‘Scenario planning, Formulation, Implementation and Effects:
A review of best theory and practice’
by
George Konstantinou Lekeas,
BSc in Mathematics
Dissertation submitted in partial fulfilment for the Degree of
Master of Science in Engineering Business Management
Department of Engineering University of Warwick
September 1999
To my parents,
Constantine and Athina,
who devoted their lives
to make me
a better person...
Abstract
i
ABSTRACT
The topic of this dissertation is scenario planning; it is a relatively new technique since it became popular after the oil crisis that took place in seventies. We will be looking at the formulation of scenarios- presenting the most widespread methodologies, the implementation of these methodologies- the way those are applied in organisational settings will be discussed, and the effects on organisations. The main aim of this project, however, is to assess the suitability of scenario planning as an organisational planning tool; in addition, we will look at the three major schools of thought for scenarios and decide on which one of them delivers betters results. In order to achieve this objective an in-depth literature review was conducted, both primary and secondary, and questionnaires were sent out to a number of big commercial companies as well as to consultancy companies. Moreover, certain people whose experience in similar projects could be proven useful were conducted. The results of the research undertaken show that scenario planning is a suitable planning tool for dealing with the turbulence that characterises the present business environment; this is something we can not expect from other planning methods such as forecasts, portfolio analysis and simulation models. On the other hand, the methods mentioned before can very well be incorporated in the scenario process at specific steps ad add value to it. Simulation models offers managers a risk-free environment to test and quantify the alternative strategies and portfolio analysis can be used for an assessment of the present situation of the company at the first steps of the scenario process. Finally, forecasts have a role to play in the projection of the key elements in a scenario. On the other hand, we should not consider the implementation of the scenario methodology within a company a very easy task. In order for it to be successful, the development team should take into account a number of issues related to the number of scenarios that should be generated, the promotion and communication of them within the organisation as well as a number of other issues of equal importance. As far as the comparison of the three general scenario-generating methodologies, the conclusion is that there is no best methodology applicable in every situation. As a general rule, however, we can say that the more important a decision is for a company, the more money should be spent on the project.
Acknowledgements
ii
Acknowledgements I would like to thank my supervisor, Ms Athina Nicolaides, for her guidance
and support throughout the project. Her help has been invaluable.
I would, also, like to thank Miss Aileen Thomson for the help she offered me
in this project.
I want to express my thanks to the planning department of the Greek
Telecommunications Industry for the information they provided me with. I am,
also, grateful to all those who kindly and patiently shared with me their
thoughts about the project, helping me the most to make it better.
Declaration
iii
Declaration I hereby declare that this dissertation is the result of my own work, unless
otherwise stated, and the information contained has not previously been used
by me for any purpose.
Table of Contents
iv
Table of Contents
Abstract.................................................................................................................i Acknowledgements..............................................................................................ii
Declaration..........................................................................................................iii
Table of Contents................................................................................................iv
List of Tables.......................................................................................................xi
Table of figures.................................................................................................xiii
Table of abbreviations.......................................................................................xiv
Chapter 1
Project Introduction
1.1 Introduction........................................................................................1
1.2 Research Objectives...........................................................................1
1.3 Research Interests...............................................................................2
1.4 Research Methodology.......................................................................3
1.5 Chapter Layout...................................................................................4
1.6 Limitations.........................................................................................6
Chapter 2
Origins of Scenario techniques and Present trends
2.1 Origins of Scenario Techniques.........................................................7
2.1.1 Military History...................................................................7
2.1.2 Economic History................................................................8
2.2 Development of Scenario Planning after the Second World War......9
2.3 Present trends in scenario planning.................................................17
Table of Contents
v
2.3.1 The survey of the Conference Board Europe....................17
2.4 A movement towards new techniques for decision-making............20
2.5 Drivers of change.............................................................................23
2.5.1 Technology........................................................................24
2.5.2 Changes in societal factors................................................26
2.5.3 Global Economic Forces...................................................28
2.5.4 Political Revolutions.........................................................29
2.6 Uses of scenario planning................................................................31
2.7 Conclusions......................................................................................32
Chapter 3
The scenario process
3.1 The eight steps in a scenario process...............................................36
3.1.1 Introduction.......................................................................36
3.1.2 Task Analysis....................................................................37
3.1.3 Influence Analysis.............................................................39
3.1.4 Projections.........................................................................45
3.1.5 Grouping Alternatives.......................................................46
3.1.6 Scenario Interpretation......................................................48
3.1.7 Consequence Analysis.......................................................50
3.1.8 Analysis of Disruptive Events...........................................51
3.1.9 Scenario Transfer..............................................................53
Chapter 4
Scenario compared to other planning methods
Table of Contents
vi
4.1 Scenarios compared to forecasting..................................................56
4.1.1 The need and dangers of forecasting.................................56
4.1.2 Comparing scenarios with forecasting..............................58
4.1.3 Conclusion.........................................................................60
4.2 Scenarios compared to portfolio analysis.........................................61
4.2.1 What is portfolio analysis?................................................61
4.2.2 Comparing scenarios with portfolio analysis....................62
4.2.3 Conclusion.........................................................................62
4.3 Comparing scenarios with simulation..............................................63
4.3.1 The need and dangers of simulation..................................63
4.3.2 Comparing scenarios with computer simulation models..63
4.3.3 Integrating simulation and scenarios.................................64
4.3.4 Conclusion.........................................................................66
4.4 Conclusion........................................................................................66
Chapter 5
Methodologies for constructing scenarios
5.1 Introduction......................................................................................68
5.2 SRI....................................................................................................68
5.2.1 Background.......................................................................68
5.2.2 Method..............................................................................69
5.3 NCRI................................................................................................72
5.3.1 Background.......................................................................72
5.3.2 The Future Mapping Method............................................72
Table of Contents
vii
5.4 The Futures Group.........................................................................75
5.4.1 Background......................................................................75
5.4.2 Methodology....................................................................76
5.5 The French School...........................................................................78
5.5.1 Background.......................................................................78
5.5.2 Methodology....................................................................78
5.6 The European Commission’s Methodology....................................81
5.6.1 Background.......................................................................81
5.6.2 Methodology.....................................................................82
5.7 The Global Business Network..........................................................83
5.7.1 Background.......................................................................83
5.7.2 Methodology.....................................................................83
5.8 The Copenhagen Institute For Future Studies..................................86
5.8.1 Background.......................................................................86
5.8.2 Methodology.....................................................................86
5.9 Computer-Driven Simulations.........................................................87
5.9.1 Background.......................................................................87
5.9.2 Methodology.....................................................................87
5.10 Comprehensive Situation Mapping (CSM)....................................88
5.10.1 Methodology...................................................................88
5.11 Battelle’s Basics.............................................................................88
5.11.1 Methodology...................................................................88
Chapter 6
Table of Contents
viii
Setting up the scenario agenda in a company
6.1 Introduction......................................................................................91
6.2 Overview..........................................................................................92
6.3 Towards the scenario agenda...........................................................93
6.3.1 The two players.................................................................93
6.3.2 Defining the scope of the project and getting the
information.........................................................................................................94
6.3.3 SWOT Analysis.................................................................94
6.3.4 Interviews..........................................................................97
6.3.5 Interview techniques.......................................................101
6.3.6 Interview analysis............................................................102
6.4 The scenario agenda.......................................................................103
Chapter 7
Uses of scenario planning
7.1 Introduction....................................................................................105
7.2 Scenarios in corporate planning.....................................................105
7.2.1 Introduction.....................................................................105
7.2.2 The business corporate planning strategy system...........106
7.2.3 Uses of scenarios in corporate planning..........................111
7.3 The scenario method for technology investments..........................115
7.3.1 Introduction.....................................................................115
7.3.2 The scenario method for technological decisions...........116
7.4 Customer-driven scenario planning...............................................118
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ix
7.4.1 Introduction...................................................................118
7.4.2 Customer-driven scenario planning................................119
Chapter 8
Case studies
8.1 Introduction....................................................................................123
8.2 British Airways..............................................................................123
8.2.1 Introduction.....................................................................123
8.2.2 The methodology.............................................................124
8.3 Shell............................................................................................... 130
8.3.1 Introduction.....................................................................130
8.3.2 The methodology.............................................................130
Chapter 9
Discussion on findings
9.1 Introduction....................................................................................138
9.2 Scenarios compared to forecasts and simulation............................139
9.3 Advantages of introducing scenario planning to a company.........142
9.4 Pitfalls in scenario planning...........................................................147
9.5 The scenario generating method....................................................152
9.6 Remarks on scenarios.....................................................................157
9.7 The three different ‘schools of thought’ for scenario planning......164
9.8 Further work...................................................................................167
Chapter 10
Conclusions
Table of Contents
x
Conclusions......................................................................................................169
References........................................................................................................173
Bibliography.....................................................................................................179
Appendix 1
The Brainstorming method...............................................................................185
Appendix 2
The General Electric’s planning process..........................................................190
Appendix 3
Letter to organisations......................................................................................192
Appendix 4
Letter to consultancy companies.....................................................................195
Appendix 5
Questionnaire...................................................................................................197
List of Tables
xi
List of Tables Table 1 Questions asked in the Conference Board’s survey.......................................................18
Table 2 Critical issues for incorporating forecasting in our planning system.............................22
Table 3 The four areas of change................................................................................................25
Table 4 Uses of Scenario Planning..............................................................................................32
Table 5 The eight tasks in a scenario process..............................................................................37
Table 6 Typical questions for finding solutions to problematic areas.........................................38
Table 7 Ranking system for the elements on the network matrix................................................41
Table 8 Rules for making a system succesful..............................................................................44
Table 9 Questions for constructing the consistency matrix.........................................................47
Table 10 Steps for choosing the ‘best’ scenarios.........................................................................48
Table 11 Factors that are assessed during the scenario analysis................................................. 50
Table 12 The four categories of products according to the BCG matrix.....................................61
Table 13 Benefits from using simulation in the scenario process...............................................64
Table 14 Steps for integrating simulation and scenarios.............................................................65
Table 15 Guidelines for simulating scenarios successfully.........................................................66
Table 16 The three ‘schools of thought’ of scenario analysis.....................................................68
Table 17 Advantages of the SRI method.....................................................................................69
Table 18 The two basic principles of the Future Mapping method.............................................73
Table 19 The terminology used in the Future Mapping method.................................................73
Table 20 Stages in a scenario project according to the Future Group’s methodology................76
Table 21 The three stages in a scenario project according to the French School........................79
Table 22 Levels of influence.......................................................................................................79
Table 23 The GBN methodology................................................................................................84
Table 24 The Battelle’s methodology.........................................................................................89
Table 25 Parts of a SWOT analysis............................................................................................ 95
Table 26 The three categories of weaknesses..............................................................................96
Table 27 Rules for having a succesfull interview........................................................................98
List of Tables
xii
Table 28 Three questions to ask for formulating the business’s strategy..................................107
Table 29 Eught factors for evaluating our strategy....................................................................108
Table 30 The process followed in project planning...................................................................110
Table 31 Rules associated with dimensions...............................................................................116
Table 32 The eight steps of the brainstorming method..............................................................186
Table 33 Rules associated with the brainstorming method.......................................................188
Table of figures
xiii
Table of figures Figure 1 The dangers of forecasting...........................................................................................34
Figure 2 A typical network matrix..............................................................................................40
Figure 3 System Grid...................................................................................................................42
Figure 4 Effects of disruptive events...........................................................................................52
Figure 5 Projected vs Real Demand for Ships.............................................................................58
Figure 6 The SRI Approach.........................................................................................................70
Figure 7 From scenarios to strategy.............................................................................................72
Figure 8 The Futures Group methodology...................................................................................76
Figure 9 Influence/ Dependence diagram....................................................................................80
Figure 10 The Battelle’s methodology........................................................................................89
Figure 11 The five levels of corporate planning........................................................................109
Figure 12 The driving forces......................................................................................................127
Figure 13 Schematic illustration of the ‘Wild Gardens’ scenario..............................................128
Figure 14 Schematic illustration of the ‘New Structures’ scenario...........................................128
Figure 15 The major oil exporters.............................................................................................133
Figure 16 The General Electric’s planning process...................................................................190
Table of Abbreviations
xiv
TABLE OF ABBREVIATIONS
SRI Stanford Research Institute MIT Massachusetts Institute of Technology U.S. United States G.E. General Electric B.C.G Boston Consulting Group NCRI Northeast Consulting Resources
Inc. GBN Global Business Network UPM Unified Planning Machinery
Chapter 1- Project Introduction
1
Chapter 1
Project Introduction
1.1 Introduction
This chapter will introduce the objectives of the project, as well as the
research interests. In addition, the research methodology, which was followed
for the successful completion of it will be discussed and analysed. Finally, there
is a layout of the project’s contents.
