The document outlines an agenda for a scenario planning workshop, including introductions to scenario planning, exercises analyzing a case study and developing scenarios, and presentations. It discusses learning objectives of gaining experience with scenario planning and understanding trends. The schedule covers lectures on scenario planning and a case study, and group work developing scenarios and presentations.

1. Scenario Planning
MBA in Executive Format
Stockholm School of Economics
Robin Teigland
robin.teigland@hhs.se
www.knowledgenetworking.org
www.slideshare.net/eteigland
Robinteigland
January 2014

2. Who am I? (LinkedIn Inmaps)
Industry
Research
SSE
Stanford
Wharton
SSE MBA
McKinsey
Exec Ed

3. One of my favorite hobbies
Dec 2014
3

4. Learning Objectives


To experience the process and challenges of
scenario planning and its strengths and
weaknesses as a technique for assessing and
anticipating the future
To gain an understanding of political, economic,
sociological, technological, environmental, and
legal trends and their interrelationships
4

5. Schedule

Thursday afternoon




Lecture: Introduction to scenario planning
Groupwork: UPS Case
Guest Lecture: Mats Lindgren, Founder and CEO, Kairos
Future, and Author of Scenario Planning, Palgrave
Macmillan
Friday morning


Groupwork: Scenario planning
Group presentations and discussions
5

6. "...when the rate of change
outside an organization is
greater than the rate of change
inside, the end is near...."
Jack Welch…

7. Increasing pace of change

From 1920s to 2010s


From 2000 to 2010


Average lifespan of S&P 500 company fell from 67
years to 15 years
40% of companies on Fortune 500 list replaced
Predictions



In next few years, 70% of Fortune 1000 companies
replaced
By 2020, >75% of S&P 500 companies we do not know
today
By 2025, >45% of Fortune 500 from emerging markets
Fast Company, McKinsey & Inc

8. Did You Know: Shift Happens
http://www.youtube.com/watch?v=cL9Wu2kWwSY&feature=search
1. What trends do you recognize?
2. How are these trends affecting you and
your organization?
Note – This video is from 2008. Notice how
much has changed since then

9. Kurzweil
9

10. 10 jobs that did not exist 5 years ago
1. iOS developer
2. Android developer
3. Zumba instructor
4. Social media assistant
5. Data scientist
6. UI/UX designer
7. Big data architect
8. Beachbody coach
9. Cloud service specialist
10.Digital marketing specialist
http://www.dn.se/ekonomi/tio-jobb-som-inte-fanns-for-fem-ar-sedan/
10

11. How is your organization‟s peripheral vision?
Strength of Capability
(strategic thinking, culture,
configuration, knowledge
management)
Need for
Peripheral
Vision
(complexity and
volatility of
environment)
High
Low
Vulnerable
(myopic)
Focused
(laser-beam)
Low
Schoemaker, Scanning the periphery
Vigilant
(20/20)
Neurotic
(ADD)
High

12. Opportunities in weak signals
Domain
Opportunities in
Periphery
Who Saw It
Who Missed It
Technological
Digital revolution
Apple and iPod
Music industry
White LED lighting
LED companies
Light bulb manufacturers
Open-source software
Linux, IBM
Microsoft and Sun
Microsystems
CD-ROM encyclopedias
Microsoft
Encyclopedia Britannica
Rapid spread of GSM
Nokia
Iridium
Overnight package delivery
FedEx, UPS
USPS, United Airlines
Search engine potential
Google
Microsoft
Discount point-to-point airlines
Southwest, Ryanair and
EasyJet
United, Delta, Lufthansa
Sports and New Age drinks
Snapple, Gatorade
Coke, Pepsi (initially)
Popularity of reality shows
Reality show producers
Game shows
Age compression and demand
for more sophisticated dolls
Bratz
Mattel (Barbie)
Generic AIDS drugs in Africa
Indian pharmaceutical
companies
Major global pharma companies
Social discontent in Venezuela
Hugo Chavez
Establishment (PDVSA)
Role of “exurbs” in changing
US voter patterns
George Bush and Karl Rove
John Kerry
Economic
Societal
Political
Schoemaker: http://www.youtube.com/watch?v=6aLvCVL6bGw

13. Why do organizations
get blindsided?
13

14. Why do organizations get blindsided?
1. Reactive leadership
 Narrowed focus on current business
 Lack of curiosity about the periphery
2. Strategic planning process
 Inside out rather than outside-in
 Fear of cannibalization
3. Inward looking culture
 No willingness to listen to scouts
4. Limited information sharing
 Across organizational boundaries
5. Organizational configuration
 Limited windows on the larger world
Schoemaker

15. http://www.youtube.com/watch?v=vJG698U2Mvo
15

16. Why think about the future?
All our knowledge is about the past, but all
our decisions are 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.

