Introduction to Scenario Planning

This present moment Used to be The unimaginable future

Stewart Brand

The Clock of the Long Now

An Introduction to Scenario Planning Foresight Methodologies Workshop 28 September 2003 Maree Conway

Who am I?

25+ years as a manager in tertiary education institutions.

Internal re-structure at Swinburne in 1999 – appointed to position of Director, Foresight, Planning and Review.

Foresight journey for both me and Swinburne.

Now strong interest in developing ways to embed foresight into universities in particular, and organisations in general.

Practitioner focus – how to ensure outcomes of foresight are relevant to staff, and can be used by them.

Welcome!

Suspend disbelief for a moment….

Imagine that you part of the senior executive group at your institution – you are meeting to consider the future viability of your institution which has been affected negatively by the Nelson Reforms.

In walks Universitas, the renowned and proven clairvoyant. She says:

You can ask me three questions about your future.

What would those three questions be?

Before we start…

Overview

What is Foresight?

The Scenario Planning Process

Implementing Scenario Planning in Organisations

Close

Welcome!

An introduction to scenario planning within the broad context of foresight.

Scenario planning is a foresight methodology – it helps make sense of an uncertain future.

The focus is on making better decisions.

Additional references so you can explore the methodology after the workshop.

Overview

The world is more complex than that envisaged when many of our institutions were created, and those institutions are now creaking, facing significant new challenges and pressures.

It is tough to be a manager in a time of such uncertainty.

Decisions taken today will have effects years into the future, but in what sort of world?

Never mind the future, it is increasingly difficult to discern trends and realities, and to make well-informed decisions today!

So, why do it?

The future is not pre-determined or predicable.

If it were, there would be no point in taking action today, because it would have no effect on the future.

Full information about the future is never available.

It makes sense to look for ways to understand the future to deal with uncertainty.

So why do it?

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 (Trends) ( Deep Drivers) Plausible Probable

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 future s (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 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 Copyright © 2000 Joseph Voros “ 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 at Swinburne

The Future as a Strategic Landscape The strategic objective: • A compelling, relevant future • BHAG—“Big Hairy Audacious Goal” • A concrete, specific goal • A challenge, but achievable The strategic environment: • Strategic implementation and tactics • Threats and opportunities • Actions of other strategic actors • Driving forces • Mapped and understood using scenarios The purpose of the organization • A “future-focused role image” • Not completed or “used up” Strategic identity: • Current reality • Self-knowledge • Strengths and weaknesses • Values • Preferences and experience ‘ The Chessboard’ — Issues and challenges we are likely to face ‘ The Star’ — Our enduring and guiding social role ‘ The Mountain’ — What we hope to achieve ‘ The Self’ — Our values and attributes as a strategic player “ Star, mountain, chessboard, self” image © 1999 Synthesys Strategic Consulting Ltd The ‘self’ journeys across the chessboard to the mountain, which lies in the medium term future

The “Strategic Landscape ” Adapted from H. Tibbs Self Mountain Star Chessboard

Strategic Landscape (Tibbs)

Self

Chessboard

Mountain

Star

Our capacities, skills, values & attributes as a strategic player

Issues & challenges we are likely to face

Major goal or objective we want to achieve

Enduring & guiding social role or purpose

The “Strategic Landscape ” Foresight Adapted from H. Tibbs Self Mountain Star Chessboard

Foresight is a normal capacity of the human mind.

Everyone thinks about the future every day, and plans ways to deal with the uncertainty inherent in that future.

BUT , that thinking is usually unconscious, and usually stays within the brain of each person.

The challenge is to take it from being an implicit, unconscious process taking place in a single mind to being an explicit conscious process taking place in many minds

In other words, from implicit & unconscious to explicit & conscious and from individual to collective .

In organisations, this requires explicit foresight processes be created to support existing strategic processes.

Foresight in Organisations

Five levels to implement foresight:

Level 1: recognition of foresight as an innate human capacity – every individual has the capacity for foresight

Level 2: immersion in foresight concepts – using foresight concepts and ideas to generate a futures discourse

Level 3: using foresight methodologies – use of key methods to make foresight “real”

Level 4: creating organisational niches – permanent, purpose-built areas to focus foresight

Level 5: foresight at the social level – where long-term thinking becomes the norm.

Richard Slaughter

Implementing Foresight

Choose an appropriate method or two from each level.

Refine the “flow” of information leading from Inputs to Strategy.