1.2 Research Objectives
The first objective of the project is to ‘bring to light’ all the available
resources for this subject in order to have a clear view for it. Scenario planning,
despite the fact that as a concept it exists since the Roman times, is a relatively
new method with respect to its implications on organisations. In order to
achieve that objective a literature review, both primary and secondary, was
conducted in the field of scenario planning,.
Once this is done, the second objective is to identify and present how
scenario planning is used in practice. This includes both the general scenario
approach method as well as the various methodologies derived from it in order
to develop scenarios. The several techniques used in each stage of the scenario
approach method will also be presented.
Chapter 1- Project Introduction
2
The third objective concerns the ‘ practicalities’ of scenario planning; this
refers to the process before implementing scenarios in organisational settings. It
involves the formulation of the scenario team as well as the procedure that
needs to be followed during the scenario workshops.
Apart from the theory on scenario, it is also important to assess its
implications in industries. That approach will enable us to draw conclusions
upon the relationship between theory and practice. This will be done by the use
of relevant case studies.
Finally, it is certainly beneficial to reach a conclusion about the suitability of
scenario planning as a tool for organisational planning. In addition, companies
should be aware of any pitfalls involved in this approach; these will be
discussed as well.
1.3 Research Interests
The first research interest focuses on the comparison of the various
techniques that have been developed and used by various universities and
consultancy companies, in terms of the ‘schools of thought’ they represent. It
would be, certainly, useful to compare as many techniques as possible in the
context mentioned above and draw conclusions based on these comparisons.
Another important area that attracts our attention is the area of pitfalls for the
companies. It is many times the case that the theory seems very simple but in
practice the opposite is proven. We will, therefore, be identifying those pitfalls.
Chapter 1- Project Introduction
3
1.4 Research Methodology
The research that was followed for the project is divided into four parts:
primary literature review, secondary literature review, questionnaires and
personal contacts. These are explained in more details below.
As far as the primary literature review is concerned, this term is used in order
to describe all literature available in public domain. A search in the university’s
library was conducted; the research was extended to other universities’ libraries
as well. Moreover, a search was conducted on the World Wide Web; this
includes web sites available to the public as well as certain databases- some of
them requiring subscription in order to get the information.
With respect to secondary literature review, this includes sources of
information not available in the public but someone has to get in touch with
companies in order to get them I managed to get some information from the
Greek Telecommunications Organisation; this organisation is currently
undergoing a scenario-planning project.
It is always useful to learn from other people’s experience from similar
projects. I have conducted a number of people, both academics and from
companies, who might have been involved in scenario planning projects in the
past (Appendices III & IV). The purpose those projects were conducted for
varied from case to case- it could be, for example, marketing or corporate
planning.
Chapter 1- Project Introduction
4
The final form of research that I used was the formulation of certain
questionnaires (Appendix V). Those questionnaires included questions on the
length of a typical scenario project the company has undertaken as well as on
their experiences from this procedure.
1.5 Chapter Layout This thesis consists of nine chapters, the content of which is briefly described
below.
The first chapter is an introductory chapter that refers to the objectives of this
study; these are clearly stated along with the research interests. In addition, a
description of the research methodology is included.
The second chapter deals with the ‘ history’ of scenario planning. It traces its
origins back to the Roman times and it describes its progress after the end of the
Second World War. Likewise, the present trends associated with this
methodology are presented along with those factors that are responsible for the
rapid changes taking place, making scenario planning a very popular technique.
A very strong trend was that forecasting is the method an organisation should
use as a tool for planning; in fact, it was common belief that the more
sophisticated a model is the more appropriately it describes the situation. The
third chapter deals with that belief by comparing scenario planning with
forecasting as well as with portfolio analysis and simulation.
Once the need and the usefulness of scenario planning are established, we
need to define the scenario approach and describe the eight steps involved in
Chapter 1- Project Introduction
5
that. The fourth chapter does that serving, in parallel, as an introduction for the
next chapter.
The various methodologies that are used by certain institutions and
consultancy companies are the subject of the fifth chapter. A distinction is made
between the three categories- intuitive logics, trend-impact analysis and cross-
impact analysis- that the methodologies can be classified into in broad terms;
each methodology is then, in turn, described.
The next step is to move from the theory to the ‘practicalities’ of the method;
this is done in the sixth chapter. In this chapter, the procedure for undertaking a
scenario project, from the formulation of the team in charge of the project to the
organisation and implementation of the workshops, is described.
As far as the areas within a company that scenario planning is applied, a
comprehensive list should include almost all its departments; from the
marketing and sales department to the R&D and planning departments. The
seventh chapter gives us a ‘flavour’ of the applications of scenario planning. In
particular, it deals with three of them; the use of scenarios in corporate
planning, for technology-related decisions and for customer-driven planning.
The eighth chapter is wholly devoted to case studies in order for us to be able
to compare theory with practice. The cases of British Airways, Shell and the
British Telecommunications Organisation are presented and examined.
It is the case, beyond any doubt, that scenario planning can give to a
company many advantages; on the other hand it is often misused. These topics
are assessed in the ninth chapter along with the pitfalls for companies when
Chapter 1- Project Introduction
6
using this methodology. Moreover, a general methodology is derived and
certain recommendations are made for the way scenarios should be developed.
A summary of the work done can be found in the tenth chapter, which is the
final of this dissertation. This chapter will also include the conclusion that was
reached along with the recommendations that were made in the previous
chapter.
1.6 Limitations
With respect to the limitations of the project these were, in essence, two. The
first one was that no replies were received from the companies to whom the
questionnaires were sent. This dispossessed us from information on the insights
of scenario planning as experienced by companies in real life.
Moreover, a scenario planning project is, as we will see, a lengthy task. Its
duration varies, but in most of the times a period of one year or more is needed.
This did not allow me to set up a case study on my own, but I had to rely on
case studies already published in scientific magazines and journals.
Chapter 2-Origins of Scenario techniques & Present trends
7
Chapter 2
Origins of Scenario techniques and Present trends
2.1 Origins of Scenario Techniques
Seneca’s scripts (as cited in Ute Von Reibnitz, 1988) is the first source of
information when attempting to trace the origins of scenario techniques through
time. ‘It is more important to know whither events turn than to know where
they come from’ is stated in one of his writings. The latter is an indication of
how strongly his mind was occupied with possible ways in which the future can
develop. The ‘ancestors’, however, of scenarios can be found in military and
economic history.
2.1.1 Military History
The earliest indications of scenarios can be traced in Moltke’s and
Clausewitz’s writings at the fall of the eighteenth century. They were dealing
with finding ways of an army to survive and win the war; thus they came up
with proposals to attack one’s enemy at its weakest point, build upon one’s
strong points and bear always in mind the long-term objectives.
It would be useful, here, to make a distinction between strategy and tactics.
The term strategy is used in order to describe long-term plans for winning the
battle; people in the highest positions of the military hierarchy have developed
those. On the other hand, the term tactics is used to describe the actions taking
Chapter 2-Origins of Scenario techniques & Present trends
8
place during the battle; those being in the middle of the hierarchy carried out
the actions required; a distinction similar to the situation in a company.
The scenarios of this type were visionary; there was no explanation for the
way they have emerged from the present situation. They were, however,
developed in order to assist the army in reacting in a right manner to ‘strange’
situations; thus, the victory would be closer.
2.1.2 Economic History
As mentioned above, scenarios were first applied in a military context.
However at the beginning of the seventh decade of this century, we experienced
a move towards their use in business applications; these was the case since
models constructed on the basis of quantitative factors only were proved to be
wrong especially when turning points occurred. Apart from that, Shell’s success
in predicting the oil crisis- as a fact since the year was wrongly estimated-
increased the credibility of this method.
Furthermore, two groups were formed with respect to their orientation in
planning techniques; the first group had a quantitative orientation and its major
representative was the Club of Rome. The second group had a qualitative
approach with Shell being its main representative; we should mention here that
the shift towards qualitative methods took place after the ‘failure’ of
quantitative forecasting. It was then when trial-and-error approaches were
adopted with regard to qualitative planning. The group consisted of other
important institutes as well; these were the Datar Institute- the Office for
Chapter 2-Origins of Scenario techniques & Present trends
9
Regional Planning and Development in France- and the Battelle Institute in
Frankfurt.
Chapter 2-Origins of Scenario techniques & Present trends
10
2.2 Development of Scenario Planning after the Second World War
The use of models as pictures of the real world is common practice; we use,
for example, mathematical models in scheduling, where our objective is to
achieve the best allocation of resources under certain constraints. We need,
however, to make certain that ‘real life’ is represented by the model we built;
there are two requirements we should satisfy in order to achieve that. The first
one is related to the behaviour of our model to any changes either in constraints
or in the external environment; we have to make sure that these are
incorporated in our model as well as any relationships between the forces that
drive this behaviour. In addition, we need an ‘abstract model’ that will allow us
to search for evidence confirming our findings. Because of those two factors, it
is very difficult to make use of forecasting methods in order to drive our
strategic planning process; this is the case because the increased uncertainty of
real life makes the development of an accurate model that would incorporate
everything almost impossible.
Since change takes place at a very fast pace, there is a need of finding a way
in order to deal with uncertainty. Clausewitz- in eighteenth century- was among
the pioneers in this field; his suggestion (as cited in Ringland, 1998, p. 11) was
‘take an educated guess and then gamble that the guess was correct’. This is
where scenario planning ‘comes in’ in order to improve our guess before
gambling. As that, it passed during several stages after the Second World War,
which are described, in more detail, in the remaining of this chapter.
Chapter 2-Origins of Scenario techniques & Present trends
11
As mentioned before, scenario planning made ‘its first steps’ in a business
context the years after the end of the Second World War. It was then when
RAND Corporation was set up; its aim was to research new forms and ways of
weapons technology. The president of RAND, Hermann Kahn, introduced a
new technique; the technique of ‘future-now’ thinking as the term scenario
planning was not used that time. Leo Rosten was the ‘godfather’ of the
technique; the president of RAND accepted this term since it described in the
best way what the technique was about- it was emphasising the creation of a
story.
At the same time, around 1947, Stanford University was setting up its own
institution, the Stanford Research Institute (SRI). The aim of this institute was
to offer long-term planning facilities for businesses as well as science and
military consulting.
The sixth decade of our century was characterised by the idea of science
dominance. As an evidence for that, we can refer to a research carried out in
1966 in which twenty seven top scientists- a relatively small number for
drawing conclusions upon- were asked how the world would be after twenty
years to they opinion (Ringland, 1998). They gave a wide range of answers
from undersea motels and factories using nuclear power as their energy source
to the organisation of commercial trips to the moon. The total number of
predictions was three hundred and thirty five- corresponding to fifteen
predictions per person; almost all of them were proved to be wrong. We have
to note, however, that the reasons responsible for that were not only scientific-
Chapter 2-Origins of Scenario techniques & Present trends
12
political and ecological reasons, for example, blocked the expansion of nuclear
energy
In the same decade, in 1968, the SRI group undertook the task of creating
scenarios concerning US in year 2000 for the Office of Education (Ringland,
1998). A variety of methods were used and the result was the development of
five scenarios; one of them assumed that the present situation will continue- the
‘Official Future’ or surprise-free scenario whose utility will be discussed later-
and the remaining four were the possible answers to the two questions that
formed the basis for the scenarios. The first question was whether the society
would be able to control its destiny and the second one was about the nature of
the U.S. society- open or authoritarian. Likewise, work was done for the
Environmental Protection Agency (EPA). This resulted in the development of
ten to twelve scenarios for the future- certainly a big number of scenarios that
are difficult to handle; they were built around a key concept different for each
one of them, which came out of a brainstorming task- a very common method
for generating ideas (its function is explained in Appendix I).
