The CMO Survey - Highlights and Insights Report - Spring 2024
Tools for Strategic Decision- Making in Turbulent Times, US Cellular
1. A
B
C
?
U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
Elliot Rawls,
Sr. Director, Strategy & Corporate Development
Dec 7, 2012
Tools for Strategic Decision-Making
in Turbulent Times
2. A
B
C
?
U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
Elliot Rawls,
Sr. Director, Strategy & Corporate Development
Dec 7, 2012
Tools for Strategic Decision-Making
in Turbulent Times
3. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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1980:
AT&T Hires McKinsey & Co. to forecast the long-term future demand
for cell phones.
Their Prediction:
‘By the year 2000, we should expect no more than 900 thousand
subscribers to cellular phone service’.
Actual Cell Phone Subscriber base in 2000:
Over 109 million.
Result:
AT&T takes a pass on this ‚lackluster‛ business opportunity.
McKinsey’s Prediction
4. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Actual # of
Subscribers
Predicted # of
Subscribers
McKinsey’s Prediction
US Wireless Subscriber Growth
6. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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What went “wrong”?
7. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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1. Tools to effectively describe and categorize uncertainty.
2. Tools that allow us to incorporate uncertainty into our
thinking and decision-making processes (rather than
ignoring it).
3. Tools that facilitate better strategic decision-making –
(but first, we need to better define what good strategic
decision-making is).
How can we improve forecasting and decision-making
when significant uncertainties exist?
Part I: Dealing with Uncertainty
Part II: Improving Decision Making
8. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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A
B
C
A Clear Enough
Future
A single view of
the future
?
A Range of
Futures
A range of
possible future
outcomes
Alternative
Futures
A limited set of
possible future
outcomes, one of
which will occur
True Ambiguity
Not even a range
of possible future
outcomes
Hugh Courtney’s Four Levels of Residual Uncertainty (‚20/20 Foresight‛:
Hugh Courtney)
Part I: A Tool for Categorizing and Describing Uncertainty
(Redeeming McKinsey)
9. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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Categorizing Uncertainty
•McDonald’s forecasting
earnings for a new
restaurant
•Walmart or Home Depot
determining store
locations
Forecasting demand and
cost variables in stable
markets with relatively
stable business models
‚A Clear Enough Future‛
Examples of Level One
Uncertainty
Traditional Tools:
•Porter’s 5 Forces
•Market Research
•Cost Benchmarks
•SWOT analysis
•Core competencies
diagnostics
•Discounted cash
flow/NPV valuation
models
Tools for Level One
Uncertainty
Decision-making “model”:
Tools designed to produce point forecasts of key drivers.
Choose the strategy that maximizes the company’s objective (e.g., ROI).
10. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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Categorizing Uncertainty
‚Alternative Futures‛
Examples of Level Two
Uncertainty
Tools for Level Two
UncertaintyA
B
C
Traditional Tools plus:
•Decision or event
trees
•Scenario-planning
exercises
•Game theory
•Decision-tree Real
Option Value
techniques
Decision-making “model”:
Tools are designed to produce a ‚MECE‛ set of scenarios and show how
potential strategies change the likelihood and payoffs of each scenario.
Utilize decision analysis.
•Potential regulatory,
legislative or judicial
changes.
•Industry standards
decisions.
•Certain types of
competitor responses –
e.g., whether or not they’ll
match new pricing.
11. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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Categorizing Uncertainty
‚A Range of Futures‛
Examples of Level Three
Uncertainty
Tools for Level Three
Uncertainty
Traditional Tools plus:
•Scenario-planning
exercises
•Game theory
•Latent demand market
research techniques
•Systems dynamics
models
•Real Option Value
techniques
Decision-making “model”:
Complete description of a representative set of scenarios.
Utilize qualitative decision analysis.
•Demand for new products
and services.
•Automaker launches a
new vehicle.
•U.S. Cellular®
investments in next-
generation network
equipment.
12. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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Categorizing Uncertainty
‚True Ambiguity‛
Examples of Level Four
Uncertainty
Working backward to what
you would have to believe
to support a given strategy.
• Analogies and
reference cases
• Management flight
simulators
Tools for Level Four
Uncertainty
?
Decision-making “model”:
Tools designed to yield a set of ‚what you would have to believe
statements‛ w/ supporting analogies, reference cases, and key indicators.
Decision-making relies upon ‚getting comfortable with what you would
have to believe‛.
