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

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. Who am I? (LinkedIn Inmaps)
Swedish
Industry
SSE
Exec Ed
Research
Wharton
Stanford
McKinsey
vonorange.com

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
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. 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. 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. “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
Kurzweil

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. 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. 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. 13
Why do organizations get
blindsided, i.e., miss the signals?

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. 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. 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. 17
So, how can we prepare for the future?

17. From controlling risk to navigating
uncertainty
18
Schoemaker: http://www.youtube.com/watch?v=6aLvCVL6bGw

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. 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. 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
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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. Types of futures
Time
Today
Possible
Plausible
“Wildcard”
Scenario
Probable
Preferable
Conway 2003

23. 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?
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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. 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. 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. 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. 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?
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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)
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Conway 2003

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?
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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. Stage 2: Building blocks for scenarios
Drivers of change
Basic trends Key uncertainties
Rules of interaction
Multiple scenarios
Schoemaker

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. 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. 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. 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. 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. 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. 44

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. 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. 51

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. 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. 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.
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