Finally, as far as the era of sixties is concerned Professor Jay Forrester of the
Massachusetts Institute of Technology (M.I.T) used his previous work in
supply chain and demand to examine if there is any relationship between
world’s population and supply and demand (Ringland, 1998). The Club of
Rome model, which was developed afterwards, was based on that concept.
Summarising, with respect to this decade, we can see that the pioneers in
scenario planning did not have forecasting in mind. They were, rather, trying to
Chapter 2-Origins of Scenario techniques & Present trends
13
communicate to people the ‘consequences’ of growth in order to open a debate;
this was the key idea for scenarios in sixties.
Moving on to seventies, a U.S. company- General Electric- was the leader
company in planning. Its model consists of a mixture planning by corporate
staff, computer models, forms, charts and graphs in order to anticipate the
investment in business. Scenarios formed part of its planning process; the
method for constructing them involved the use of Delphi method for forming
panels that, in their turn, identified the critical variables for the case under
consideration. Trend-impact analysis as well as cross-impact analysis methods
were used afterwards in order for the interactions between critical variables and
indicators to be scrutinised. The cross-impact effects among possible
developments were assessed in a qualitative way by the use of ‘+’ or ‘-‘ signs;
the developments of different scenarios follows that procedure (a schematic
illustration of the procedure can be found in Appendix II).
Shell was another company very well known for its planning system. At the
beginning the company’s planning system was dominated by numbers and the
planning horizon was only five years (Wack, 1985a); however, Wack in 1967
outlined the need for long-term planning. A study was organised, following that
discovery, looking at the company’s future till the new millennium- further
details for that study can be found in chapter eight. The finding of that study
was that the stable environment would no longer be existing in the future;
therefore forecasting methods could not be applied. In addition, a shift would
have been made to oil producers from the Middle East; this would be
Chapter 2-Origins of Scenario techniques & Present trends
14
influencing the price heavily. This was, indeed, the case since the Yom Kippur
war begun and the embargo imposed lead to an increase in oil price. Shell,
having previously considered the problem, managed not to be heavily affected;
the company became the leader in oil industry. The latter was achieved by
introducing scenario planning in its planning process; this happened back in
1967 when Pierre Wack, the editor of a philosophical magazine, and Ed
Newland, an Argentinean with a tension towards gambling, became the leaders
of the company’s planning department. The company, after the oil embargo,
managed to become the strongest oil multinational company while before it
Shell was the weakest one.
The companies directly affected by the oil crisis first used the scenario
method; these were the oil industry and car industry. A high amount of effort
was put in the development of planning techniques, which do not have that
importance themselves as certain principles they should incorporate, that would
provide them with a ‘secure’ prediction for the future.
Scenario planning, however, achieved a wider recognition towards the end of
seventies. It was then when it was used by most of the Fortune top 1000
companies. A variety of techniques were adopted, including multiple scenarios.
It was only after the oil embargo that the vast majority of the oil companies
realised the value of scenario planning; seventy five percent of those companies
considered it as an option after they were hit by the embargo; those companies
had to go through a ‘cultural shock’ in order to adopt and accept scenario
planning.
Chapter 2-Origins of Scenario techniques & Present trends
15
This was not the case in eighties. The use of scenario techniques was
dramatically increased due to a number of reasons. A reason for that was that
the oil embargo was becoming ‘history’; as mentioned above, this was the main
reason that directed many companies towards the use of scenario planning.
Furthermore, the beginning of the decade was characterised by a recession that
led to many people made redundant- the fact that this development was not
predicted led to the mistrust of scenario. Finally, people were very often
confusing scenarios with forecasts; the latter already had a ‘bad name’ because
of their inability to predict future developments. It was because scenarios and
forecasts were considered as the same thing that the same opinion was in power
for scenarios as well. Ian Wilson (Wilson, 1990) outlines that the
disenchantment involved rather the area of strategic planing than scenarios. The
losses of big companies- like Chrysler, General Electric, Kodak, Xerox and
General Foods- contributed to that belief and a new approach to planning had to
be found. Michael Porter, for example, accepts scenarios as a tool for
understanding and recommends them as a form of sensitivity analysis. He
defines scenarios as “an internally consistent view of what the future might turn
out to be- not a forecast, but one possible future outcome”; the first of the three
principles- internal consistency- is already mentioned in this definition (as cited
in Ringland, 1998, p.24). At the same time, a number of consulting companies
have been set up offering scenario planning facilities using a variety of
methodologies which will be described in detail in the fifth chapter- we should
Chapter 2-Origins of Scenario techniques & Present trends
16
bear in mind, however, that attention should be paid to the principles rather than
the methods.
Shell, during this time, kept on being the leader in this field. A big amount of
effort has been put into integrating scenario planning with business and
strategic planning; as we will see later the scenario development team spent half
its time promoting the scenarios (Wack, 1985a). Furthermore, the company
established her leadership in using scenario planning by ‘predicting’
successfully two crucial things for the oil business; the first was that oil will
become a commodity in the future and the markets would be responsible for
setting prices- neither the companies nor the producers. A trade system was
specifically designed to cope with this development. The second very important
‘prediction’ was that oil and gas prices could drop; this enabled Shell to ‘sit in
the corner’ and wait while its competitors kept buying other oil companies.
After the drop of oil prices, Shell was able to take advantage of bargain prices
as far as the purchasing of other companies is concerned.
As far as the last decade of our century is concerned, emphasis has been
placed on strategy. The context of strategy and strategic planning are different
from those that were used in eighties. Nowadays, strategy is constantly under
review- due to the uncertainty that dominates real world- and concerns a small
number of issues- like achieving a favourable position against the competitors-
meaning something totally different from the form of operations and production
planning. In addition to that there is a trend towards smaller teams that would
be responsible for planning projects as well as the reach of an agreement
Chapter 2-Origins of Scenario techniques & Present trends
17
concerning the strategic targets between the headquarters and the members of a
corporation ; these will form the basis of the business idea that needs to be
articulated throughout the organisation (Van der Heijden, 1996).
Chapter 2-Origins of Scenario techniques & Present trends
18
2.3 Present trends in scenario planning
As mentioned above there was a shift towards strategy as being the main
issue in nineties. Scenario planning is used as a tool to facilitate companies in
formulating their strategy as well as for many other purposes, which are
mentioned later.
2.3.1 The survey of the Conference Board Europe
In order to explore further how scenario planning is used within businesses
as well as the present trends, the Conference Board Europe- part of the global
business and research organisation- carried out a survey among its members.
The questions that were asked are those in the table following.
Table 1 Questions asked in the Conference Board’s Europe survey
(Source: Ringland, 1998)
Have you used scenarios?
Was the use of scenarios useful for your organisation?
If you failed using scenarios, could you indicate the most important
reasons for that?
How much time did you spend developing the scenarios?
What did you use the scenarios for?
Did you use consultants?
Did you carry out an exhaustive analysis before getting into the
developing stage?
Chapter 2-Origins of Scenario techniques & Present trends
19
The number of companies that participated at that survey by returning the
questionnaire was twenty- a rather small number for drawing conclusions;
most of them gave a positive answer at the first question.
The use of scenarios, however, was not always followed by success. It
was a failure for a few companies and the main reasons that were identified
for that was the lack of integration of scenarios with the aims of the
company- British Airways and Shell, for example, used at the beginning
scenarios on an experimental basis- as well as the incompatibility of the
process adopted for developing the scenarios with the processes normally
used from the company.
With respect to the time that was spent for the development stage, this
was till six months in most of the cases; however it did not exceed one year.
This time should include the time needed for the preparation, the collection
of data and the communication of scenarios.
As far as the personnel involved in scenario projects is concerned, those
were both internal staff- usually from high ranks- and consultants or people
from the academia. Investment management was the major reason for their
use- however after completion only 25% reported that as the main benefit,
as scenario approach does deliver many other benefits as well. The scenario
approach was used as well for helping companies familiarise themselves
with changes in cultures, political and environmental factors. Finally, it was
used in order to assist organisations in creating a new ‘look’; that will help
them winning the ‘business war’.
Chapter 2-Origins of Scenario techniques & Present trends
20
The answer to the last question- whether exhaustive research is required
or not- the answer was neither negative nor positive; it really depends on the
case under consideration. However, in most of the cases, a considerable
amount of time needs to be spent in collecting data for studying each of the
main factors.
Finally, it is becoming a common belief as time goes by that we are going
through a period of great changes similar to the period of the oil shock back
in seventies.
Chapter 2-Origins of Scenario techniques & Present trends
21
2.4 A movement towards new techniques for decision-making Since the early days of business, forecasting was the traditional approach for
dealing with a variety of problems; operational, investment, inventory and so
forth. In order for that to being successfully achieved, a variety of techniques
were introduced; smooth and exponential average- where a weighted average
was calculated using the α factor- as well as ARIMA models are examples of
these methods. ( Makridakis, 1998: Millet, 1991: Makridakis, 1984:Makridakis,
1989: Farnum, 1989: Thomopoulos, 1980)
The techniques mentioned above have one thing in common; they are trying
to use past information in order to draw conclusions for the future. They
achieve it in a quantitative way, through a mathematical formula; this formula
is more or less complicated, ranging from a simple calculation of the average to
sophisticated recently developed statistical techniques, depending on the model.
The dominant trend, however, is that the more variables a model includes, the
better the better it is (Huss, 1988).
Someone might argue that with those ‘state-of-the-art’ statistical techniques
we do not need anything else; we should be able to predict any future trend with
a very high probability of getting it right. The opposite, however, is the truth;
despite all those developments, statistical models do not give us the whole
picture. As a result of that, they lost top managers support.
The main reason for this is that their main concern was to predict the future
with a certain accuracy, which is not what managers are asking from
forecasting; this is where scenarios come in. A scenario can assist the
Chapter 2-Origins of Scenario techniques & Present trends
22
forecasting process by ‘adding’ the long-view perspective; thus it is not only
predicting the future but it can be used as a planning tool as well revealing the
forces driving a trend. This is the area where forecasts failed to the extent that
much effort was put in improving the accuracy of the model rather than
identifying key variables. The identification of turning points, which is the most
important application, becomes extremely difficult this way.
In order for forecasting to be incorporated into planning as our main planning
procedure, we have to think of the following issues: (Huss, 1988)
Table 2 Critical issues for incorporating forecasting in our planning system
(Source: Huss, 1988)
With respect to the first point, there is a number of issues that can not be
dealt with numerically; examples of such issues include cultures, changes in
law, environmental issues and so forth. The classical trend in forecasting that
needs to be changed- this can only happen if managers go through an
‘education’ process about the dangers of forecasting- can very well be
Qualitative issues should be included in the model
The macro environment should be carefully analysed
Forecasting techniques proved to be incapable of predicting turning points
Forecasting and planning should be used as a communication tool among
departments as well
By combing forecasts we get a better result
The way that forecasts are related to decision-making needs to be improved
Chapter 2-Origins of Scenario techniques & Present trends
23
summarised in the following sentence: ‘ If you can’t count it, it doesn’t count’
(Huss, 1988).
Moreover, as far as the macro environment is concerned we have to examine
it in more depth; till now in order to develop a time series model a prediction
was made for each variable and the individual predictions were used. It is
important, however, to look for sets of those factors since they might be a better
representation of the future.