17. “I think there‟s a world market for
maybe five computers.”
Thomas Watson, Chairman of
IBM, 1943
“There is no reason
anyone would want a
computer in their home.”
Ken Olson, President,
Chairman and Founder of
Digital Equipment
Corporation, 1977
“Heavier-than-air flying
machines are impossible.”
Lord Kelvin, President, Royal
Society, 1895
17

18. So, how can we prepare for the future?
18

19. From controlling risk to navigating
uncertainty
Schoemaker: http://www.youtube.com/watch?v=6aLvCVL6bGw
19

20. How can we look into the future?

Forecast


Vision


How we think the future will be
How we want the future to be
Scenario

What the future can be
???
?
……. Scenarios: More pictures of the future
20

21. Ranges of usefulness
U
Uncertainty
F
S
H
Predictability
Forecasting
Scenario planning
Distance into “the future”
Adapted from K. van der Heijden
“Hoping”
t

22. Scenario planning




It is a method of preparing for the future
regardless of what happens.
But not a vehicle for predicting the future.
It helps make sense of an uncertain future and
enable better decisions.
Also, a tool for collective learning in organization
22

23. Types of futures

Possible - “might” happen

Plausible – “could” happen

Probable - “likely to” happen

Preferable - “want to” happen
Conway 2003
(future knowledge)
(current knowledge)
(current trends)
(value judgments)

24. Types of futures
Possible
“Wildcard”
Scenario
Plausible
Probable
Preferable
Today
Time
Conway 2003

25. 25

26. UPS Case – Prepare 10 min presentation





What are the strengths and weaknesses of scenario
planning?
What is your evaluation of UPS‟s 1997 scenario
planning exercise? Its Horizon 2017 planning
exercise? How do the two efforts compare?
What are the other key elements of UPS‟s approach to
strategic planning? In particular, what is your evaluation of
the UPS Charter? The Centennial Plan? The Strategy Road
Map?
Why was John McDevitt put in charge of “strategic
integration?” Should he remain in that role?
How does UPS‟s strategic planning process compare with the
approach at your organization?
26

27. Why scenario planning?

Expands strategic thinking



Promotes motivation and creative thinking



More possible futures imagined and analyzed
Uncovers inevitable and near-inevitable
scenarios
Protects against groupthink
Challenges conventional wisdom
Can be used as a management/
communication tool
Holde
27

28. How to conduct scenario planning?

Stage 1: Orientation - what is key focal issue?


Stage 2: Exploration - what are the driving forces?




2x2 matrix based on two axes of critical uncertainties
Four plausible, alternative scenarios and their characteristics and narratives
Stage 4: Options – What are the robust strategies?


Trends that likely to affect, influence, and shape key focal issue (PESTEL),
predetermined trends and uncertainties
Uncertainties that most likely to define or significantly change future ranked by
uncertainty and importance
Stage 3: Scenarios - What scenarios build the framework?


Important long-range consequences for organization
Implications of scenarios for key focal issue and organization
Stage 5: Integration - What are the early warning signals?

Leading indicators and scenarios used to evaluate strategic options
Note on Strategic Planning, HBSP
28

29. Short Scenario Planning Exercise (2 hours)
Stage
End Product
Time
Total
1. Orientation
• Big question and time dimension
15 min
15 min
2. Exploration
• Driving forces (PESTEL)
• Ranking of critical uncertainties
20 min
15 min
35 min
50 min
3. Scenarios
Creation
• Scenario framework
• Characteristics and narratives that
describe scenarios
15 min
25 min
65 min
90 min
4. Options
Consideration
• Strategic implications and potential actions
20 min
110 min
5. Integration
• Early warning signals
• Actions to communicate results to
organization
10 min
120 min
Adapted from Note on Strategic Planning, HBSP
29

30. Preparation for tomorrow (Stage 1)
Individually…

Review readings and course slides
In your group…

Choose an organization for the scenario planning exercise



Start discussing what is the “Big Question” for the organization (Stage 1)?


E.g., new product/service, new market, new business model
What is the time horizon?


Should be for the organization of one of the group members.
For what part of the organization is this? E.g., whole organization, specific
division/unit, geographical location, department?
Short enough to create probable scenarios but long enough within which
important changes will occur
What elements of the current situation are important?

