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Scenario Planning
 

Scenario Planning

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This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:

This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
http://flevy.com/browse/business-document/scenario-planning-243

Scenario Planning, also called Scenario Thinking or Scenario Analysis, is a method used in the strategic planning process to help businesses make flexible long-term plans.

This document describes a 9-phase process for Scenario Planning, and shows how to apply this process to a workshop environment. Many organizations conduct off-site Scenario Planning Workshops as part their annual strategy development process.

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    Scenario Planning Scenario Planning Presentation Transcript

    • Business Framework Scenario Planning Scenario Planning is an integral part of the Strategic Planning Process. This document describes a robust 9-phase process for proper scenario planning analysis and shows how to integrate it into a Scenario Planning Workshop environment. Axes of Uncertainty Axes of Uncertainty Axes of Uncertainty Axes of Uncertainty Scenario A Scenario B Scenario C Scenario D Find our other documents at http://flevy.com/seller/learnppt
    • 3 Contents • Overview • Scenario Planning Process - Process Overview - 9 Phases • Scenario Planning Workshop - Facilitation Tips - Suggested Layouts
    • 5 Contents • Overview • Scenario Planning Process - Process Overview - 9 Phases • Scenario Planning Workshop - Facilitation Tips - Suggested Layouts
    • 7 Phase 1: Define the scope and context Describe scenarios Checked for robustness Outline scenarios Generate outcome combinations Determine outcomes Rank critical uncertainties Identify axes of uncertainties Define scope of scenarios KEY ACTIVITIES  Identify the objectives of the scenario exercise – What output is required? For what purpose? By when?  Investigate the strategic backdrop – What are the key options? What are the visions as by the team?  Establish the appropriate timeframe – Determine the industry investment horizon, timeframes for key decisions  Clarify what should be included and excluded – E.g. geographical limits, value chain segments Phase 1 – Overview EXECUTION METHODOLOGIES  Executive interviews and workshops  Focus group interviews  Management team surveys When conducting the scenario in a workshop setting, these info collection activities can be conducted prior to the workshop
    • 9 Phase 3: Rank critical uncertainties in terms of importance and business impact KEY ACTIVITIES  Identify possible linkages between the clusters of critical uncertainties – Are the driving forces independent of each other?  Sort the critical uncertainties by important to the business and degree of uncertainty  Identify the driving forces most relevant to the decisions facing the business  Classify the critical uncertainties into the two primary and relevant secondary categories Phase 3 – Overview EXECUTION METHODOLOGIES  Correlation Matrix (to determine linkages)  Facilitated group discussion (for uncertainty ranking)  Voting (for uncertainty ranking) Describe scenarios Checked for robustness Outline scenarios Generate outcome combinations Determine outcomes Rank critical uncertainties Identify axes of uncertainties Define scope of scenarios
    • 11 Phase 4: Determine possible outcomes for Axes of Uncertainties KEY ACTIVITIES  Identify possible stable end-states for each uncertainty – Outcomes should be significantly different (i.e. choose the extremes) – Pick two outcomes for each – It isn’t necessary to cover all possible outcomes – Avoid value judgment over good/bad states  Characterize and label the outcome of each uncertainty  Use a matrix to tabulate the range of identified outcomes Phase 4 – Overview EXECUTION METHODOLOGIES  Facilitated group discussion Describe scenarios Checked for robustness Outline scenarios Generate outcome combinations Determine outcomes Rank critical uncertainties Identify axes of uncertainties Define scope of scenarios
    • 13 Phase 5: Generate plausible combinations of outcomes KEY ACTIVITIES  Create strawman models for each scenario by selecting internally consistent combinations of outcomes for critical uncertainties – Check for and discuss possible conflicts among outcomes selected – Where the most important critical uncertainties are evident, make sure to include all identified outcomes in the selected scenarios – Target to create around 4 scenarios—don’t create too many scenarios! – Ensure the scenarios you have created are distinctly different Phase 5 – Overview EXECUTION METHODOLOGIES  Facilitated group discussion  Breakout groups Describe scenarios Checked for robustness Outline scenarios Generate outcome combinations Determine outcomes Rank critical uncertainties Identify axes of uncertainties Define scope of scenarios Don’t try to over-think the process of generate every possible outcome—use sound judgment to evaluate whether the scenarios selected represent the broad range of possible future states TIP
    • 15 Use the top 2 uncertainties to create a scenario map for the initial 4 scenarios to work on Phase 5 – Scenario Map Example Scenario A Scenario B Scenario C Scenario D Regulatory environment Harsh Harsh Liberal Liberal Brand premium Erodes Maintains Erodes Maintains 2 PRIMARY AXES OF UNCERTAINTIES REMAINING AXES OF UNCERTAINTIES Price of oil Increases Drops Increase Drops Technology breakthrough Yes Yes No Yes Threat of digitization High Low High High … … … … … … … … … … … … … … … These values defined by the Scenario Map (from previous slide) Describe scenarios Checked for robustness Outline scenarios Generate outcome combinations Determine outcomes Rank critical uncertainties Identify axes of uncertainties Define scope of scenarios
    • 17 Phase 7: Check scenarios for robustness KEY ACTIVITIES  Test the stability of the end state described – Will stakeholders in the industry intervene to prevent this end state from occurring?  Test the relevance of the scenarios described – Do the outcomes relate to the decisions facing the business?  Test the internal consistency of the scenarios – What contradictions do the scenarios contain?  Test whether the scenarios are distinct and unique – Try to avoid developing scenarios that are variations of the same theme Phase 7 – Overview EXECUTION METHODOLOGIES  Facilitated group discussion  Breakout group presentations  Validation with external industry reports Describe scenarios Checked for robustness Outline scenarios Generate outcome combinations Determine outcomes Rank critical uncertainties Identify axes of uncertainties Define scope of scenarios
    • 19 It is important to document all leading (contra-)indicators and economic parameters Phase 8 – Key Indicators Scenario A Scenario B Scenario C Scenario D KEY INDICATORS  …  …  …  …  …  …  …  … KEY CONTRA-INDICATORS  …  …  …  …  …  …  …  … The tracking and monitoring of these indicators will help determine any strategic changes in the future. Describe scenarios Checked for robustness Outline scenarios Generate outcome combinations Determine outcomes Rank critical uncertainties Identify axes of uncertainties Define scope of scenarios
    • 21 Successful scenario planning workshops are usually conducted offsite over a 2- or 3-day period with involvement beyond just top management Scenario Planning Workshop – Facilitation Tips  Allow plenty of time for the group to bond and for the discussions provoked by the scenarios  Go offsite  Be sure to involve the top team …  … but also consider including other “expert” resources • Each breakout group exercise can open up wide ranging debate around deep questions which will affect the future of the business • Schedule evening work to create the opportunity for an open-ended discussion • It is difficult to engage senior management’s captive attention if they are accessible to deal with current business ―crises‖ • Don’t allow the management to delegate the exercise—they oftentimes won’t buy in to scenarios unless they have been through the learning involved in exploring the future • Involve people from further down the organization—especially people capable of creative, out-of-the-box thinking about the future of the industry • Invite academics, industry experts, regulators, and even partners (e.g. suppliers, alliance) to enrich the breadth of the discussion
    • 23 Workshop layouts that work well include the horse shoe and round table layouts Scenario Planning Workshop – Suggested Layouts HORSE SHOE LAYOUT ROUND TABLE LAYOUT SCREENSCREEN You should avoid classroom or boardroom layouts.
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