It is very difficult to predict turning points with the use of forecasting
techniques; this is the case since the ‘replication’ of the past is their main
characteristic. They are not looking at causal relationships which makes it
difficult for turning points to be predicted; a task that is difficult anyway. Shell,
on the other hand, by combining the predetermined events and the uncertain
ones, it managed to ‘predict’ the oil crisis that occurred in 1973-74; it got the
year wrong but because of the expectation of such an event business plans were
adjusted.
With respect to the last three factors, we should note that forecast should be
used as a communication tool across departments; forecasting should be done
on a common assumptions base. In addition to that more than one forecasting
techniques should be used and those techniques should be integrated in order to
get the better result out of them. The link to planning, finally, is another
important issue- since forecasts provide decision-makers only with numbers
and do not help them understand the driving forces inn order to fromulate
accordingly their plans.
Chapter 2-Origins of Scenario techniques & Present trends
24
2.5 Drivers of change While our century is approaching to its end, diverse events are taking place
considering all aspects of science. The developments in science are taking place
at a fast pace. Nowadays ‘wishful thoughts’ of previous generations now seem
more close to reality than ever. The average age, for example, would be greater,
computers will change many aspects of our lives and we will, probably, be able
in a few years time to ‘have our tea’ or go for vacations outside of this planet.
On the other hand in the field of moral values, developments are not so
encouraging. There is a constant decrease of morality and corruption cases are
more occurring more often than ever. In addition to that, wars are taking place
at all over the planet; from Bosnia to Somalia.
As a response to those developments, the United Kingdom’s Open University
(http1) conducted a survey to identify the drivers for future events. The project
took place over the last three years and involved more than one thousand big
organisations. In addition to that due to the rigorous approach followed it was
made sure that the views expressed by the people involved in the project were
formed after careful consideration and thought; something that increases the
validity of results.
Those opinions can be divided into four main categories. Those four areas-
political, economical, technological and societal factors- that are highlighted
below form the external business environment of a company and are of great
importance to the planning personnel. They will be discussed in more detail in
the remaining of this chapter.
Chapter 2-Origins of Scenario techniques & Present trends
25
Table 3 The four areas of change
(Source: http1)
2.5.1 Technology
As mentioned above, technology is the first of the four categories with
respect to the drivers of change. The trend is that technology will keep growing
offering more and more benefits to the society.
The first area of influence is that of physical resources- the development of
renewable sources of energy is part of it; the problem of availability is
practically solved since technology advancements gave us the opportunity to go
further in this area and even look for solutions to places outside the ‘borders’ of
our planet. Moreover, devices are becoming smaller and smaller; this means
that less raw materials are needed in order to manufacture them. Finally due to
the enormous growth of technology many services, the financial for example,
have totally changed, requiring less resources.
The second element of technology evolution lies in communications with
Internet becoming even more popular. This will practically eliminate any
problems created due to distances; we will be able to talk to our friends no
matter how far they are as well as doing our business without having to travel
Technology
Society development
Global Economic Forces
Political Revolutions
Chapter 2-Origins of Scenario techniques & Present trends
26
from our home or office’s desk. The simultaneous way of talking to other
people is another change emerging from the growth of communications- we
will not need to wait for ays till our mail reaches its destination; furthermore we
won’t need to posses specialised knowledge on any issue since that would be
available on the web. Finally our criteria for making friends will differ;
common interests will replace the national borders due to the ease of
communications. As a result of these people will change; we will depend
heavily on computers for everyday life tasks and we will reach a situation that
can be described from the Greek word ‘symbiosis’ with computers.
The average age, as mentioned above, will increase as a result of advances in
medical technology. This might lead to considerations for raises in expenditure
related to pensions but the truth is that since we will live longer, we will work
longer as well; new jobs created by the expansion of information technology
will be suitable for older people- since they will only involve typing some data
on the computer- and our future will be brilliant.
Space travel is our day’s ‘state-of-the art’ technology; the first trip to the
moon for tourist purposes has already been planned for the year 2015.
Moreover, we are not far from the day when space colonies will be created;
after all the technology needed has been around for many years, it is the
political will that it is missing.
Summarising, information technology, undoubtedly, has a very important
role to play, given the options that it will give us in the future. As an example,
Nicholas Negroponte in ‘Being Digital’ (as cited in Ringland, 1998, p.41) states
Chapter 2-Origins of Scenario techniques & Present trends
27
that: “Early in the next millennium your telephone won’t ring indiscriminately;
it will receive, sort, and perhaps respond to your incoming calls like a well-
trained English butler. Mass media will be redefined by systems for
transmitting and receiving personalised information and entertainment. Schools
will change to become more like museums and playgrounds for children to
assemble ideas and socialise with children from all over the world. The digital
planet will look and feel like the head of a pin.
As we interconnect ourselves, many of the values of the nation-state will give
way to those of both larger and smaller electronic communities. We will
socialise in digital neighbourhoods in which physical space will be irrelevant
and time will play a different role. Twenty years from now, when you look out
of a window, what you see may be five thousand miles and six time zones
away. When you watch an hour of television it may have been delivered to your
home in less than a second. Reading about Patagonia can include the sensory
experience of going there. A book by William Buckley can be a conversation
with him”.
2.5.2 Changes in societal factors
The development of society is the second area where changes will take place
in the near future. According to the survey, the breakdown of the community-
even the breakdown of the family- is very likely to happen. This is not
necessarily a problem; however we have to allow for some time before society
reaches a stable point.
Chapter 2-Origins of Scenario techniques & Present trends
28
The form of our relationships- both in work and everyday life- will change
dramatically. We will get in touch with other people through computer
networks and our friends may well live thousands of miles away from us. In
addition to that, this will change the way we work; our ‘working partners’ will
increase at a very fast pace. On the other hand these relationships will not last
for long; this is the case since they will not be based on any common
backgrounds.
The ‘ two-thirds’ society remains a danger; the future will probably be bright
for those who can afford adopting the new technologies; for the remaining one-
third it will be a nightmare since it will keep them away from many services
and facilities. This creates a danger of them moving outside the law borders,
which will not be a danger for most of the nations.
The second half of our century was partly characterised by the movement of
feminisation; the evidence show that it will be a dominant factor in the future
both at society and individual level. At society level we will soon experience a
change in its values whereas at individual level we will be close to the revival
of matriarchy.
Another element associated with society is the lifestyle its members adopt.
There will be a major change in the future with regard to that; each member of
the society will be able to choose the style that best fits his needs among a wide
range of choices. He will, also, be able to shift between different lifestyles very
easily.
Chapter 2-Origins of Scenario techniques & Present trends
29
The legalisation of drugs is important as well; it will be conducted on the basis
of two facts. The first fact is that certain substances are already very popular
and by legalising them we would be able to control them in a better way. The
second fact is that they will have to satisfy much more rigid quality
requirements in order to get to the market, which will prevent many people
from suffering.
Finally, in the future there would be no educational borders; the education
process should be an on-going procedure. Its aim should be to provide the
individual with knowledge related to his interests; the view we have about
education as a continuous training session is wrong. This will, of course, be
facilitated by the changes in technology , which were discussed earlier.
2.5.3 Global Economic Forces
As far as the global economic forces are concerned, the concept of
globalisation has been around for a number of years. It means that borders or
any other types of obstacles no longer exist- we are able to communicate with
someone leaving in another continent as easy as we can communicate with
someone leaving next door to us. This is not going to affect labours in the
‘developed’ world as recent research carried out by the Open University
revealed.
Another key element is the demographic pressures. Earth’s population is
estimated at twelve billion for 2025; this, however, will not affect the other
resources, such as food and energy, given that their rate of growth is much
bigger. The remaining problem is how these resources will be distributed
Chapter 2-Origins of Scenario techniques & Present trends
30
between the haves and the have-nots, so that the eighty-twenty rule will not be
applied.
The power of the Third World countries will go on growing and they will
soon become very powerful. This will have two major impacts; the first impact
would be on the problem of distribution of resources previously mentioned. The
shift of power will automatically lead it towards a solution. The second impact
concerns the Western countries and, in particular, the United States of America;
it is the loss, on their behalf, of the world’s dominance.
Finally, global economics is another issue we should consider especially in
terms of international trade. This is especially applicable in the case of
knowledge industries where data ‘travel’ at speeds far beyond any human’s
mind. This flow of data can, in a very small portion of time, influence investors
at the other end of the world and, this way, destabilise world markets and put
national economies in danger.
2.5.4 Political Revolutions
Political revolutions are the last main area where changes will occur. The
main trend is decentralisation of power.
One of the most important problems that will arise is the lost of faith in
politicians. There are certain single issue groupings- such as people concerned
with the protection of the environment represented by Greenpeace- which
appear to have a great influence on people. This will result in traditional
political parties having problems since, apart from that, the form of democracy
becomes a debatable issue as well.
Chapter 2-Origins of Scenario techniques & Present trends
31
The situation described above will mostly influence the people in power, the
political establishment in other words. This creates a sort of panic and may lead
to unpredictable situations. The ‘period of recovery’ after the ‘revolution’ will
also be shorter; it will probably take less than a generation to get over it.
Finally, there is a common belief that our future will be better as opposed to
traditional pessimistic beliefs. This is mainly due to the technological advances
taking place at the second half of this century.
Chapter 2-Origins of Scenario techniques & Present trends
32
2.6 Uses of scenario planning Despite its rather short ‘lifetime’, scenario planning has proven to be very
useful in a number of applications ranging from strategic planning to
marketing; some of them have already been mentioned in the survey of Open
University discussed earlier.
The following table summarises, using bullet points, the uses of scenario
planning.
Table 4 Uses of scenario planning
(Source: von Reibnitz, 1988)
Strategic planning
Developing and testing a Corporate identity
Developing goals and strategies
Assessing current goals and strategies
Assessing Strategic Decisions
Assessing operating planning (short- term or medium term)
Environment monitoring
Innovation planning
Diversification planning
Production planning
Marketing planning
Personnel planning
Personal career planning
Influence public attitudes
Sensitivity and risk assessment
Chapter 2-Origins of Scenario techniques & Present trends
33
2.7 Conclusions The characteristics of the world we live in have changed a lot during the
second half of this century; we live in a much ‘smaller’ world where someone
from Europe is able to communicate with someone in the United States of
America with the ease he communicates with his neighbour.
Apart from the role of technology, there are other three elements that
complete the ‘puzzle’ of the new world; these are the global economic forces,
the development of the society and the political revolutions to take place. The
two pole system existing during the Cold War when America and Russia were
fighting with world’s control being the prize does not exist any more. The
replacement for that situation was not as simple as many people have expected
it to be (http1, Peter Schwartz); complexity and chaos would describe it better.
In an environment like the one described above, businesses will have a hard
time; they will need to adjust to those changes and formulate new strategies
based on the latest data available. The traditional forecasting methods failed to
serve as a tool in this process; the following picture illustrates it very
well.(please refer to next page)
Chapter 2-Origins of Scenario techniques & Present trends
34
Figure 1 The danger in forecasting
(Source: Ringland, 1998)
As a result to those circumstances, a new approach had to emerge. The
response to those uncertainties was the use of scenario planning; its origins date
back to Seneca but the first company to realise the value of the technique and
implement it was Shell (http2, Francoise Hecht). That happened back in
seventies and was led by a team including Pierre Wack, a French with
philosophy as his background, and Ed Newland, an Argentinean with a passion
for gamble.
According to Pierre Wack (as cited in http2, Francoise Hecht, p.60) “
Scenarios deal with two worlds: the world of facts and the world of perceptions.
They explore for facts but they aim at perceptions inside the heads of decision-
makers. Their purpose is to gather and transform information of strategic
significance into fresh perceptions. This transformation process is not trivial
more often than not it does not happen. When it works, it is a creative
Chapter 2-Origins of Scenario techniques & Present trends
35
experience that generates a heartfelt ‘Aha!’ from your managers and leads to
strategic insights beyond the mind’s reach”.
The solution, therefore, has partly been found; scenario planning could, to
some, extent count for the uncertainties present in the real world. In order for it
to being successfully implemented there was a need for formulating methods,
techniques and methodologies for deriving scenarios. Mainly consultancy
companies involved in the generation of scenarios as well as the pioneers
companies in the field did this. The following chapter introduces us to this
approach by describing the general steps involved in most of scenario studies.