•The outcomes of major
technological, economic,
or social discontinuities.
•Early e-commerce
investments.
•Long-term investment
value of alternative
technologies.
13. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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When a wireless carrier like U.S. Cellular® evaluates a next-generation
technology investment, it must address the following key risks and
uncertainties:
Can’t adequately
address all of
these uncertainties
using only level
one tools.
• Likely technology decisions of competitors;
• Device evolution and associated customer demand;
• Future bandwidth requirements and the likelihood of being able
to acquire it;
• Content evolution (i.e., new applications) along with associated
customer demand;
• Associated capital and opex costs for all of the above.
14. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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Expanded Mindset and Enhanced Perspective
…..that is, a better understanding of the challenge along with
its potential risks leading to better preparation and/or
solutions .
(even more likely and arguably, more important)
What are the benefits of using this expanded set of tools?
Improved Analytical Accuracy
(likely)
15. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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A
B
C
?
Where was McKinsey’s focus when they were providing
AT&T with a future forecast of wireless devices?
Mindset
Prediction
16. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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What if McKinsey’s prediction had gone like this:
“Our best forecast suggests 900,000 customers by 2000.”
Suggesting level
one uncertainty
“But, that’s from a range of between 250,000 and
10,000,0000 customers.”
Suggesting level
three uncertainty
17. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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Part II: How does identifying uncertainty help
me make the right decision?
So what is a good decision and how do we
know we’ve made one?
The “right” decision versus a “good” decision.
18. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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What Makes a Decision a Good Decision?
Bob spends his monthly paycheck on Lotto instead of
paying his mortgage…then he hits the jackpot.
Laura, in an effort to improve her cardiovascular
health, goes out for a jog. 5 minutes into her run, she
sprains her ankle.
Example 1:
Example 2:
……good decision or bad decision?
……good decision or bad decision?
19. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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Decisions Versus Outcomes
Decision
Good Bad
GoodBad
Outcome
Bob spends his
monthly paycheck
on Lotto instead
of paying his
mortgage…then
he hits the
jackpot.
Laura, in an effort
to improve her
cardiovascular
health, goes out for
a jog. 5 minutes
into her run, she
sprains her ankle.
Good decisions don’t guarantee good outcomes…but they increase their likelihood.
Bad outcomes don’t invalidate good decisions.
Good decision-making isn’t actually about the outcome – it’s about the quality of
the decision.
20. ABC
U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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What Makes a Decision a Good Decision?
The more we tend to judge decisions by outcomes, the
more we remain in
“Prediction Mode”
i.e., using your time and resources in an effort to validate
a likely outcome.
But high uncertainty requires that you devote appropriate
time and resources to
“Strategic Decision Mode”
i.e., how to ensure good decision-making given high
uncertainty.
21. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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What Makes a Decision a Good Decision?
Prediction Mode tends
to keep you here
…… when your focus may
need to shift this way
A
B
C
?
22. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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What Makes a Decision a Good Decision?
So if outcomes are not what you focus on to ensure a
good decision, what do you focus on?
23. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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1. Appropriate
Frame
3.
Meaningful, Rel
iable
Information
4. Clear
Values &
Trade-offs
5. Logically
Correct
Reasoning
2.
Creative, D
oable
Alternatives
6. Commitment
to Action
Decision
Quality
Strategic Decision Group’s Decision Quality Checklist
24. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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Decision Quality Checklist
Achieving quality in each of these six elements produces quality in the overall decision.
1. Appropriate Frame
• Clear Purpose; Defined Scope; Conscious Perspective. Critical for building
confidence throughout the rest of the process.
2. Creative, Doable Alternatives
• Creative; Achievable; Significantly Different; Coherent; Compelling; Complete – has
value-creation potential been fully explored?
3. Meaningful, Reliable Information
• Judge the quality of available information before plunging into evaluation.
4. Clear Values and trade-offs
• Trade-off between long-term and short-term results; Trade-off between risk and
return. Is there a shared understanding of what we want? – Must be clear on
strategic objectives, company values, etc.
5. Logically Correct Reasoning
• Judging the quality of the reasoning indicates whether the evaluation should be
refined.
– Opportunities to evaluate risk.
6. Commitment to Action
• Judging the quality of commitment to action reveals the effectiveness of the decision-
making process.
25. ABC U.S. Cellular® Proprietary and Confidential – Strategic Analysis Group
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End