
13
Create Alternatives by Combining Choices
Across the Strategy Elements
Strategy Elements
Products and
Services
Investment
Level
8 Commodities
Maintenance Plus
$50 Million/Yr
4 Commodities
3 Specialties
4 Commodities
3 Specialties Plus
Service
$100 Million/Yr
$500 Million
Plus
$100 Million/Yr
3 Specialties Plus
Service Company
Technology
Position
Geographic
Locations
Common Process With
Limited Development
Capability
Growth
Posture
Alternatives
Organic Growth
1. CURRENT
US National
Advanced Process Plus
Supporting R&D & IP
Merge With Equal
US Regional
2. MERGE
Acquisition
Advanced Process Applied,
No IP, Limited R&D
International
Common Process
Outsource Tech Service
Virtual Through
Alliance
SE Asia
$1 Billion
4 Commodities
2 Commodities
3 Specialties
Manufacturing
Equipment
Ad Hoc Outsource
R&D, Tech Service
Maintenance
Americas
Selected
Divestment
3. DIVEST
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Strategy Alternatives are Rated Based on Agreed
Criteria
• Identify and prioritize key success factors by which to
evaluate strategy alternatives.
• Evaluate each strategy alternative against the key success
factors under each scenario.
Factor Analysis Template
Risk
Low
Revenue
High
HighLow
Expenditure
Low
High
Manageability
High Low
Low Low
Impact
High
High
Capability
15
Profile Comparisons Aid Strategy Selection
SCENARIO
A
B
C
STRATEGY
ALTERNATIVE
1. CURRENT
2. MERGE
3. DIVEST
ETC.
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Scenario and Strategy Development
Process Steps
Strategic Need
External Forces
Strategy Description
Decision Focus
Strategy Selection
Key Decision Factors
Strategy Alternatives
Axes of Uncertainty
Implications
(Opportunities)
Signposts
Scenarios
External environment
Strategy/Action
17
Developing Strategic Roadmaps
18
Why Create Strategic Roadmaps?
• To provide a framework for integrating technology, products/services, markets/customers,
and other critical strategic information
• To sequence and prioritize
– Business investments
– Technology investments
– Resource allocation
– Technology sourcing relationships
• To communicate and coordinate interrelated strategy, plans, and business activities
• To evaluate position and direction with respect to competitors
• To develop an effective strategic monitoring system that tracks:
– Internal progress of R&D activities (milestones)
– Critical external developments in technology, products, markets, etc (signposts)
Milestones are used to track the company’s progress
(a standard best practice for R&D project management)
Signposts are used to monitor external developments that
are strategically significant
19
Strategic Technology Roadmaps Come In Two
Parts
“Industry-Level” roadmaps (the landscape)
• Display technology, products/services, and other business
information that surrounds the strategy
• Are important for understanding competition and identifying other
external developments
Company roadmaps (the pathway)
• Highlight the technologies, functionalities, products, services, and
markets that the company intends to develop
• Identify which external developments are critical and need to be
monitored (signposts)
20
“Industry-Level” Roadmap
“Industry-Level” roadmaps are developed from strategy
descriptions and additional analysis
Additional Analysis
Strategy Description
Descriptions
•
•
•
•
•
•
Now
Business
Considerations
Need
2 Years
5 Years
Market
Competition
Product/Service
A
B
C
Functional
Requirements
A
B
C
Technologies
1
2
3
4
“Industry-Level” roadmaps provide the context in which the
company charts its pathway (strategy)
21
Company Roadmap
Company roadmaps identify the specific technologies, functional
requirements, and products/services that the company intends to
develop
Now
Business
Considerations
Need
2 Years
Competition
5 Years
Market
Product/Service
A
B
C
Functional
Requirements
A
B
C
Technologies
1
2
3
4
Pathway
22
Company Roadmap
Specific plans with project milestones are added to the strategic
pathway
Now
Business
Considerations
Need
2 Years
Competition
5 Years
Market
Product/Service
A
B
C
Functional
Requirements
A
B
C
Technologies
1
Pathway
2
3
4
Milestone
23
Company Roadmap
Finally, signposts related to critical external developments are
identified
Now
Business
Considerations
2 Years
5 Years
This way