Chapter 3- The scenario process
36
Chapter 3
The scenario process
3.1 The eight steps in a scenario process
3.1.1 Introduction
As mentioned above, scenario planning achieved wider recognition during
the seventies, when it was recognised that due to the continuously increasing
uncertainties that dominated the world another method should be used for
strategic planning. The forecasting techniques, previously used, were incapable
of providing the information needed; they were, therefore, abandoned and
scenario planning replaced them.
In order to build the scenarios, many methodologies were developed. They
all, however, to some extent have eight tasks in common (Reibnitz 1988); in the
remaining of this chapter we will analyse those tasks in more detail. These steps
are highlighted in the following table (please refer to the next page).
Chapter 3- The scenario process
37
Table 5 The eight tasks in a scenario process
(Source: Ute von Reibnitz, 1988)
3.1.2 Task Analysis
As the first step in a process, it deals with the question ‘Where are we now?’;
in other words it provides a comprehensive analysis of the smaller strategic
planning unit in a company. The latter is different for every company and
depends on its size; if the company under consideration is a small or a medium-
sized company then the strategy is formulated for the business as a whole. On
the other hand, if it is a large, maybe multinational, company that manufactures
many products and operates in many markets it is more advisable to build
separate scenarios for each product or market.
In order to carry out that task, we have to take under consideration the goals
and strategies of the company, which are expressed in the form of the business
idea; the significance of each one of them viewed as individual should be
examined. A ‘portion’ of SWOT analysis- to the extent that we only need the
Task Analysis
Influence Analysis
Projections
Grouping Alternatives
Scenario Interpretation
Consequence Analysis
Analysis of Disruptive Events
Scenario Transfer
Chapter 3- The scenario process
38
strengths and weaknesses- follows in order to identify the potential areas where
problems could arise and form this way the scenario agenda.
Once these problems are spotted, we have to formulate them in a question
format; to do this successfully we need to remember that the way we are asking
should not prompt to a specific answer, since we want to aim at managers’
perceptions, to stretch their mental models (Fahey-Randall, 1998, Schwartz,
1998). It is, also, important to exclude the use of problem-solving techniques-
such as cause and effect diagrams or fishbone diagrams- as means to reach the
solution; this needs to be done in order not to extrapolate past events into the
future but to promote alternative ways of thinking.
Typical examples of such questions can be found in the following table.
Table 6 Typical questions for finding solutions to problematic areas
(Source: Reibnitz, 1998)
At this point, it is important to decide to the time duration of the project;
many companies, like British Airways underestimated it (Ringland, 1998:
Moyer, 1996). This will, obviously, depend on the research and development
horizon and the type of the company. Despite that, there is a simple rule for
defining the time needs of the project; we add five to seven years to the period
needed on behalf of the company to develop the activity under consideration.
As mentioned above, we need to assess the strengths and weaknesses of the
company at the beginning of the scenario project; a structured way of doing it is
How can new ways for utilising our existing products be found?
How can we communicate with our customers in a new way?
How can economical and technological developments in our customers’ countries assist us?
Chapter 3- The scenario process
39
through the use of check lists. This is a way of assessing the performance of the
company’s departments so that any problems are automatically highlighted; the
way it works is very simple- certain questions are posed and we put a tick
against the box that contains the closest answer to our beliefs. It is good
practice, however, to inform the members of the scenario team about that
questionnaire one or two months prior to the start of the project. The project can
involve either a ‘ mini scenario project’ that consists of two three-day
workshops or a ‘scenario project’ that consists of four workshops each one
having duration of three to four days. There is no difference as far as the
procedure followed is concerned; the time is only compressed a bit at the first
approach.
Finally, at the end of that step a check is carried out to ensure that the
information gathered is correct; if any mistake is found, we will have to
undertake this step again.
3.1.3 Influence Analysis Once the first task is completed, we move on to the influence analysis; our
aim at this level is to identify the external factors of influence, to determine the
degree of their influence as well as any interrelationships between them; an
early sign of cross-impact analysis. A number of factors appearing in almost
every project which form an example for this category are customers,
competition, legislation and technology.
Chapter 3- The scenario process
40
It is, however, too difficult to work with those headlines since their meaning
is different when the company under consideration changes. As a result of that,
we need to identify and assess the influencing factors falling under every
headline- the relative order of rank for each factor should also be defined. Once
this is done, we have to assess the degree of influence each factor has on our
company along with any interrelationships. The latter task is about comparing
each factor with the others and is carried out with the aid of a network matrix-
an example of which is shown below.
Figure 2 A typical network matrix
(Source: Reibnitz, 1988)
Before using it, we have to make sure that there is no overlap between the
factors in terms of both function and structure. A marking system is used,
afterwards, to evaluate any interrelationships; we start from left to right and
Chapter 3- The scenario process
41
according to the degree of influence we put one of the following numbers to the
respective square.
Table 7 Ranking system for the elements on the network matrix
(Source: Reibnitz, 1988)
Once this task is completed, we are interested in two sums for each factor;
the sum across the row and the sum across columns. The first sum is called
‘active total’ and is an indication of the degree to which one factor affects the
others while the second sum is called ‘passive total’ and indicates how much a
factor is influenced by all the others. It is advisable, also, to justify on a
separate sheet of paper the degree of influence as a mean of verification of the
results. Finally, by dividing the active by the passive total we get an estimation
of the degree of importance for a factor within a system.
Another method we can make use of after the construction of the network
matrix is the system grid; this is nothing else but an orthogonal co-ordinate
system with the passive values being put on the horizontal axis and the active
values being put on the vertical axis. This division enables us to form four
fields with respect to the system’s elements, as shown below. The first field
consists of the active elements that are characterised by a high active and a low
passive total; therefore we can locate them among those with a high importance
ratio- these are the driving forces, the elements we should concentrate on during
0= no influence
1= weak influence
2= medium influence
Chapter 3- The scenario process
42
the scenario project. The second field consists of the ambivalent elements;
those are the elements whom importance ratio is close enough to one- their
influence to the system is almost equal to the influence they receive from the
system- those values, however, are relatively high. Buffering or lesser
ambivalent system elements form the next category; the importance ratio of
those elements is, again, close to one but this due to their low activity and
passivity. Finally, the last category consists of the passive elements; these are
the elements that are heavily influenced by the others but, themselves, they
have a little influence on the system.
The above can be highlighted in a diagram, as following
Figure 3 System Grid
(Source: Reibnitz, 1988)
By following this way of analysis, the network matrix at the beginning and
the system grid afterwards, we need to keep in mind two rules of systems
dynamics. The general concept is that the active elements should be in
Low High
High
Active Value
Low
Passive Value
Active Ambivalent Buffering Passive
Chapter 3- The scenario process
43
compliance with the strategy of the company in order to achieve the best
results; they should be part of the business idea. We should note, here, that it
would be even better if ways of creating ‘snowfall’ effects could be found.
As far as system dynamics is concerned, the first rule is that we need to focus
on those elements that can give us the most reinforcement effect, which are the
key elements that should attract our attention; most of the times, these are either
active or ambivalent elements. The second rule concerns buffering and passive
elements and is about not directly influencing them since their overall
contribution would be small. We should note, here, that it is many times the
case that a company is in no position to influence some factors like technology.
The question then should be transformed to how this factor can be used in order
for the company to gain competitive advantage.
Apart from that, there are three common errors appearing when dealing with
networking systems. The first is about the dimensions of the matrix; many
people assume that if a problem is described by a large matrix then due to its
complexity it won’t be possible for them to deal with it. This results in causing
undesired effects to the system, since we are omitting relationships between the
factors that could be important.
The second error is related to our ‘anxiety’ for results, which is a common
pitfall in scenario planning projects. It is the case many times that results are
expected in a very short period of time after the implementation of the new
strategy. If these do not come up, we take corrective actions; in most of the
times, however, we need to wait for some time before drawing any conclusions.
Chapter 3- The scenario process
44
If we take any actions in the mid time, this will only result in side effects. The
third error is that we try to isolate the problems and work on them separately;
this can have a severe impact on the system; this is the case since changes in a
number of factors- due to the interrelationships- can affect other factors of the
system.
In summary, being on that step we need to keep the mind what makes a
system successful; the key elements are highlighted in the following box.
b
b
Table 8 Rules for making a system successful
(Source: Reibnitz, 1988)
With respect to the first issue, it is good practice to communicate any
information to the whole company; customer complaints, for example, are
equally needed to the production department as well as to the service
department. As far as flexibility is concerned, we need it in order to adjust our
existing strategies and create new ones for the market we operate in.
Diversity and decentralisation are another key features; it is better for a
company, for example, to adopt different functions with different markets rather
Communicate the information to the whole company and not only to the ‘relevant’
departments
Sensitivity and flexibility to both external and internal factors
Maintain the balance by making use of diversification and decentralisation
Receive feedback frequently
Have clear objectives for the whole system
Chapter 3- The scenario process
45
than having a single marketing organisation which will depend on a few
customers and suppliers with flexibility being the key issue. If the company has
a decentralised structure, it is much more easier to cope with problems when
these occur; diversification is a way of ensuring that the company will keep on
going even if a problem appears at an individual part.
It is important, also, to get feedback from the system; we should, however,
bear in mind that it is better to group, for example, products in areas like
communications or energy than treating each problem in isolation. We should,
however, as mentioned earlier to wait for some time before evaluating it since
immediate actions can cause problems.
It is very important, finally, to develop an overall system of objectives for the
whole company; the individual departments can then work out their individual
strategies, which should be in compliance with the company’s system of
objectives, with the business idea. This will lead to greater opportunities for
responsibility and control on behalf of the departments and will lead to higher
motivation as a sense of ownership is developed.
3.1.4 Projections
Once we have decided on the influencing factors at the previous step, we
need to define ‘descriptors’ for these factors; these will describe both the
present and the future status of each factor. At this point, we should note that
this description has to be done in a neuter way so that it will not prompt the
participants to any specific direction, since we want to stretch their mental
models, their perceptions about the outside world- one of the two worlds that
Chapter 3- The scenario process
46
scenarios deal with (Schwartz, 1998). In order to illustrate that, we can use
technology as an example; it is better to have attitudes towards new
technologies as a descriptor rather than simply acceptance of new technologies
or rejection of new technologies.
In addition, it has been proven by the working experience of people involved
in scenario projects that if the descriptor is formulated in a neuter way this
allows alternative ways in which the future will develop to come up. This is the
point when we should move from descriptors to alternative descriptors; these
are the alternative future developments of descriptors like acceptance or
rejection of new technologies. Another type of descriptors, finally, is the clear
descriptor; these are the descriptors for which the future development is pretty
clear from the present point of view. In other words, these are the
predetermined elements as Pierre Wack calls them (Wack, 1985a).
It is good practice, however, to justify any proposal related to future
developments of factors; this can be done through the use of forecasting
methods, which by knowing and accepting their limitations and by formulating
the right assumptions can give us a ‘clear’ view to some extent.
3.1.5 Grouping Alternatives
At this step, our aim is to check the combinations of alternative
developments against each other for consistency, compatibility and logic; these
are the three principles any scenario should incorporate. In order to do that,
there are two different ways.
Chapter 3- The scenario process
47
The first way of doing that is comparing these alternatives within a
discussion; at the end of the discussion self-consistent sets of factors should
have been identified. This is a good way of dealing with the subject when the
number of descriptors is relatively small; this is not always the case.
In the case of a large number of descriptors, it is better to use a consistency
matrix; an example of such a matrix is shown below.
In order to construct the consistency matrix, the following questions should
be asked.
Table 9 Questions for constructing the consistency matrix
(Source: Reibnitz, 1988) We should note here that, due to practice experience, it is easier to assign
values of –1 rather than values of –2.
Are two alternatives of a descriptor that apply in one field directly correlated? If not then the weighting is
zero which indicates the lack of relationship; otherwise proceed to the next question.
