The greatest danger in times of turbulence is not the turbulence it is to act with yesterdays logic

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The greatest danger in times of turbulence is
not the turbulence it is to act with yesterdays
logic Wack, 1985, p150
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Agenda

• What is it?
• When should it be used?
• How to do it?
• Good Scenario Planning must.
• The Good bits
• Limitations
• How does it relate to BMPP?

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..imagine a company that has so many resources
that they can pay two men with great intellect,
put them in an office with no job description
with access to all company information to think
and ponder the market
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Who are the men? What is the company? Which
decade is it?
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Pierre Wack Arie de Geus Royal
Dutch/Shell 1970s This is where scenario
planning really began.....
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What is it?

• Scenario
• an outline of the plot of a play, film, opera,
  with details of the scenes, situations
• 2. a postulated sequence of imagined future
  events
• The Australian Concise Oxford Dictionary, 1997,
  p1209

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What is it?

• A method of forecasting
• Forecasting is difficult many have tried to
  developed ways to predict
• Traditional approach assumes that tomorrows
  world will be much like today's
• A different (Scenario) approach
• accept uncertainty, try to understand it, and
  make it part of our reasoning
• Wack, 1985, p73

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Scenario..the focus is not on forecasting the
future, or fully characterizing uncertainty, but
rather on bounding the uncertainty Schoemaker,
1991, p550
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What is it?

• The art of scenario planning is not mechanistic
  but organic.........that is whatever we have
  learnt from the previous step advances us to the
  next
• Generations of scenarios

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What is it? Scenario Planning
G4
G3
G2
Units sold
G1
03/04
05/06
07/08
09/10
Time
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Philosophy of Scenario Planning

• Scanning the environment and crystalising the
  findings in a set of scenarios
• Means dealing with a world outside the
  corporation
• Means taking into consideration political,
  environmental, economic and cultural changes
• Need to take heed of facts perceptions

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I have found that scenarios can effectively
organise a variety of seemingly unrelated
economic, technological, competitive, political,
and social information and translate it into a
framework for judgment - in a way no model could
do Wack, 1985, p146
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Scenarios serve 2 Main Purposes

• Protective purpose
• Anticipating and understanding risk
• Entrepreneurial purpose
• Discovering strategic options of which you were
  previously unaware
• Wack, 1985, p 146

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Experience has taught us that the scenario
technique is much more conducive to forcing
people to think about the future than the
forecasting techniques we formerly used Benard,
1980, p91
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When should it be used?

• Uncertainty is high
• Too many costly surprises have occurred in the
  past
• Insufficient new opportunities are perceived and
  generated
• The quality of strategic thinking is low

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When should it be used?

• The industry has experienced significant change
  or is about too
• A common language and framework is desired,
  without stifling diversity
• Strong difference of opinion exist, each of
  which has its merits
• Your competitors are using scenario planning
• Schoemaker, 1990, p550

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How to do it? 10 steps

• Define the issues
• Identify stakeholders
• List current trends
• Identify key uncertainties
• Construct two forced scenarios

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How to do it? 10 steps
6. Assess internal consistency plausibility 7.
Delete scenarios that are not credible 8. Assess
revised scenarios 9. Re-examine internal
consistency 10. Re-asses the ranges of
uncertainty Schoemaker, 1993, p197
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Good Scenario Planning must..

• Involve middle and top management for buy in
• Focus understand the driving forces of
  uncertainty and change
• Have considered both (business) facts and
  (management) perceptions
• Driven by a market not production orientation

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Testing Scenarios

• Need to ask two simple questions
• What do they leave out?
• 2. Do they lead to action?

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The Good bits

• Understands and anticipates risk
• Entrepreneurial in nature
• Opportunities can be identified benefited from
  if alternative scenarios occur
• encourages emergent strategy within bounds
• Breeder Effect which generates energy optimism

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But there are limitations

• Often analysts are production focused not market
  focused
• Decision makers are not properly briefed on the
  scenarios
• Scenarios must be seen as plausible and be
  accepted by management
• Management generally want definite answers not
  alternative futures

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How does it relate to marketing planning?

• it sets the boundaries for marketing planning
• Enables both planned and emergent approaches
• .but Control is not a key element
• Considers both internal and external factors
• Is a living thing - a dynamic method for
  anticipating change and being opportunistic.

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Readings

• Schoemaker, P. (1993) Multiple Scenario
  Development Its Conceptual and Behavioural
  Foundation Strategic Management Journal, Vol 14.
  pp.193-213
• Schoemaker, P. (1991) When and How to Use
  Scenario Planning A Heuristic Approach with
  Illustration Journal of Forecasting, Vol 14.
  pp.193-213

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Additional Readings

• Wack, P. (1985) Scenarios uncharted waters
  ahead Harvard Business Review, Sept-Oct, pp.
  73-89.
• Wack, P. (1985) Scenarios Shooting the rapids
  Harvard Business Review, Nov- Dec, pp. 139-150.