Aim for a deep foresight process.

Always Ask: Are our proposed strategic actions ‘wise’ when considered from a ‘future’ perspective?

The Goal: to act with wisdom in the present — informed by a perspective from the future , not only the past .

Practical Strategic Foresight

Scenario Planning

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?

One of many foresight methodologies.

Well developed and tested across government, business and education.

Provides structured process for people to start ‘consciously’ thinking about the longer-term future and possible implications for strategy today (ie navigating the ‘chessboard’).

A creative and shared process that allows time for reflection about the organisation and its future.

Why Scenarios? (The ‘Chessboard’)

Scenarios strengthen a manager’s strategic management tool box:

traditional methods focus on the past

scenario planning focuses on the future

Combining both the past and the future makes thinking about strategy stronger and promotes:

responsiveness

flexibility

competitive advantage

Why Scenarios?

Scenarios allow a shared view of the future to be developed, and then

Provide the opportunity for an organisation to consider how it wants to position itself in that future.

Why 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

Imagine you are back in your senior executive group meeting. Universitas, the clairvoyant, has left, promising to return soon with a detailed report on her findings.

As a group, you are now considering what you think will be the most important, but uncertain, external forces (drivers of change) that will affect your institution over the next 10 years.

What are the top 3 drivers of external change on your list?

Your turn…

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

Identify a focal area or issue – such as a decision or question that is critical to the future of your unit now .

Useful foci often emerge from major challenges of today, or from questions such as “what one question would you ask a real psychic?”

Choose a “horizon year” as the distance into the future that the scenarios will extend ( at least 10 years):

allows suspension of disbelief (the “that won’t happen” reaction);

will you be in the same job you are in today in 10 years?

The Focal Question

“ 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 ...

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 Copyright © 2000 Joseph Voros

Levels of Structure Events Patterns, Trends System Structure News Items Recurring Themes Underlying “Drivers” “ Core” Human Intelligences Mental Models Thinking Systems Mindsets, Worldviews, Metaphors, Myths Copyright © 2001 Joseph Voros

The Interpretation step means the Prospection step is better informed (in this case, the scenarios you will develop).

So, look beneath the events, news items, themes and trends for the deep drivers of change.

What’s Really Happening?

Social

Technological

Economic

Environmental

Political

Major Drivers of Change

Globalisation

cheap travel & instant transfer of information/communications, trans-national commerce, student diversity

Economics

massification of education in OECD

percentage of population in post-compulsory education rising

rising funding costs to government

Technology

internet, online instruction, e-commerce, cost and complexity of science

The ‘knowledge project’ itself is changing

from dualist objectivism to participatory worldviews

Major Drivers of Change

Rising and ageing population

Movement towards consumer-driven lifelong education

Increasing life expectancy and quality of life, supported by a move towards a more holistic approach to health

Increasing socio-economic inequality

Cultural transformation driven by globalisation, immigration and technology

Shift of economic power to the consumer

Growth of population in the urban areas particularly the concentration of knowledge workers around the city centres

Social Trends

Continued improvements in Information and Communications Technology (ICT) and increased human reliance on this technology

More efficient and cleaner automobile technologies

Increasing development of environmental technologies and businesses

Major health and agribusiness productivity improvement likely from biotechnology advances

Greatly advanced materials technologies resulting from nanotechnology

New and cleaner renewable energy sources becoming economically viable

Technological Trends

Technology advances underway may be sufficient to

guarantee global prosperity of a new magnitude. The

combination of technologies coming on-line should greatly

increase economic efficiency. Some of the major

technological breakthroughs of the coming decade include:

portable information devices becoming common

fuel cell cars entering the market

increasing electronic devices to assist in shopping and work

increasing use of genetically modified foods

alternate energy sources becoming widely used.

Technological Trends (contd)

Declining trade based on traditional commodities

The global city

Growth of jobs in new export industries associated with the global economy and increasing participation in the global economy

Unemployment for those in the old economy sectors

Change in the locus of wealth creation from industry to to the information/knowledge economy

Evolution of global finance towards a single currency

Economic Trends

Increasing acceptance of the concept of sustainable development

Continued degradation of the natural environment

Declining water quality

Generally declining air quality and increased energy consumption

Uncertainty surrounding the impact of global climate change while Australia is still increasing its output of CO2.