Strategy, competitors, technology?
30

31. Stage 1: “Big Question”

Broad yet strategic query serving as anchor for
scenarios


Critical to future of unit/organization now
Often emerges from today‟s major challenges



“What keeps you up at night?”
“What one question would you ask a real psychic?”
Choose “horizon year” as distance into future that
scenarios will extend


Short enough that probable, but long enough for impact
The further out – the greater suspension of disbelief (the
“that won‟t happen” reaction)
Conway 2003
31

32. Examples of the “Big Question”








Should we introduce a completely new product or
service?
Should we retain our current “value proposition”?
Should we integrate our various businesses so they
contribute more value to our organization?
Does our R&D need redirecting?
Should we buy a certain competitor?
Should we enter (or exit) a geographical market?
What competences do we need in the future?
How is our competitive advantage affected by
developing events?
32

33. Schedule

Thursday afternoon




Lecture: Introduction to scenario planning
Groupwork: UPS Case
Guest Lecture: Mats Lindgren, Founder and CEO, Kairos
Future
Friday morning


Groupwork: Scenario planning
Group presentations and discussions
33

34. How to conduct scenario planning?

Stage 1: Orientation - what is key focal issue?


Stage 2: Exploration - what are the driving forces?




2x2 matrix based on two axes of critical uncertainties
Four plausible, alternative scenarios and their characteristics and narratives
Stage 4: Options – What are the robust strategies?


Trends that likely to affect, influence, and shape key focal issue (PESTEL),
predetermined trends and uncertainties
Uncertainties that most likely to define or significantly change future ranked by
uncertainty and importance
Stage 3: Scenarios - What scenarios build the framework?


Important long-range consequences for organization
Implications of scenarios for key focal issue and organization
Stage 5: Integration - What are the early warning signals?

Leading indicators and scenarios used to evaluate strategic options
Note on Strategic Planning, HBSP
34

35. Stage 2: Building blocks for scenarios
Drivers of change
Key uncertainties
Basic trends
Rules of interaction
Multiple scenarios
Schoemaker

36. Macro
environment
PESTEL
International/
national
economy
Politics and
government
Industry
Social and
Demographic
structure
Legal
structure
Company
Environment
Technology
36

37. PESTEL – A closer look

Political

















Population demographics
Income distribution
Social mobility
Lifestyle changes
Attitudes to work and leisure
Attitudes to consumerism
Levels of education
Changes in values/attitudes
Education conditions
Work environment conditions
Health conditions
Environmental





Ecology
Pollution conditions
”Green” energy
Energy conservation
Waste handling
Economic







Socio-cultural


Global, regional, and national political
development (administration, political
parties)
Taxation policy
Foreign trade regulations
Labour market politics
Government stability




Technological







Business cycles
GNP trends
Interest rates & Exchange rates
Money supply
Inflation
Unemployment
Wage level
Private consumption and disposable
income
Public finances
Energy availability and cost
Government spending on research
Government and industry focus of
technological effort
New discoveries/development
Speed of technology transfer
Rates of obsolescence
New patents and products
Legal



Development in price and competitive
legislation
Labour market legislation
Product safety and approvals
37

38. Some search tips

Global scenarios for 2025




Futures studies organizations





Shell International Limited
U.S. National Intelligence Council
World Economic Forum
Decision Strategies International
Institute for the Future
Kairos Future
McKinsey Global Institute
Other tips


Blogs, wikipedia, slideshare, twitter
Search words: scenario, foresight, trend, trendspotting,
trendwatching, future studies, institute for future

39. But take a critical perspective of your sources

Author and authority



Accuracy of research and data collection



Author credentials?
Publisher credentials?
Choice of method?
Data collection?
Accuracy and objectivity of document



Are trends, findings supported by data, references?
Degree of objectivity?
Logical conclusions?
http://www.qou.edu/english/scientificResearch/eLearningResearchs/developingACritical.pdf
39

40. Stage 2: Driving forces
For the timeframe of your focal issue…

Brainstorm list of PESTEL trends that could impact focal issue
Be specific as well as give a direction for each trend, ie a hypothesis on a
direction
Hi
Certain &
Critical
 Evaluate the identified trends.
Important
Uncertainties
Impact

How predictable?

Degree of impact on focal issue?
Lo
Lo
Hi




Uncertainty
What are the Certain & Important trends?
What are the Critical Uncertainties?
Which 4-5 Critical Uncertainties have the highest uncertainty
and highest impact?
Adapted from Lindgren & Bandhold 2009
40

41. How to conduct scenario planning?

Stage 1: Orientation - what is key focal issue?