Is that relationship free of contradiction or does it contradict itself? If it is consistent,
then a positive weighting is assigned.
Is it consistent and free of contradiction with or without reinforcement? If the answer is
without reinforcement then we assign the value +1; in the opposite case the value
assigned is +2
Is it partly or absolutely inconsistent? If it is partially inconsistent the value –1 is
assigned; otherwise we assign the value –2 .
Chapter 3- The scenario process
48
Once this task is completed, we follow the steps listed below; this is done by
the aid of a computer program. We should stress at this point the danger that
this incorporates since key qualitative issues might be neglected. On the other
hand the number of scenarios that are selected at the end- two- is quite
debatable; however the software fulfils the three key principles selecting the
scenarios that incorporate them the most.
Table 10 Steps for choosing the ‘best’ scenarios
(Source: Reibnitz, 1998)
3.1.6 Scenario Interpretation
This step deals with the analysis of scenarios we have chosen during the
previous step; these are two stable and consistent, on one hand, scenarios but
very different on the other hand; however, the number should not been taken
for granted. The analysis will be based on the clear descriptors introduced at the
We calculate all the possible consistent combinations; this will lead to all the possible scenarios for the future.
Among those, we select the ones with the bigger consistencies.
Among that subset, we select those which have internal stability; this means that if any
disruptive events occur they do not change towards the direction of greater consistency.
This gives them long-term validity.
Select two scenarios that are consistent, stable and different from each other
Carry out a sensitivity analysis. This means that a factor is changed and we assess the
impact that this change has on the scenario
Chapter 3- The scenario process
49
third step; they are the descriptors whose development is pretty clear from the
present. The network analysis conducted in the second step will also be helpful.
There are several computer software packages in the market that can assist in
the assessment of the clear descriptors in relation to the alternative ones. The
amount of money, however, that will be spent on that program- if any- as well
as the amount of effort that will be put in the project very much depend on the
wishes of the company’s directors for such a project.
We should note, here, that interpreting scenarios is not an easy task; this is
the case since their development in the future is not static but dynamic. This
means that if the company takes certain actions, these will lead to counter
responses on behalf of the competitors which might change the situation. These
changes need to be taken under consideration when interpreting the scenarios.
By the end of this step, we should reach at a point where we have two
contrasting scenarios. We can give descriptive titles to these scenario pairs;
titles like optimistic and pessimistic scenario and harmony and disharmony
scenario- the titles should reflect the main planning concerns of the company;
on the other hand, they should not lead the audience to think of those scenarios
as ‘good’ and ‘bad’.
It is advisable at this point to carry out again both a network analysis and a
system grid for those two different scenarios. The analysis should be based on
the several future forms of the scenarios; by doing that, we can assess the
following things:
Chapter 3- The scenario process
50
Table 11 Factors that are assessed during the scenario analysis
(Source: Reibnitz, 1988: Fahey-Randall, 1998)
3.1.7 Consequence Analysis
At this step we are looking at the ‘results’ of the scenarios that were
developed during the previous steps. We are looking for potential opportunities
for the company as well as for risks the company might be exposed to. Their
importance is, afterwards, assessed and measures and activities are designed for
them. The purpose of that is for the opportunities to further exploit them and for
the risks either to reduce them or convert them into opportunities. It is good
practice to further extend the analysis and examine whether those opportunities
and risks are related to the short or medium term or to the long term.
It is this the step that is the most important during the whole process as far as
strategic planning is concerned; this is the case since it is the step where we
start developing the company’s strategy through the assessment of opportunities
and risks. This will be done by posing to the members of the scenario team the
question: ‘How would you deal with this problem if scenario A was true?’.
It follows, finally, from its importance that an appropriate amount of time
should be allocated to that step.
The differences between the scenarios and the present situation
The dynamics of development from the present to the alternative futures; the key
difference between scenarios and forecasts
The difference between the two scenarios and
Chapter 3- The scenario process
51
3.1.8 Analysis of Disruptive Events
At this stage we are interested in the identification and analysis of any
disruptive events that may occur; we need to assess their magnitude on the
company and to prepare both preventive and response measures as well as
formulating crisis plans. According to Seneca (as cited in Ute von Reibnitz,
1988, p. 51) “ If you want a man not to tremble in the face of danger, then train
him early in the ways of danger”.
As far as the analysis of disruptive events is concerned, we have to stress that
this should not be done on the basis of the likelihood of them appearing. It is a
result of experience that the disruptive factors that appeared in the past were
ranked from the members of the scenario team as having a very low possibility
of occurring. If we take Shell’s case for example, the oil crisis was expected in
the eighties; however it occurred in 1973. The lesson from that is that
disruptive events should be considered on the basis of their magnitude, not
on the basis of their probability of occurring.
It is good practice, at this point, to analyse disruptive events from as many
areas as possible; we should include them under headlines such as society,
legislation and politics. Since we can not do anything for factors such as the
Third World War it is better not to include them in our analysis.
Once a disruptive event is identified, we assess its effects both on scenarios
and the company. Some of these effects may lead the scenarios to develop in
alternative directions; we, therefore, have the disruptive scenarios. We should
Chapter 3- The scenario process
52
note, however, that during the analysis process both the direct effects and the
effects of the changes in the scenarios should be taken into consideration.
The disruptive event analysis method presented above is, in fact, a
methodology for crisis management; moreover, we are interested in the
advantages the company can get from the appearance of such events. In
addition, by using this methodology we can identify any special weaknesses of
the company and put many effort in solving those problems. Our attitude
towards these events is incorporated into the master strategy of the company.
The table presented below, finally, can assist us in the identification of the
effects of disruptive events.
.1.8 Analysis of Disr
Figure 4 Effects of disruptive events
(Source: Reibnitz, 1988)
With respect to the actions that should be undertaken by the company, they
can be divided into two parts; preventive measures and response measures. As
the name implies, these are measures taken in order to prevent a disruptive
event from occurring. It is the result of experience that many times companies
are responsible for disruptive events; in this case they should analyse their
... ... ... ...
Effects
on the
scenario
Direct
and
indirect
Prevent
ive
Respon
se
measures
Chapter 3- The scenario process
53
internal operations to check if they are preparing the ground for disruptive
events to occur.
The second type falls under the headline response measures; another name
for them is crisis plans. In several companies people argue that it is better to
formulate those plans as soon as the event occurs; it is advisable, however, to
do it beforehand.
3.1.9 Scenario Transfer
This is the last step of the scenario process. Its aim is to make use of the
opportunities and risks already identified in previous steps in order to formulate
the corporate strategy of the company as well as defining alternative ones and
monitoring the environment.
In order to start our analysis, we need the results of the consequence analysis
study we have conducted before. We will develop the master strategy on the
basis of the similar answers we got to the questions posed there. This is,
however, not enough by itself; we should elaborate on those ideas that are
innovative and test them to see if they are effective under both scenarios; or the
number of scenarios generated, in general. In the case that we face problems,
we can reformulate those activities in order to make them compatible with both
scenarios. Our conclusions from the last step- analysis of disruptive events,
preventive measures and response measures- should also be included in the
master strategy.
The strategy is, then, further divided in such a way that will help each
division of the company to get specific information from the formulated
Chapter 3- The scenario process
54
strategy; this can include, for example, the master strategy for the R&D
department or the master strategy for production. We should highlight, here, the
fact that the corporate strategy is related back to where we start from at the first
step to examine whether certain goals and objectives are the same or pretty
similar. We are, also, interested in the existence of any weaknesses that will
make the reach of certain goals impossible or any strengths that will assist us in
making our strategy reality.
There are two types of companies, with respect to that distinction. Some
companies with conservative attitude concentrate mainly on aspects related to
the strengths and much less on those aspects that require the company to
undergo. On the other side, we have the companies which have a progressive
attitude; those companies will be willing to change their situation in order to
profit from the factors arose through the scenario process.
An environmental monitoring system should be our next step; this system
will serve as a tool to monitor the external developments that are of great
significance to the company. In order to do that, we should use the data
produced by the sensitivity analysis; we should correlate the important factors
for the company with the external factors that influence them. If changes occur
in those factors, relevant adjustments should be made to the company’s
strategy.
A common mistake is that as soon as a change is observed, there is the
tension on behalf of the companies to implement changes immediately on their
master strategy; sometimes they drop their strategy and they rebuild it on the
Chapter 3- The scenario process
55
basis of a short-term change. This, however, should happen only after a lengthy
monitoring period, and only if this changed has frequently occurred. It is
advisable, finally, to develop a target portfolio including the targets to be
reached and to compare it with the actual portfolio. The latter, however, should
not under any circumstances form the basis for the development of the new
target portfolio. We should, firstly, develop the scenarios, establish the main
goals and then formulate the portfolio.
Chapter 4- Scenarios compared to other planning methods
56
Chapter 4
Scenario compared to other planning methods
4.1 Scenarios compared to forecasting
4.1.1 The need and dangers of forecasting
The concept of forecasting is not new; in fact, all of us understand its
necessity and implement it in our everyday lives. We all try, for example, to
forecast how many time we will have to wait at a bus station or at an
underground tube in order to get to our work in the morning or go to a social
meeting. Sometimes our predictions are correct and we reach our destination
without waiting for a long period of time; sometimes we fail to make an
accurate forecast and we suffer because of that.
With respect to organisations, the case is pretty much the same; forecasts are
used to solve problems in many areas like operations and inventory. Moreover,
many techniques are in use- these can be classified into quantitative and
qualitative. The quantitative techniques are further divided into two categories:
causal techniques- such as regression analysis, life cycle analysis and
econometric models- and projective methods- such as the simple moving
average, the exponential smoothing and the Holt-Winters and Box-Jenkins
techniques (Malins, 1999). A similar classification exists for the qualitative
techniques as well; these are divided into judgmental methods- such as the
personal insight method, the panel consensus and the historic analogy – and
Chapter 4- Scenarios compared to other planning methods
57
technological and environmental methods- such as the Delphi method, the
curve fitting S-Curve technique and the relevance trees (Malins, 1999)
As far as qualitative techniques are concerned, their way of operating is to
combine experience intuition and other skills in order to derive relationships
between the variables that can applied when making the forecasts. The
quantitative techniques operate in a different way; they make use of sets of data
to establish trends and patterns useful for projecting quantities into the future
(Malins, 1999).
The basic concept, however, is common for both techniques; we look at the
past of the organisation to establish trends and then the likelihood of these
trends continuing in the future is examined (Huss, 1988). Likewise, during the
sixth and the seventh decades of this century the emphasis had been placed on
the development of sophisticated models that would include as many variables
as possible. According to Huss “The feeling throughout this period was that the
more factors which could be considered simultaneously and the better past
trends and relationships could be modelled, the better the forecasts. The move
toward sophistication proceeded on all terms”. (Huss, 1988, p.377)
Despite all those efforts, however, many times forecasts were not accurate.
The figure presented below is a forecast for shipbuilding demand created by the
Association of West European Shipbuilders (Van der Heijden, 1998). (please
refer to the next page).
Chapter 4- Scenarios compared to other planning methods
58
Figure 5 Projected vs Real demand for ships
(Source: Van der Heijden, 1996)
The same situation applies to qualitative techniques as well. A forecast for
the price of an oil barrel was conducted in 1971, based on the Delphi technique;
this technique is a group technique but the communication between members is
not allowed. (Malins, 1999) The company that conducted this survey was Shell
and none of the experts predicted a price higher than two dollars per barrel.
(Van der Heijden, 1998)
The danger lies in the critical assumption that is hidden behind forecasting;
this is that the future will be like the past. By using forecasting, we can plan
effectively given that the rate of change is relatively slow (Ute von Reibnitz,
1988). This, however, does not go on forever; the forecasters, therefore, should
be aware of that fact and pay attention to the respective variables that can
change the current situation. (Van der Heijden, 1998)
4.1.2 Comparing scenarios with forecasting There are certain differences between scenarios and forecasting; the first lies
in the theory of strategic management they are associated with. The method of
Chapter 4- Scenarios compared to other planning methods
59
forecasting is related to the rationalist approach; according to this there is one
best answer and all we have to do is find it (Van der Heijden, 1998). We,
therefore, have to allocate that task to someone who is clever and computer
literate to make sure he finds that answer. On the other hand, scenarios have
contingency planning theory as their base: there is no best answer. It is a more
processual oriented approach, which accepts the fact that the future can not be
predicted, and, therefore, there is a significant amount of risk in every decision
we take.
