Quick takes

Citation

(2003), "Quick takes", Strategy & Leadership, Vol. 31 No. 1. https://doi.org/10.1108/sl.2003.26131aae.001

Quick takes

“Quick takes” presents the key points and action steps in each of the feature articles

Page 4Scenario planning after 9/11: managing the impact of a catastrophic event Peter Kennedy, Charles Perrottet and Charles Thomas

Post 9/11 is one of the most unsettling and confusing business environments since the Depression. Executives are grappling with the short- medium- and long-term decisions that must be made in the face of unknowable shocks and crises.

How to respond? Consider decision-driven scenario planning, which is extremely effective in working through uncertainties, exposing faulty assumptions, and probing conventional wisdom. Scenarios focused on the near term greatly enhance operational efficiency by confronting ambiguity head-on and forging critical alignment around big issues.

Alternative scenario-based tools: traditional scenario planning can be retooled to address the current, specific need for continuity assurance and near-term operations planning. Three areas of needs are described in this article with case studies to show how each matches a modified scenario planning process. The processes are:

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  Business continuity planning - the focus is on tactical responses to an "event''; the use of a tightly focused set of scenarios using a very simple two-by-two scenario space matrix works well. The case study is of a financial services firm that used two-scenario set to build its plan but stress tested its recovery strategies with relevant wild-card events.

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  Near-term (1-3-year) operations planning - the focus is on the range of plausible outcomes that follow the "event''. The case study works through critical operational issues in four narrowly focused business environments to ensure maximum preparedness for challenges to employee mobility, project management and new business development.

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  Strategic planning - the focus is on development of new business model and strategies that are robust no matter how the future unfolds; four or more dimensions are used.

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  A third case describes the development of a new strategy by the US Coast Guard prior to 9/11. The process has been credited with helping this service quickly adjust to the post 9/11 environment.

In the first two cases, scenario planning brought in a larger pool of executives into the decision-making process than would typically be the norm. As a result, plans and actions were more carefully developed and the outcome engendered greater confidence, clarity and energy for subsequent implementation. The greatest benefit, though, may be the rigor and creativity to defining ways to meet a different set of outcomes. Scenario planning is an excellent tool at this time. This is perhaps the best safeguard against our previous "failure of imagination''.

Page 14Decision-driven scenarios for assessing four levels of uncertainty Hugh Courtney

To get the most out of the scenario planning efforts, select the process designed for the outcome anticipated. Practitioners should choose between two basic techniques: vision-driven and decision-driven scenario processes, both essential components of any company's strategy toolkit. Companies that sponsor vision-driven exercises every 1-3 years will be best positioned to recognize and capture the new opportunities and manage the risks inherent in today's rapidly changing business environment. These exercises help set valuable strategic and organizational priorities, and provide the necessary context for all decision-driven scenario efforts

This article focuses on the less well-known decision-driven scenarios and explains how to match the right process with the level of uncertainty the scenario addresses. Companies should select concrete, decision-driven scenarios to make the right capital investments, marketing campaign and other strategic decisions when uncertainty implies that there is no "obvious'' answer. Vision- and decision-driven exercises are highly complementary.

For those focused on near-term strategic decisions, the use of decision-driven scenarios should be tailored to the correct level of uncertainty being faced. Points are presented in the article to assess when and how to apply each type of process.

The four levels of uncertainty are:

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  Level 1: The future is predictable enough to identify a dominant strategy choice, such as McDonald's US restaurant location decisions.

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  Level 2: Alternative futures are possible and the best strategy to follow depends upon which outcome occurs. The strategist must choose between strategic options with different risk-return profiles across the different scenarios.

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  Level 3: The range of futures is unbounded. Customer demand for new products and new technology adoption rates are common sources of Level 3 uncertainties. General rules to follow are presented. Qualitative "business judgement'' factors play a more prominent role here than in Levels 1 and 2.

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  Level 4: True ambiguity equates to future outcomes that are both unknown and unknowable. Analysis cannot identify the range of possibilities, let alone scenarios within the range. An example is formulating an airline's strategy on 12 September, 2001. At this level, it is best to work backwards from potential strategic options to define "what you would have to believe'' about a future scenario to support this option. A systematic checklist of key considerations would drive decision-making.

Armed with the right technique and right support practices, scenario efforts are more likely to generate valuable foresight that leads to clearer strategic visions and better strategic decisions.

Page 23Scenarios and strategies: making the scenario about the business David H. Mason and James Herman

A methodology practiced by the authors makes scenario planning more relevant to senior business managers. "Future Mapping'' incorporates the future of the client's business itself into the scenarios being developed about the external business environment. For each external state, there is a future state for the business. The organization is the central focus of the scenarios - scenarios about the business strategy alternatives (e.g. low cost, differentiate, focus on markets served). This approach to scenario planning offers three key benefits:

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  It keeps the business and its choices apart of the discussion throughout the exercise

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  It is much easier to get senior management excited and engaged

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  It turns the scenario development process into a strategy development process that balances external and internal issues.