Stage 2: Exploration - what are the driving forces?




2x2 matrix based on two axes of critical uncertainties
Four plausible, alternative scenarios and their characteristics and narratives
Stage 4: Options – What are the robust strategies?


Trends that likely to affect, influence, and shape key focal issue (PESTEL),
predetermined trends and uncertainties
Uncertainties that most likely to define or significantly change future ranked by
uncertainty and importance
Stage 3: Scenarios - What scenarios build the framework?


Important long-range consequences for organization
Implications of scenarios for key focal issue and organization
Stage 5: Integration - What are the early warning signals?

Leading indicators and scenarios used to evaluate strategic options
Note on Strategic Planning, HBSP
41

42. Stage 3: Build scenario framework

Test 4-5 most Critical Uncertainties in pairs in scenario
framework


Must be very low correlation between pair of uncertainties
Develop characteristics for each scenario
Uncert A
Scenario 1
Scenario 2
Scenario 3
Scenario 4
Uncert
B
Uncert A
Uncert
B
42

43. Requirements of each scenario






Unlike the present but likely and arguable
Internally consistent yet distinct
Relevant to the issue or question of interest
Tailored to company
Recognizable from early and weak signals of
change
Challenging as it contains some elements of
surprise or novelty in directions where
organization‟s vision needs to be stretched
Adapted from Miesing & Van Ness 2005
43

44. When writing scenario narratives…
Plausible, consistent stories describing the path and
environment towards the End State of the scenario framework.
 A story needs a title, beginning, middle, and an end.
 The difference in scenarios should be clear and the names are
an important part of aligning them to different worlds.
 A small set of variables will be identical in all scenarios.
 Key variables should be quantified and early indicators listed.
 Summarize in scenario table to see if really different
Who does what, with whom,
when, where and why?
Adapted from Ringland 2002
44

45. 45

46. How to conduct scenario planning?

Stage 1: Orientation - what is key focal issue?


Stage 2: Exploration - what are the driving forces?




2x2 matrix based on two axes of critical uncertainties
Four plausible, alternative scenarios and their characteristics and narratives
Stage 4: Options – What are the robust strategies?


Trends that likely to affect, influence, and shape key focal issue (PESTEL),
predetermined trends and uncertainties
Uncertainties that most likely to define or significantly change future ranked by
uncertainty and importance
Stage 3: Scenarios - What scenarios build the framework?


Important long-range consequences for organization
Implications of scenarios for key focal issue and organization
Stage 5: Integration - What are the early warning signals?

Leading indicators and scenarios used to evaluate strategic options
Note on Strategic Planning, HBSP
46

47. From Scenarios to Strategy




Scenarios provide „clues‟ about what might be important
drivers of change in the future, and how those drivers
might interact and affect the organization.
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 issue….
Conway 2003

48. Strategic implications


What are the main opportunities and threats that
each scenario poses for your organization?
How well prepared are you (or can you be) to
seize these opportunities and avert or minimize
the threats?
48

49. Approaches to Strategy




Robust strategy - 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”
Conway 2003

50. “Bet the Farm” is the common default


In the absence of well-developed set of scenarios,
single-point forecasting and / or a reluctance to allow
uncertainty (i.e., 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
Conway 2003

51. From Scenarios to Decision / Strategy

Examine what could happen if these scenarios become reality, and what
that can mean to your organization.
Consider both immediate and longer-term consequences for your organization
for each of the scenarios.

What are the main opportunities and threats each scenario poses for your
organization?

List contingencies that should be put in place now to deal with these scenarios.

Develop a robust strategy that is resilient and viable regardless of which scenario
actually does occur.
Consider the following:

Given these possible futures, what is your overall assessment of the
organization‟s strategy?

Where is your strategy vulnerable? What major modifications do you recommend
to the strategy? Will you be flexible to change this strategy in response?

How will you know which scenario is actually unfolding? What are the “flash
points” or “sign-posts” (either metrics or events)? Which key indicators must
occur for that scene to become reality?

When should your vision change in response to environmental shifts?


51

52. 52

53. How to conduct scenario planning?

Stage 1: Orientation - what is key focal issue?


Stage 2: Exploration - what are the driving forces?




2x2 matrix based on two axes of critical uncertainties
Four plausible, alternative scenarios and their characteristics and narratives
Stage 4: Options – What are the robust strategies?