Furthermore, with respect to forecasts they are done, as stated above, by
experts; this keeps the decision maker away from the process as well as
unaware of the uncertainties taken into account in order to arrive to the final
result. We have to select the variable we want to forecast and then to
concentrate on that. The scenario planner, on the other hand, has a much wider
view of the business and he will address issues related to key uncertainties.
Scenarios reveal the driving forces for the specified industry; the forces that can
change its situation at any time.
There are two additional differences between forecasts and scenarios. The
first difference deals with their input to the decision-making procedure; the
input we get from forecasts helps us to reach to a yes or no decision whereas it
is much more difficult- if not impossible- to make such a decision on the basis
of scenarios.
The second difference lies in our ability to test the results afterwards. We can
test the forecasted variable against its real value and draw conclusions upon the
Chapter 4- Scenarios compared to other planning methods
60
validity of the forecast. This is not the case with scenarios since what we are
trying to achieve with them is not that; if the range of scenarios is made wide
enough we can be almost certain that the future will lie somewhere in between.
We need to make sure, however, that they represent our best knowledge of the
present status of our company (Van der Heijden, 1998) so that they will lead to
better strategies.
4.1.3 Conclusion In conclusion, there is a fundamental difference between forecasting and
scenarios with respect to uncertainty. If we are interested in the short term-
where uncertainty is relatively low- we can use forecasting; in the long term,
however, where uncertainty raises forecasting is no longer useful- we need to
use scenario planning.
The above are very well illustrated in the following paradigm given by
Albert Olensak of Sun Oil (Van der Heijden, 1998, p.90) : “ Forecasting can be
thought of as analogous to the illumination by the headlights of a car driving
through a storm at night. A bit of what lies ahead is revealed, not very clearly.
The driver merely tries to avoid danger and pick out enough detail to arrive at
his destination intact. He needs to be prepared for sudden major obstacles, be
aware of his limited view and try to adjust his speed accordingly. Obstacles will
appear suddenly, and then it may be too late to adjust. The obstacles the driver
must be prepared for are outside the limited view that he has. The reaction
required adjusts speeds in response to limits in perception. We have to forecast.
Chapter 4- Scenarios compared to other planning methods
61
We couldn’t drive the car with the lights switched off altogether. The important
thing is to realise the limits of our view”.
4.2 Scenarios compared to portfolio analysis
4.2.1 What is portfolio analysis?
The portfolio analysis is a tool for assessing the company’s performance and plan according to that.
In order to achieve that, we concentrate on two characteristics of the product;
these are the market attraction or market share and the other is the market
growth. This can be done with the aid of the Boston Consulting Group
(B.C.G) matrix, which is a graphical representation of the market share of a
product against the market growth on a X/Y co-ordinate system (http2:
Yazdani, 1998).
The B.C.G matrix distinguishes among four categories of products:
Table 42 The four categories of products according to the BCG matrix
(Source: Yazdani, 1998)
With respect to the categories of products mentioned above, a dog is a
product that has a low market share and the market growth for this product is
slow as well. A cash cow is a product that has a high market share but the
Dogs
Cash Cow
Problem Children or Question Marks
Stars
Chapter 4- Scenarios compared to other planning methods
62
growth rate for the market is low; in other words, it is a cash generator. In the
case that the combination of low market share with high market growth
appears, the product is a problem children or a question mark- we have to invest
in that more money that we can generate from it. Finally, a product that has a
high market share and its market is growing at high rates is a star.
4.2.2 Comparing scenarios with portfolio analysis The method described above can be used from a company in order its
position against the competitors (Ute von Reibnitz, 1988). It has, however, the
disadvantage that it is just a picture of the present; we can not make predictions
for the future. This is because we do not know what is going to happen in the
future with respect to our business units. It is common practice on behalf of the
companies to establish their target portfolio based on the existing one.
On the other hand, scenarios can provide us with the information needed to
manage that portfolio. This is the case since we get a description of how
possible futures would look like.
4.2.3 Conclusion Concluding, we see that the portfolio analysis approach is a very useful tool
for the company when the question ‘Where are we now?’ is posed. It can not be
used, however, on its own for establishing the company’s strategy. On the other
hand, we can set our target portfolios on the basis of possible future
developments as described by scenarios and derive our strategy from those
scenarios (Ute von Reibnitz, 1988).
Chapter 4- Scenarios compared to other planning methods
63
4.3 Comparing scenarios with simulation
4.3.1 The need and dangers of simulation Everyone, especially managers, is familiar with the concept of simulation. As
far as managers, in particular, are concerned there is a need of building mental
models of the systems they are in charge of (Fahey-Randall, 1998). There is,
however, a limit to the amount of information a human brain can commit;
because of that most of us build cause and effect relationships of the factors we
believe they are involved in a given situation.
There is, however, a couple of drawbacks associated with that approach
(Fahey-Randall, 1998). The first is related to the dominant tendency towards
the development of simple reasoning for the outcomes. It is the case most of the
times that one or two factors will be sufficient to explain a situation and actions
should be taken against those factors if the results are not the expected ones.
A second drawback is that these models are not consistent if different people
within the company are asked to explain the situation. Everyone will base his
answer on his point of view; a sales manager will have a different opinion from
a production manager on the reasons that generate profits, for example.
4.3.2 Comparing scenarios with computer simulation models
The simulation models we build on computers have much in common with
the mental models described above; the main similarity is that they are both
based on the relationships between significant variables. These are represented
through a set of equations in the case of computer models and allow the people
Chapter 4- Scenarios compared to other planning methods
64
in charge to assess the implications of complex interactions among these
variables.
The problem with the simulation models, however, is that humans are not
able to fully understand the diversity of possible future developments and
incorporate them into the model (Ute von Reibnitz, 1988). Despite that, we can
use simulation models in the scenario process to add value to it (Fahey-Randall,
1998).
In particular we can get the following benefits by using computer modelling
into the scenario process:
Table 13 Benefits from using simulation in the scenario process
(Source: Fahey- Randall, 1998)
4.3.3 Integrating simulation and scenarios
There are four steps involved in this procedure. These are presented in the
following table: (please refer to the next page).
Get a full insight view of the relationships among the model’s factors
Assess any assumptions
Obtain quantitative estimates concerning the effectiveness of various strategies
under different environmental conditions
Chapter 4- Scenarios compared to other planning methods
65
Table 14 Steps for integrating simulation and scenarios
(Source :Fahey-Randall, 1998)
With respect to the first step, we need to bear in mind that a simulation study
should focus only on a specific issue (Fahey-Randall, 1998). In order to realise
this issue we need to be aware of the factors that affect the company’s
performance as well as the performance measures we will use to assess its
performance and the drivers for those measures.
The second step is about building the model. Once the most significant
variables have been identified in the previous step, we need to decide upon their
interrelationships. This can be done through a series of meetings with managers
asking them to identify the type of relationship between performance measures
and variables; then we need to collect data on these variables and decide on the
equation we will use to model these.
We, then, have to examine if the model we constructed is an accurate, as far
as possible of course, picture of the real world. The importance of this task is
many times underestimated and most of the effort is placed on the development
of the model. The method for testing our model is to use past results as well as
running it under several conditions which are unlikely to appear in real world.
The final step concerns the use of scenarios as a learning experience. In this
section, we test alternative strategies and we analyse the scenarios.
Define the purpose of the simulation study
Draw the structure of the model
Test the model
Use it as a learning experience
Chapter 4- Scenarios compared to other planning methods
66
4.3.3 Conclusion Concluding, we see that simulation models give us the opportunity to test
different strategies under different assumptions. This can help us to a great
extent; by simulating the scenarios already developed. In order, however, to
implement them successfully, the following guidelines should be satisfied
(Fahey-Randall, 1998).
Table 15 Guidelines for simulating scenarios successfully
(Source: Fahey- Randall, 1998)
4.4 Conclusion In this chapter we focused on the comparison of scenario planning with three
other popular planning methods: forecasting, portfolio analysis and simulation
models. Each method was described briefly and was, in a way, ‘assessed’
against scenario planning.
Each method has its own value and can, certainly, be useful at a stage of the
planning procedure. Forecasting is useful for predictions in the short term when
the business environment is relatively stable, portfolio analysis is an excellent
tool for understanding the present situation of the company and simulation
Use graphic techniques in order to ensure early involvement on behalf of the
managers
The structure should be simple and we should focus on a single issue
We might need to use external consultants
The analysis phase should be given enough time
Managers should be given time to experiment with the model
Chapter 4- Scenarios compared to other planning methods
67
models can be used to test alternative strategies. The value of scenarios,
however, lies in the fact that they assist us in long-term planning and they
challenge our thinking for coming up with alternative future developments.
It was because of these advantages that several methodologies for
constructing scenarios were developed; these are presented in the following
chapter.
Chapter 5- Methodologies for constructing scenarios
68
Chapter 5
Methodologies for constructing scenarios
5.1 Introduction In the previous chapter we saw that the advantage of scenarios over the other
planning methods is that it can provide us with a long-term view; it can be used
for planning in the long term where the business environment is pretty unstable
and the uncertainty is high. In particular, Michael Porter (as cited in Ringland,
1998, p.24) defined scenarios in 1985 as: “ an internally consistent view of
what the future might turn out to be- not a forecast, but one possible outcome”.
There are, in general, three categories in which we can classify scenario
methodologies (Ringland, 1998):
Table 16 The three ’schools of thought’ of scenario analysis
(Source: Ringland, 1998: Fahey-Randall, 1998: Huss, 1988)
5.2 SRI
5.2.1 Background SRI consulting was one of the pioneers in the field of scenario planning; it
was in the middle of the sixth decade of this century that the development of
techniques for scenario planning- along with Royal Dutch Shell and General
Intuitive Logics
Trend-impact analysis
Cross-impact analysis
Chapter 5- Methodologies for constructing scenarios
69
Electric (Ringland, 1998: Ralston, 1997: SRI International, 1999). At the fall
of seventies, this methodology was revised mainly due to the needs of US
companies to analyse future uncertainties related to strategic plans and
investments. The development took place in close co-operation with Shell. It is
a relatively simple and easy to follow procedure. Furthermore, it has the
following three advantages (Ringland, 1998: Huss, 1988):
Table 17 Advantages of the SRI method
(Source: Ringland, 1998)
The SRI process falls in the intuitive logics category.
5.2.2 Method The scenario process at SRI consists of six steps. It is performed from a
team, whose members come from several departments of the organisation, and
is illustrated at the figure below. ( please refer to the next page)
It is a highly flexible procedure
The identification of both the issues and their drivers plays an important role
The participants have a sense of ‘ownership’
Chapter 5- Methodologies for constructing scenarios
70
Figure 6 The SRI approach (Source: Ringland, 1998)
The two first steps of the process are decision-focused; the first step is to
identify the strategic decision areas that we want to focus on with the scenarios.
We have to note, here, that we are not interested in the macro-environment yet.
The second step is about the key decision factors; the reason, to some extent,
of the scenario project but, here, we are just stating the concerns of the
company. These are the factors the management team is interested in knowing
in order to make a better decision; it is a way of making sure that the scenarios
we would end up with will focus on those issues that are relevant to the
decision-making process.
The analysis of the environmental forces is the next step we need to
undertake. This includes the identification and mapping of all those
environmental factors that will influence the business in the future. These
factors can be further divided into two categories: the microenvironment forces-
these include the factors at the industry and market level- and the macro-
Chapter 5- Methodologies for constructing scenarios
71
environment factors- these include the factors at the social, economic,
technological and political level. Each factor is, then, assessed on the basis of
their severity as well as the extent to which its development can be predicted;
we manage, this way, to distinguish the rather predictable factors from the
uncertain ones whose alternative developments will form the basis of our
scenarios.