This way
No
Need
Competition
No
Market
Yes
Yes
Product/Service
A
B
C
Functional
Requirements
A
B
C
Technologies
1
2
3
4
This way
Pathway
Milestone
No
Yes
Signpost
24
Developing an Intelligence
System for Monitoring Progress
25
Intelligence System Challenges
• Monitor the “right” information
• Effectively integrate vast amounts of data in “real time”
– Too much information
– Diverse information
– Rapidly changing information
– Varied sources of information
– Distributed expertise
– Misinformation
•
•
•
•
•
•
Add meaning to data in light of strategic focus
Capture unique benefits of human judgment and perspective
Allow numerous inputs and opinions to be represented (and not lost)
Make analyses and information sources transparent
Be easy to use for a wide range of users and decision makers
Clear line of sight to actionable results
26
Company Roadmaps Set the Stage for Monitoring
Signposts related to critical business considerations
and external developments that need to be
monitored are identified on the company roadmap
Now
Business
Considerations
2 Years
5 Years
This way
This way
No
Need
Competition
No
Market
Yes
Yes
Product/Service
A
B
C
Functional
Requirements
A
B
C
Technologies
1
2
3
4
This way
Pathway
Milestone
No
Yes
Signpost
27
SEAS* Is An Analysis Tool That Fills The Gap Between
Intelligence Collection and Communication
Targeted
Intelligence
Collection
Analysis
Communication
SEAS
Intelligence Cycle
*
SEAS = SRI Early Alert System
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A Closer Look at SEAS Design—
Setting Up the System
• The intelligence system architects create a structure (template), which is a
focused set of questions with a range of possible answers
• The questions start with a high-level strategic concern, and then branch
downward with narrower questions that relate back to the top
Petrochemical industry
example:
Top-Level Question:
INDUSTRY/COMPETITION: Can our technology strategy focusing on low costs and globalization be
successful over the next 5 years (2005-2009) given recent or potential petrochemical industry
developments?
Bottom-Level Question: (One of 12)
MARKET CONCENTRATION: Will the market concentration of the top 10 petrochemical producers
increase significantly over the next 5 years (2005-2009)?
Answers:
A great deal. Market concentration will increase by more than 15 percentage points.
Quite a bit. Market concentration will increase by 10-15 percentage points.
Some. Market concentration will increase by 5-10 percentage points.
A little. Market concentration will increase by 2-5 percentage points.
No. Market concentration will increase by less than 2 percentage points.
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SEAS Design—
Intelligence Input
Intelligence agents answer the structured questions, provide their rationale,
and attach supporting material.
MARKET CONCENTRATION: Will the market concentration of the top 10 petrochemical
producers increase significantly over the next 5 years (2005-2009)?
Answers:
Rationale:
Support:
A great deal. Market concentration will increase by more than 15 percentage points.
Quite a bit. Market concentration will increase by 10-15 percentage points.
Some. Market concentration will increase by 5-10 percentage points.
A little. Market concentration will increase by 2-5 percentage points.
No. Market concentration will increase by less than 2 percentage points.
There appears to be a likelihood that industry consolidation will continue during the next few
years, and that consolidation may tend to erode our current low cost advantage.
Documentary Evidence
Asia Pacific Chemical Outlook, C&EN, Volume 84, pp 24-28.
Analyst:
Leiby, Susan, SRI Consulting Business Intelligence
On:
January 9, 2006
Relevance: Chemical companies in Japan, Singapore, Korea, China, and India are rapidly
expanding capacity to meet growing demand. Concerns about the long-term
impact of high oil prices likely to lead to some industry consolidation.
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SEAS Display of Results
Results are displayed
graphically in a manner
that highlights new and
relevant information.
Red light
signals industry
situation alert.
Flag indicates
new information.
Past results can stored, reviewed, and compared wit new information.
31