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Scenario planning lecture 24 july2013

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Thira Woratanarat
Thira Woratanarat

This document discusses scenario planning and foresight. It provides examples of past predictions that turned out to be wrong. Scenario planning is described as a way to consider plausible futures rather than making predictions. The key aspects of foresight are exploring options rather than planning actions and considering implications of possible futures. Scenarios are defined as possible narratives that provide context for decision making. The scenario planning process involves environmental scanning, identifying drivers of change, building scenarios, and considering strategic implications.

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Scenario Planning
• “Inventions have long since reached their limit, and I see no hope for future development”: Roman engineer Sextus Julius Frontinus, 1st Century AD • “Heavier than air flying machines are not possible”: Lord Kelvin, President of the Royal Society, 1895 • “I think there is a world market for maybe 5 computers”: Thomas Watson, Chairman of IBM, 1943 • “Space flight is hokum”: Astronomer Royal, 1956 • “Stocks have reached what looks like a permanently high plateau”: Irving Fisher, Professor of Economics, Yale University, 1929 Things Change ...
• “We don’t like their sound, and guitar music is on the way out”: Decca Recording Co. rejecting The Beatles, 1962. • “640K [of RAM] ought to be enough for anybody”: Bill Gates, 1981 • “The fact that conflicts with other countries [producing civilian casualties] have been conducted away from the U.S. homeland can be considered one of the more fortunate aspects of the American experience”: Quadrennial Defense Review (QDR) for the US Dept of Defence, 2001 Things Change ...
What is Foresight?
• All our knowledge is about the past, but all our decisions are about the future. • We create our future by what we do or don’t do today; it makes sense to try and understand as best we can what that future might be like before we act. • Foresight is not prediction! It is about getting an idea about what plausible futures might look like. • We are good at learning from the past; we need to learn from the future as well – we need to develop a ‘history of the future’ as we do a ‘history of the past’. What is Foresight?
Why think 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. All our knowledge is about the past, but all our decisions are about the future.
Possible - “might” happen (future knowledge) Plausible – “could” happen (current knowledge) Probable - “likely to” happen (current trends) Preferable - “want to” happen (value judgements) Types of Futures
Types of Futures Time Today Possible Plausible Probable Preferable Scenario “Wildcard”
Types of Futures Time Today Plausible Probable (Trends) (Deep Drivers)
• So, foresight, put simply, is an approach to thinking about the future which lets you: – free up your thinking beyond the here and now; – explore plausible futures (ie always more than one, because “the” future is not pre-determined); and – think about implications for decision making today. • Foresight is a way of thinking that enhances our understanding of our current – and plausible future – strategic operating environment(s). What is Foresight?
• An attribute, competence or process that attempts to broaden the boundaries of perception by: – assessing the implications of present actions, decisions etc. – detecting and avoiding problems before they occur (early warning indicators) – considering the present implications of possible future events (proactive strategy formulation) – envisioning aspects of desired futures (normative scenarios) What is Foresight?
Three inter-dependent but quite different elements: • Strategic Thinking – exploration, intuitive, synthesising, creative, inductive, disruptive, incomplete/ambiguous info; generating options • Strategy Development – assessing options, examining choices, making decisions and/or setting a destination or direction • Strategic Planning – implementation, analytical, deductive, making it happen, getting things done, pragmatic, “can do”; actions Foresight, Strategy & Planning
• Foresight is a strategic thinking process, not a strategic planning process. • It’s about options not actions. • Asks the question: “what might we need to do?” • not the questions: “what will we do?” or “how will we do it?” Foresight, Strategy & Planning
Inputs Strategy Outputs Foresight Expanded Perceptions of Strategic Options Strategy Development Strategic Planning “Foresight Work” Strategic Intelligence Scanning Copyright © 2000 Joseph Voros
Inputs Strategy Outputs Analysis Interpretation “what might we need to do?” “what will we do?” “how will we do it?” “what’s really happening?” “what seems to be happening?” things happening Foresight “what might happen?”Prospection Copyright © 2000 Joseph Voros
Inputs Strategy Outputs Analysis Interpretation Prospection Foresight Expanded Perceptions of Strategic Options Strategy Development Strategic Planning Scenarios “Deep” Drivers of Change (System Structure / Dynamics) Trends, Issues, Themes Strategic Intelligence Scanning, Near-Future Context Foresight Process Copyright © 2000 Joseph Voros
• Scenarios are possible views of the world, described in narrative form (stories) that provide a context in which managers can make decisions. • By seeing a range of possible worlds, decisions will be better informed, and a strategy based on this knowledge and insight will be more likely to succeed. • Scenarios do not predict the future, but they do illuminate the drivers of change: understanding them can only help managers to take greater control of their situation. Gill Ringland Scenarios in Business, 2002 What are Scenarios?
Distance into “the future” Uncertainty Predictability F S H Forecasting Scenario Planning “Hoping” Why Scenarios? (Ranges of Usefulness) t U Adapted from K. van der Heijden
• Identify the focal question • Environmental scanning – internal and external • Selecting drivers of change and ranking • Building the scenario matrix • Developing the scenarios • Presenting the scenarios • Considering the strategic implications The Scenario Planning Process
Impact-Uncertainty Classification I m p a c t Uncertainty Low Moderate High Low Mod High Critical Scenario Drivers Important Scenario Drivers Critical Planning Issues Important Planning Issues Important Planning Issues Important Scenario Drivers Monitor & re-assess MonitorMonitor
Scenario planning lecture 24 july2013
Scenario planning lecture 24 july2013
Scenario planning lecture 24 july2013
• Robust - Perform well over the full range of scenarios considered - “Blue Chip” • Flexible - Keep options open and / or wait for as long as possible before committing - “Hedging” • Multiple Coverage - Pursue multiple strategies simultaneously until future becomes clear - “Scattergun” • Gambling - Select one strategy which works very well, but in only one or two scenarios - “Bet the Farm” Approaches to Strategy

