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Scenario Analysis: Planning for Uncertain Futures


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Scenario analysis is a method for creating strategic foresight that overcomes the shortcomings of traditional forecasting methods. It helps strategists and decision makers create a shared vocabulary and baseline for quality strategic planning.

I delivered this presentation to the Society of Competitive Intelligence Professionals DC chapter on January 14, 2010.

Published in: Business

Scenario Analysis: Planning for Uncertain Futures

  1. 1. Scenario Analysis<br />August Jackson<br />Global Market & Competitive Intelligence<br />#scipdc<br />
  2. 2. It&apos;s tough to make predictions, especially about the future.<br />
  3. 3. Human Cognition, Systems Complexity and Fate Conspire to Thwart Our Efforts at Prediction<br />
  4. 4.
  5. 5. &quot;This &apos;telephone&apos; has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.”<br />Western Union internal memo<br />1876<br />
  6. 6. Lehman Brothers bankruptcy leads to a near collapse of global finance.<br />
  7. 7. Scenario Analysis Overcomes Limitations of Traditional Forecasts<br />High Uncertainty<br />Unlikely, Impactful Events<br />Differences of Opinion<br />
  8. 8. Scenario Analysis Does NOT Predict the Future!<br />
  9. 9. Ingredients and Outcomes of a Good Scenario Exercise<br />
  10. 10. Scenario Analysis Gives us a View of Multiple Possible Futures<br />Extreme Positive State<br />Critical Uncertainty 2<br />Extreme Negative State<br />Extreme Negative State<br />Extreme Positive State<br />Critical Uncertainty 1<br />
  11. 11. Stages to Scenario Analysis<br />
  12. 12. Use KITs to Define Your Scope<br />
  13. 13. Example: Rural Wireless Broadband<br />
  14. 14. Diversity of Expertise and Opinion Are Key to Identifying Critical Factors<br />Internal Experts<br />Technical, Engineering, R&D<br />Marketing & Sales<br />Management<br />External Experts<br />Academics<br />Customers<br />
  15. 15. Use Delphi Method to Engage Experts<br />
  16. 16. STEEP Framework Captures External Factors<br />
  17. 17. An Example: STEEP for Rural Wireless Broadband<br />
  18. 18. The Interplay of Critical Uncertainties Will Define Possible Alternative Futures<br />A Hundred Flowers Bloom<br /><ul><li> Competition between licensed and unlicensed broadband
  19. 19. Significant 4G build out</li></ul>4G Goes Rural<br /><ul><li> Incumbent wireless carriers compete w/RLECs
  20. 20. Wired voice & broadband becomes the exception</li></ul>USF Available for Wireless<br />Universal Service Fund Policy<br />RLEC’s Dream<br /><ul><li> Broadband remains very expensive, limited market penetration
  21. 21. High ROC for RLECs for fixed-line</li></ul>BYO Broadband<br /><ul><li> Many rural markets ceded to unlicensed providers
  22. 22. Municipal fiber in larger rural communities</li></ul>USF Limited to Fixed Line<br />License Regime<br />Unlicensed Use for WAN<br />Availability of “White Space” Spectrum<br />
  23. 23. Develop Strategies for Each Scenario<br />4G Goes Rural<br /><ul><li> Create “cut the cord” bundles for rural markets
  24. 24. Accelerate 4G Build</li></ul>A Hundred Flowers Bloom<br /><ul><li> Lobby FCC and states to ensure only for licensed providers receive USF</li></ul>USF Available for Wireless<br />Universal Service Fund Policy<br />RLEC’s Dream<br /><ul><li> Moderate 4G build-outs in rural markets, starting in largest markets</li></ul>BYO Broadband<br /><ul><li> Slow 4G build-out in rural markets
  25. 25. Sell fixed-line assets in rural markets</li></ul>USF Limited to Fixed Line<br />License Regime<br />Unlicensed Use for WAN<br />Availability of “White Space” Spectrum<br />
  26. 26. Use Scenarios to Create Early Warning<br />Event A<br />Event Z<br />Scenario 1<br />Event B<br />Event X<br />Scenario 2<br />Event C<br />Event Y<br />Event D<br />Event W<br />Scenario 3<br />Event E<br />Event V<br />Scenario 4<br />Event F<br />Event U<br />
  27. 27. Other Applications for Scenario Analysis?<br />Valuation model for early stage companies?<br />What do you think?<br />
  28. 28. Thank you!<br />August Jackson<br />+1 703 348 7337<br />august (at) augustjackson (dot) net<br /><br /><br />
  29. 29. Sources on Scenario Analysis<br />Bensoussan, Babette and Craig Fleischer. Analysis Without Paralysis: 10 Tools to Make Better Strategic Decisions. New York: FT Press, 2008.<br />Blenkhorn, David, and Craig Fleischer. Managing Frontiers in Competitive Intelligence. New York: Quorum Books, 2000.<br />Dewar, James. Assumption Based Planning: A Tool for Reducing Avoidable Surprise. New York: Cambridge University Press, 2002.<br />Day, George. &quot;Looking in to Marketing&apos;s Future.” Marketing Management September/October 2009: 12-17.<br />