Overview of the steps:

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  Step 1 is to propose multiple outcomes for the industry, market, technology and/or society within which the organization operates.

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  Step 2 is to develop an event path linking today to the endstate. This is the "scenario''.

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  Step 3 is to describe, for each endstate, an outcome for the organization itself. Events are not longer entirely external, but include actions that the organization might take. (This co-evolution is more realistic than consideration of the external environment independent of the business.) The company's own actions are complemented by a list of external events that must "go right'' for the strategy to succeed. The scenarios can also be complemented with a timeline of changes in critical business metrics. This approach puts forth a rich notion of strategy that combines a clear definition of the aspiration of the business - what it wants to become or attain - with a timeline of specific internal and external action and interventions that are needed in order to succeed.

Several variations of this approach, with a different mixture of internal and external focus and steps, allows this scenario planning process to be tailored to the unique needs of any business. For example, using this methodology, scenario planning can be used as the first step for a change management effort. Or it can be used as the forum for a healthy debate among the management team concerning critical topics, such as the scope of the business, the importance of environmental changes like the Internet, and the governance principles upon which they will run the company.

Page 32Competitor scenarios Liam Fahey

Combining scenario learning and competitor assessment provides a methodology to enable managers to efficiently and effectively assess their rivals (both new and old) in a variety of settings. Not only does this process expand the thinking of managers (who are usually only focused on current conditions) but also offers them rich insight into their company's own strategy alternatives (including ones not yet on its radar).

This article demonstrates how the competitor scenario process works in practice and, with many examples, offers learned principles and ways to avoid various pitfalls.

Briefly, a competitor scenario starts with a logical narrative that considers what a competitor might do over some specified time period, how its managers would do it, and why they would choose to do so. The scenarios can focus on a variety of topics such as:

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  Which product-customer segments the competitor chooses to compete (scope)

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  How it competes (competitive position).

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  What it seeks to achieve (goals).

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  How a competitor develops and manages a network of alliances or an integrated supply chain.

There are two distinct types of competitor scenarios that originate in two quite different forms of what-if questions: unconstrained and constrained what-if competitor scenarios.

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  Unconstrained (or open-ended) questions encourage scenario developers to pose any question pertaining to one or more rivals' marketplace strategies. Unconstrained questions are limited only by the experience, imagination and creativity of those involved. The questions can be mapped into four categories that lead to competitor scenarios with different foci.

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  Constrained competitor scenarios start from a common point of departure: what would the competitor do if a specific set of marketplace or macroenvironmental end-states or conditions were to arise? This type of scenario work is best if your firm wants to assess:

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  What would a rival do under specific market conditions?

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  Why would a rival adopt one strategy versus another?

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  Which marketplace changes might lead a rival to adopt a particular strategy?

The five steps in constructing competitor scenarios are relatively straightforward; they are discussed with examples. The last step being the essential question: what business issues emerge from each scenario that pose opportunities and threats that the organization must explore? The issues will vary significantly across the end-states. This is the power and richness of the competitor scenario process.

Page 45Using scenarios to focus R&D Gill Ringland

Scenarios provide a process, mechanism and framework for anticipating change, watching for early warning signs, and creating more robust plans. This case examines how this applies to the research and development decision-making processes (ranking R&D projects and managing the R&D programs). The logic is simple:

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  Business agility is a key requirement in the present business climate.

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  The range of factors that need to be considered in planning R&D projects are much wider now than only a few years ago, increasing the difficulty to successfully forecast.

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  Scenarios can capture the dimensions of uncertainty, thus allowing R&D managers to create robust strategies because they can anticipate change and watch for early warning indicators of new phenomena. This is possible because mangers can view the sensitivity of their R&D projects' success criteria in terms of the detailed assumptions about the future.

Three components - forecasting, scenarios, and foresight - are all important in the ongoing R&D decision process. Forecasts combine current trends and render them into a single value or range of values for a variable (timescale of market impact, cost of project, competitive position). Scenarios capture and explore the multiple images of the possible future societies and how they may react to the R&D products. Foresight is the analytical process of using a combination of scenarios and forecasts to ensure that the company focuses its R&D on the most effective areas.

This case recounts the use of the scenario process to discover ways that digital information is influencing and changing society. Emerging R&D technology could be assessed in scenarios that looked at how the combination of Information, Communication, and Technology (ICT) was influencing the way business evolves - or changes discontinuously.

When using scenarios to define a portfolio of research projects, experience has shown that the portfolio that emerges is often significantly different than the one defined by initial instincts. This is just the first of several benefits for using scenarios for understanding the major areas of uncertainty for R&D projects. Other benefits are:

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   Widen the range of discussion about the research program to encompass not just technology but also market issues and the effect on society.

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   Engage sponsors and stakeholders in exploring the context of the proposed research topics in the program as a prelude to decision making and "selling'' the research program for company funding.

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   Link technological issues to societal issues

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   Build a more robust research program by understanding the social issues that might prevent technology adoption and set up early warning indicators to monitor the pace and directions of evolution.

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   Prioritization of research topics for investment though the use of the early warning systems.