Environmental Trends

Rising influence of global government to the detriment of national governments

Rising influence of Transnational Corporations and global capital

Increasing influence of Non-Government Organisations (NGO’s) on the global and local scene

Possibility of direct democracy and new communities created by the internet

New possibilities for global conflict, terrorism and crime.

Political Trends

Impact-Uncertainty Classification Impact Uncertainty Low Moderate High Low Mod High

“ Low ” means we are reasonably certain that it will play out or continue in ways that are fairly well understood

eg. population

“ High ” means that we have no clear idea which of a number of plausible ways it might go

eg. government legislation and policy

“ Mod ” means “somewhere in between” 

What is “Uncertainty”?

Impact-Uncertainty Classification Impact Uncertainty Critical Scenario Drivers Important Scenario Drivers Critical Planning Issues Important Planning Issues Important Planning Issues Important Scenario Drivers Monitor & re-assess Monitor Monitor Low Moderate High Low Mod High

High Impact, Low Uncertainty = “ predetermined elements (or trends) ”

should be present in every scenario

High Impact, High Uncertainty = “ critical uncertainty ”

choose the two most uncertain of these to create the scenario matrix

And the “ blue drivers ”?

include in your scenarios if you like , & if it makes sense to, particularly if you think that they will be significant in the future.

Building the Scenario Matrix

Take your 3 key internal issues (the clairvoyant questions) and your 3 most important but uncertain drivers of external change.

Plot them on your impact-uncertainty matrix.

Pick two from the upper right hand corner.

Your turn…

Choose two drivers that are most uncertain and most critical in terms of impact on your organisation.

Building the Scenario Matrix Critical Uncertainty 1 Critical Uncertainty 2

Building the Scenario Matrix World 2 World 1 World 3 World 4 Critical Uncertainty 1 Critical Uncertainty 2

In a scenario workshop, small groups would ‘flesh out’ each world. The requirements for this step are to suspend disbelief, trust your intuition, look for plausibility, surprises and novel elements.

Scenarios must be internally consistent and plausible – they have to make sense to the people creating them, and to the people in the organisation who will read them.

Developing the Scenarios

Build your scenario matrix….

and

Consider what your worlds might look like….

Your turn…

Developing the Scenarios

What is the world like in your scenario in 2013?

How did your world develop? Stand in 2013 and look back over the major events that have occurred; list the events. Developing the timeline in 5 year intervals saves time, but you can also simply prepare a list of the events you think created your world.

Would your organisation exist in 2013?

What do you look like? Are you physical or virtual? Global? Specialist? Major characteristics of your customers? What do staff do?

Title of Scenario

Be creative! Imagine a title that describes the essence of your world, and that is memorable.

Narrative – the scenario story

Write up a paragraph or two to describe your world (skip this if you are running out of time).

Presentation

Decide how you will present your scenario to the rest of the group. You’ll have about five minutes, so focus on the key elements of your world as they relate to tertiary institutions.

In a real-life project:

The first set of scenarios usually needs further development and refinement.

Occurs over time, and is designed to make the scenarios understandable to the organisation (to deal with the fact that most staff won’t be directly involved in their development).

Further Development

The Scenarios are not the only purpose of the exercise!

the resulting “freeing up” of thinking while creating them is!

Expanding understanding of what options might be available in the long term:

shifts frame of reference 10-20 years out.

examining implications for the services provided by your unit in each of the scenario worlds

looking to see what your unit would need to do to stay viable

From Scenarios to Strategy

Main Uses for Scenarios

A common language for “strategic conversations” - ongoing future-oriented discussions

Risk Assessment - specific decision

Strategy Evaluation - existing strategy

Strategy Development - new strategy

Scenarios provide ‘clues’ about what might be important drivers of change in the future, and how those drivers might interact and affect the organisation.

Aim is to identify strategies that are robust across all scenarios, given what we know about how the future might develop.

Also, to identify ‘early warning indicators’ that events in the scenarios are happening – how will we respond?

Within the context of the focal question….

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

In the absence of well-developed set of scenarios, single-point forecasting and / or a reluctance to allow uncertainty (ie. the “predict and control” mentality) leads to a (usually unconscious) projection of an “official” future, which is the one assumed to be coming ...

This approach is functionally equivalent to (and an unconscious form of) the Gambling / “Bet the Farm” approach

“ Bet the Farm” is the common default

The scenarios can help you to imagine the consequences of different choices of decision / strategy in each of the different scenario “worlds” …

… without having to live with the consequences of a wrong decision or strategy for the rest of your life!