Trends that likely to affect, influence, and shape key focal issue (PESTEL),
predetermined trends and uncertainties
Uncertainties that most likely to define or significantly change future ranked by
uncertainty and importance
Stage 3: Scenarios - What scenarios build the framework?


Important long-range consequences for organization
Implications of scenarios for key focal issue and organization
Stage 5: Integration - What are the early warning signals?

Leading indicators and scenarios used to evaluate strategic options
Note on Strategic Planning, HBSP
53

54. Monitoring for early warning signals
B
Cycle 36
Cycle 25
Cycle 3
C
Cycle 2
Cycle 1
A
2004
Year 1
Monitoring helps project the
long term mean towards one
scenario and also the shorter
term variations/disruptions in
individual forces
Schoemaker
D
Strategic Decision Point &
Option Execution
2014

55. How to conduct scenario planning?

Stage 1: Orientation - what is key focal issue?


Stage 2: Exploration - what are the driving forces?




2x2 matrix based on two axes of critical uncertainties
Four plausible, alternative scenarios and their characteristics and narratives
Stage 4: Options – What are the robust strategies?


Trends that likely to affect, influence, and shape key focal issue (PESTEL),
predetermined trends and uncertainties
Uncertainties that most likely to define or significantly change future ranked by
uncertainty and importance
Stage 3: Scenarios - What scenarios build the framework?


Important long-range consequences for organization
Implications of scenarios for key focal issue and organization
Stage 5: Integration - What are the early warning signals?

Leading indicators and scenarios used to evaluate strategic options
Note on Strategic Planning, HBSP
55

56. Prepare a max 10 min presentation
Some elements to include…






Key focal issue and time horizon
Critical uncertainties that most likely to define or
significantly change future ranked by uncertainty and
importance
Scenario framework with four scenarios and
accompanying narratives
Implications of scenarios for key focal issue and
organization
Early warning signals
Next steps – Communication in organization?

57. Sources and readings


















A Note on Scenario Planning, Harvard Business School.
Strategic Planning at UPS, Harvard Business School Case.
Six Rules for Effective Forecasting, Saffo, P. Harvard Business Review, 2012.
The Current State of Scenario Development: An Overview of Techniques, foresight, 2007.
Read about the PESTEL analysis (also known as STEEP, PESTLE, PEST, STEP) framework on the internet, e.g., http://pestelanalysis.com/.
Scenario Planning: The Link between Future and Strategy, Lindgren, M. & Bandhold, H. Palgrave Macmillan.
Eyes Wide Open: Embracing Uncertainty through Scenario Planning, July 22, 2009 in Knowledge@Wharton,
https://biblio.ugent.be/publication/1081542/file/1081543.pdf.
Getting into Your Competitor‟s Head, H. Courtney, J.T. Horn, & J. Kar, McKinsey Quarterly, 2009, 1, http://bit.ly/ReMZ1X.
The Ambidextrous Organisation, J. Birkinshaw. AIM Report, http://bit.ly/S02Gen.
Scenario-based Strategy Maps, F. Buytendijka, T. Hatch, & P. Michel, Business Horizons, 2010, 53, 335-347, http://bit.ly/Sm5srs.
The Black Swan: The Impact of the highly Improbable, Taleb, N. Random House Publishing Group.
Minitrends: How Innovators & Entrepreneurs Discover & Profit From Business & Technology Trends: Between Megatrends &
Microtrends Lie MINITRENDS, Emerging Business Opportunities in the New Economy. Vanston, J. H. & Vanston, C. Technology Futures.
Trends in Connectivity Technologies and Their Socio-economic Impacts, J. Cave, C. Van Oranje, R. Schindler, A. Shehabi, Ph-B.
Bruscher, N. Robinson, Final report of the study: Policy Options for the Ubiquitous Internet Society, For DG Information Society and
Media, 2009, http://bit.ly/RuEmyk.
Foundations of Futures Studies, History, Purposes, and Knowledge - Volume I, W. Bell. New Jersey: Transaction Publishers.
Anatomy of a Trend. H. Vejlgaard. McGraw-Hill.
The Trend Forecasterʼs Handbook. Martin, R. Laurence King Publishers.
The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economics, Society
and Nations. Surowiecki, J. Anchor Books.
Additionally, you should regularly read strategy and future-related articles in publications such as the Wall Street Journal, Business
Week, Forbes, Wired, etc., as well as on online sites and blogs such as Mashable, Six Pixels of Separation, etc. I also encourage you to
use Twitter applications, such as Tweetdeck or Hootsuite, and groups/online forums such as those on Facebook and LinkedIn, to follow
strategy-related topics.
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