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Scenario planning lecture 24 july2013

  • 2. • “Inventions have long since reached their limit, and I see no hope for future development”: Roman engineer Sextus Julius Frontinus, 1st Century AD • “Heavier than air flying machines are not possible”: Lord Kelvin, President of the Royal Society, 1895 • “I think there is a world market for maybe 5 computers”: Thomas Watson, Chairman of IBM, 1943 • “Space flight is hokum”: Astronomer Royal, 1956 • “Stocks have reached what looks like a permanently high plateau”: Irving Fisher, Professor of Economics, Yale University, 1929 Things Change ...
  • 3. • “We don’t like their sound, and guitar music is on the way out”: Decca Recording Co. rejecting The Beatles, 1962. • “640K [of RAM] ought to be enough for anybody”: Bill Gates, 1981 • “The fact that conflicts with other countries [producing civilian casualties] have been conducted away from the U.S. homeland can be considered one of the more fortunate aspects of the American experience”: Quadrennial Defense Review (QDR) for the US Dept of Defence, 2001 Things Change ...
  • 5. • All our knowledge is about the past, but all our decisions are about the future. • We create our future by what we do or don’t do today; it makes sense to try and understand as best we can what that future might be like before we act. • Foresight is not prediction! It is about getting an idea about what plausible futures might look like. • We are good at learning from the past; we need to learn from the future as well – we need to develop a ‘history of the future’ as we do a ‘history of the past’. What is Foresight?
  • 6. Why think 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. All our knowledge is about the past, but all our decisions are about the future.
  • 7. Possible - “might” happen (future knowledge) Plausible – “could” happen (current knowledge) Probable - “likely to” happen (current trends) Preferable - “want to” happen (value judgements) Types of Futures
  • 10. • So, foresight, put simply, is an approach to thinking about the future which lets you: – free up your thinking beyond the here and now; – explore plausible futures (ie always more than one, because “the” future is not pre-determined); and – think about implications for decision making today. • Foresight is a way of thinking that enhances our understanding of our current – and plausible future – strategic operating environment(s). What is Foresight?
  • 11. • An attribute, competence or process that attempts to broaden the boundaries of perception by: – assessing the implications of present actions, decisions etc. – detecting and avoiding problems before they occur (early warning indicators) – considering the present implications of possible future events (proactive strategy formulation) – envisioning aspects of desired futures (normative scenarios) What is Foresight?
  • 12. Three inter-dependent but quite different elements: • Strategic Thinking – exploration, intuitive, synthesising, creative, inductive, disruptive, incomplete/ambiguous info; generating options • Strategy Development – assessing options, examining choices, making decisions and/or setting a destination or direction • Strategic Planning – implementation, analytical, deductive, making it happen, getting things done, pragmatic, “can do”; actions Foresight, Strategy & Planning
  • 13. • Foresight is a strategic thinking process, not a strategic planning process. • It’s about options not actions. • Asks the question: “what might we need to do?” • not the questions: “what will we do?” or “how will we do it?” Foresight, Strategy & Planning
  • 14. Inputs Strategy Outputs Foresight Expanded Perceptions of Strategic Options Strategy Development Strategic Planning “Foresight Work” Strategic Intelligence Scanning Copyright © 2000 Joseph Voros
  • 15. Inputs Strategy Outputs Analysis Interpretation “what might we need to do?” “what will we do?” “how will we do it?” “what’s really happening?” “what seems to be happening?” things happening Foresight “what might happen?”Prospection Copyright © 2000 Joseph Voros
  • 16. Inputs Strategy Outputs Analysis Interpretation Prospection Foresight Expanded Perceptions of Strategic Options Strategy Development Strategic Planning Scenarios “Deep” Drivers of Change (System Structure / Dynamics) Trends, Issues, Themes Strategic Intelligence Scanning, Near-Future Context Foresight Process Copyright © 2000 Joseph Voros
  • 17. • Scenarios are possible views of the world, described in narrative form (stories) that provide a context in which managers can make decisions. • By seeing a range of possible worlds, decisions will be better informed, and a strategy based on this knowledge and insight will be more likely to succeed. • Scenarios do not predict the future, but they do illuminate the drivers of change: understanding them can only help managers to take greater control of their situation. Gill Ringland Scenarios in Business, 2002 What are Scenarios?
  • 18. Distance into “the future” Uncertainty Predictability F S H Forecasting Scenario Planning “Hoping” Why Scenarios? (Ranges of Usefulness) t U Adapted from K. van der Heijden
  • 19. • Identify the focal question • Environmental scanning – internal and external • Selecting drivers of change and ranking • Building the scenario matrix • Developing the scenarios • Presenting the scenarios • Considering the strategic implications The Scenario Planning Process
  • 20. Impact-Uncertainty Classification I m p a c t Uncertainty Low Moderate High Low Mod High Critical Scenario Drivers Important Scenario Drivers Critical Planning Issues Important Planning Issues Important Planning Issues Important Scenario Drivers Monitor & re-assess MonitorMonitor
  • 24. • Robust - Perform well over the full range of scenarios considered - “Blue Chip” • Flexible - Keep options open and / or wait for as long as possible before committing - “Hedging” • Multiple Coverage - Pursue multiple strategies simultaneously until future becomes clear - “Scattergun” • Gambling - Select one strategy which works very well, but in only one or two scenarios - “Bet the Farm” Approaches to Strategy