Which of the types of decision / strategy do you want to develop in the real world?

From Scenarios to Decision / Strategy

AND, ONE MORE!!

“ Wild Cards” are low-probability, very-high-impact events that are

wide in scope and directly affect the human condition

potentially disruptive (negatively and/or positively)

intrinsically beyond the control of any single institution, group or individual

rapidly moving

eg: asteroid impact; stock market collapse; terrorist attack; disrupted water, gas or electricity supply; etc

Suddenly, the World Changes ...

Types of Futures Time Today Possible Plausible Probable Preferable Scenario “ Wildcard”

If you don’t think about Wild Cards before they happen, then all of the value in thinking about them is lost (“horse has bolted / stable door”).

If we accept that there will be Wild Cards in the near future, then the only effective defence is to begin to systematically think about them now , and examine their implications.

Suddenly, the World Changes ...

Does your organisation’s existing strategy stand up to all of the future worlds presented in these scenarios?

What rationale would you have for pursuing various strategic options in each scenario? What can you influence?

What early indicators will we monitor?

After considering the strategic implications of the scenarios, what actions might we recommend?

Deciding on an implementation plan.

Using Scenario Outputs

Given your scenario worlds, and your brief exploration about how those worlds might have developed over time,

And, remembering your focal question,

What are the implications of your scenarios for your institution today?

Would you still be in business? In what business?

Who are your customers and what do they want?

Where are the gaps in your knowledge? What do you need to know more about?

Your turn

Implementing Scenario Planning

In Organisations

Implementing scenario planning is exciting for those who do it – it changes the way you think.

Need open minds, tolerance for ambiguity and ‘fishing expeditions’.

Commitment to understanding the future better.

Implementation has to take place within broad foresight framework – scenario planning is a tool to help improve thinking about the future, not an end in itself.

Implementing Scenario Planning

Implementation Organisations are changing … Traditional strategic planning processes are no longer enough ! From To Command and control Empowerment Structured life Unstructured life Importance of size Need for speed Predictability Uncertainty Clarity Ambiguity Slow change Rapid change and obsolescence Reliance on processes Reliance on people Hierarchical or managed organisations Alliances and coalitions Avoiding risk Managing risk

When the power of the external environment is great –when the forces at work on an organisation require ‘outside-in’ thinking.

When the organisation needs a shared context; shared vision; shared forward view.

When functional teams need to collaborate – working together on scenarios may held current working relationships.

When to implement

Stage 1: Clarify your aims: why are you doing this?

Stage 2: Engage stakeholders – very important – spend time on this until you have ‘buy-in’

Stage 3: Understand the organisation

Stage 4: Timing of scenario projects

Stage 5: Developing scenarios

Stage 6: Communicating the scenarios

Stage 7: Using the scenarios in planning and policy development

How to implement

Why are you doing this?

Introduce foresight into the organisation as strategic management tool?

Inform strategic thinking and decision-making?

Test existing strategies?

A one-off strategic exercise?

Stage 1: Clarify your aims

Identify who will drive the process.

Who needs to be consulted internally and externally?

Take the time to engage these stakeholders so they are familiar with the process, its aims and expected outcomes.

Address concerns about value of scenarios and how they will be used in decision-making/planning.

Subjective tool, but allows discussion and challenges to assumptions and judgements made during this process.

Stage 2: Engage Stakeholders

Is the organisation seeking input on future directions, or the development of a shared vision to underpin decisions?

Can the outputs be used in a strategic planning round, or decision making?

Is the organisation facing specific challenges?

Chaotic external environment – what are emerging patterns?

Critical decisions to be made, including choices between new areas of activity – how to decide?

Business plans not being met – are the assumptions still valid?

Change in traditional markets threatens services?

Stage 3: Timing is everything

Can the project be resourced?

Who might oppose the project?

Who needs to be convinced of its value?

Who can you work with to apply the scenarios in the organisation?

What will be the scope of the project, including what time frame – what will work for the organisation?

Who will be involved in the project?

Stage 4: Understand the Organisation

Stage 4: Understand the Organisation Fence-Sitters RATS - can smell the cheese, but jump ship; they have good organisational diagnostics Pragmatists Ideologues Get It Don’t Get It Bridge Builders FROGS - get it, and can use the system, very rare Laggards VULTURES - don’t bother, they are looking for you to fail True Believers LEMMINGS PITCH MESSAGE HERE Adapted from Andy Hines, 2002