The fourth step is the most important of the whole process; it is called
scenario logics. At this step, we need to identify alternative future
developments; these should include the development of the drivers we have
spotted at the first two steps- both those whose development can be predicted
and those whose development is characterised by uncertainty. This can be done
in a number of ways; we may use outside consultants, we might interview
internal staff or use a combination of those two methods.
Once the development of the factors of interest has become clear, we need to
describe the scenarios we developed. In order to do that we will make use of the
structure emerged from the previous step. The scenarios will usually consist of
a narrative description of two to three pages- in order to be easy for the reader
to go through them, a tabular description of the differences between them and a
quantitative description of key factors (Ringland, 1998: SRI, 1999). The latter
is for assisting the decision-makers to reach conclusions.
The final step is about the implications of scenarios to the decision making
process. The management team, in particular, should try to spot the potential
outcomes of the scenarios and relate them to their businesses.
Chapter 5- Methodologies for constructing scenarios
72
The following figure represents the process flow from scenarios to strategy
for SRI.
Figure 7 From scenarios to strategy
(Source: Ringland, 1998)
5.3 NCRI
5.3.1 Background An alternative method for constructing scenarios was developed by Northeast
Consulting Resources Inc. (NCRI). The company was founded in 1984 in
Boston. The methodology developed is based on the Future Mapping technique,
which emerged from the work done by Martin Ernst (Ringland, 1998: Mason
and Wilson, 1994).
5.3.2 The Future Mapping Method In this method, there are two dominant assumptions straight from the
beginning (Ringland, 1998: Mason and Wilson, 1994).
Chapter 5- Methodologies for constructing scenarios
73
Table 18 The two basic principles of the Future Mapping method
(Source: Ringland, 1998)
In order to arrive at the scenarios, the following terminology is used:
Table 19 The terminology used in the Future Mapping method
(Source: Ringland, 1998)
Endstates are pictures of the industry in the future; they are written in-groups
of four or five. Their length is about one page and, in total, they need to
incorporate all different thoughts about how the future will develop for the
company. It is not necessary to be mutually exclusive and the time period they
cover is about three to five years from the present.
On the other hand, events are specific appearances of key trends; we should
be able to answer the question whether an event took place or not. Another
characteristic of an event is that there should be industry people to make it
occur. As far as the format of events is concerned, they are written in sets of
The future is not predetermined; it depends on actions taken by many
participants
If an industry is after gaining a competitive advantage, then structural
changes have to be made
Endstates
Events
Chapter 5- Methodologies for constructing scenarios
74
150-200; each set is given a name, a description and a date and it is written on a
separate card for ease of use. We use these events as the basis for future actions.
The method is based on the different issues that can be addressed by the
endstates and the events related to them. These can be related to industry,
political, company issues or to certain departments and functions within the
company- the research and development department for example.
At the beginning, four to five endstates are created along with about to two
hundred events. Once this is done, we should identify the ‘extreme’ events;
those that are highly likely or highly unlikely. These events are, then, organised
by theme and the cards are placed on a wall in chronological order. If the model
revealed is not very common, it might be difficult to deal with the results;
moreover many times we experience disagreements about the possibility of
occurrence for an event- we shall, in this case, check if the source for this is
misinterpreted information.
The allocation of participants into teams is the beginning of the second
phase. Each team takes an endstate and the assumption that it happened in
reality is made. The task undertaken by each team is to explain how that
happened; this way they need to understand the logical relationships between
the events and how they developed in order to reach to the realisation of the
endstate. This way a check for internal consistency can be conducted and the
decision-makers will have the chance to link the paths from the present to the
specific endstate their team is in charge of.
Chapter 5- Methodologies for constructing scenarios
75
We group, after the completion of the previous step, the selected events into
themes and we develop several paths the events should go through if the
endstate was real. The last task for each team is to identify an industry and a
business upon which they would build a success story within the borders of the
scenario.
At the end of the procedure, there are two approaches we can make use of;
the common features approach and the aggressive change approach. The
common features approaches is about grouping the common events appearing
in all scenarios and direct our investments towards them. We can use them for
training purposes as well in order to train managers how to react in different
situations. The aggressive change approach is about using a ranking system for
the events; there are two stages in this system: attainability and desirability.
This will be the basis for discussions on both the direction of the industry as
well as the role of the company in it; this way we can have an overview of
where the whole industry is going as well.
5.4 The Futures Group
5.4.1 Background The Futures Group is a Connecticut-based research firm for international
strategy and policy .It uses the trend-impact analysis method for its scenario
planning process, an illustration of which can be found in the figure below.
Chapter 5- Methodologies for constructing scenarios
76
Figure 8 The Futures Group methodology
(Source: Ringland, 1998)
5.4.2 Methodology A typical project has three stages for the Futures Group; these stages are
highlighted below (Ringland, 1998: Planning Review, 1992).
#
Table 20 Stages in a scenario project according to the Future Groups methodology
(Source: Ringland, 1998)
The first stage can be further subdivided into, respectively, the definition of focus and the charting of driving forces stages. At the first sub-stage, we need
to define the limits of the scenario project. This can be accomplished by asking various questions such as the length of the period we are looking into the future,
the type of issues we want to raise and the variables, if any, that need to be forecasted in order to assist us in the decision-making process. The second sub-
Preparation
Development of the scenarios
Reporting and utilisation
Chapter 5- Methodologies for constructing scenarios
77
stage deal with the identification of the key driving forces; these are the variables that heavily influence our system and will be ‘responsible’ for its
development in the future. The second stage can, as well, be further subdivided in three sub-stages; these
are, respectively, the scenario construction phase, the selection of alternative
worlds for further analysis and the preparation of ‘scenario-based’ forecasts. In
the first phase we combine the alternative developments of the drivers to
produce alternative future scenarios. It is sometimes the case that we do not use
all of them because some are either illogical- therefore the principle of internal
consistency is not fulfilled- or the possibility of them becoming true within the
planning period is very small- this means that an ‘accurate’ method is needed in
order to decide upon their use. We, then, need to explore these results; doing
that, however, is impossible. We would, therefore, limit our analysis to those
‘futures’ that incorporate the most important challenges and opportunities-
these should be in compliance with the business idea of the company. The final
stage is, as mentioned above, about preparing forecasts; in particular we need to
identify and isolate the driving variables so that each alternative world can
become reality. We, then, need to forecast, either using a quantitative or a
qualitative method, the time every significant variable needs to reach that
status; in other words we quantify the results in order to assist decision-makers
The final stage is the reporting and utilisation stage. At this stage, we present
each scenario using graphical and text methods. The communication phase is a
very important phase – the personnel of the planning department at Shell spent
half of its time promoting the scenarios.In addition, we need to make sure that
our audience has fully understood any hidden assumptions behind the scenarios.
Chapter 5- Methodologies for constructing scenarios
78
The second phase is the phase where we are looking at our goals and decisions
for each alternative world. We, also, need to look for those actions that reduce
any risks associated with these different worlds.
5.5 The French School
5.5.1 Background
Michel Godet, a French strategy specialist, was involved in scenario planning
projects when being in charge of the Department of Future Studies with SEMA
group (Ringland, 1998); these took place in the seventies. In the eighties he
extended the methodology with the Ministry of Defence being one of the
supporters of this research. A probabilistic method is used in order to calculate
cross-impacts between the driving forces.
5.5.2 Methodology
The approach makes use of certain computer-based tools, like MIMAC- this
stands for the French words ‘Matrice d’ Impacts Croises Multiplication à un
Classement’. We can, through that tool, assess interaction effects among
variables on a causal map related to a firm’s strategy.
The methodology followed is highlighted below.
There are three phases in this approach, as shown below.
Build the database
Analyse possibilities and reduce uncertainty
Develop the scenarios
Chapter 5- Methodologies for constructing scenarios
79
Table 21 The three stages in a scenario project according to the French School
(Source: Ringland, 1988)
At the beginning, we conduct a study to spot out all the relevent, both
internal and external, factors to the company under consideration as well as its
environment. The MIMAC system is, then, used in order to define the system
created by those factors. We should, then, conduct a study as detailed as
possible on those variables.
Once this is done, we are interested in studying the extent to which each
variable influences the others; this is done by the construction of a cross-impact
matrix. Their influence is classifed either as binary- two possibilities : exist or
not exist- or we can use a range from zero to four to estimate their influence.
The influence that corresponds to any specific number is highlighted below :
Table 22 Levels of influence (Ringland 1998)
0=none
1=weak
2=medium
3=strong
4=very strong
Chapter 5- Methodologies for constructing scenarios
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The results of this study are plotted on a two-axis co-ordinate system ; this
determines their positions and roles and is shown in the diagram below.
Figure 9 Influence/ Dependence diagram
(Source: Ringland, 1998)
We should note, however, that during the analysis we should pay attention to
the current situation but not overdoing it. This is the case since by analysing
past trends we can understand the dynamics of every factor but if we over-
empashize it we will end up extrapolating the past into the future ; which is why
forecasting methods failed.
The next step is to make use of the MACTOR method in order to identify the
position of actors, who are those that influence the factors and shape our future,
in relation to each other. In order to do that, we draw a table showing their
strategies.
Chapter 5- Methodologies for constructing scenarios
81
The second stage of the procedure is about scanning the range of
possibilities and reduce any uncertainties involved. We do that by analysing
future possibilities against a set of hypotheses ; these could be the continuation
of a trend or the appearance of a new one. This can be further broke up into
several dimensions so that we can study different combinations of them ; a
good way of doing it is through a morphological analysis. There is, also,
available software- SMIC, for example- for reducing uncertainty ; this is done
by calculating the probabilities of any different combination occuring.
The last stage is the stage of development of scenarios. In this stage, we
describe the path for getting from the present situation to the future.
5.6 The European Commission’s Methodology
5.6.1 Background
It is a strong belief that the future can not be forecasted since it is not written;
what will happen in the future is not predetermined. We can, however,
influence the company’s policy for the future by analysing the implications of
alternative developments of it.
The popularity of the concept described above is continuously increasing
nowadays. The Forward Studies Unit’s ‘Shaping Factors-Shaping Actors’ is
one method for implementing this concept; it was first used in the study of
Europe Post, which took place in 1992.
Chapter 5- Methodologies for constructing scenarios
82
5.6.2 Methodology
Before explaining the method, it would be useful to define the two terms
appearing in its definition; the shaping actors and the shaping factors.
The term shaping factors is used in order to describe those issues that have a
very strong impact on future outcomes. They can be regional, national or global
or even sentiments (Ringland, 1998). According to Dr. Michael D. Rogers (as
cited in Ringland, 1998,p. 212) “ they are the long-run structural factors, be
they socio-economic, socio-political or cultural, that are, de facto, influencing
our European futures”.
On the other hand, the term shaping actors is used in order to describe those
players that can influence the shaping factors interactively. These could be
either decision-makers or groups of individuals (Ringland, 1998). According to
Dr. Michael D. Rogers (as cited in Ringland, 1998, p.213) “... they themselves
can become environment makers as opposed to environment takers.
Therefore, the rhythm of change- and the process of change itself- are open to
influence by the leading actors”.
The first stage of the method is to identify the shaping factors. Their list
should be as much comprehensive as possible. This can be carried out through
the use of brainstorming, for example.
The second stage of the scenario procedure is to identify the primary links
between the most important actors and factors. This will help in understanding
the dynamics of the system and identify the paths to that future.
Chapter 5- Methodologies for constructing scenarios
83
As a method, it bears a resemblance to the Delphi method, where a panel of
experts interchange opinions. It is, however, less formal than the Delphi method
but results are produced faster. Moreover, it allows divergent ideas to be heard.
On the other hand, its main weakness is that each study is conducted only by a
limited number of experts; their selection, therefore, is very important for
getting the best results.
Finally, w should note that because both the actors and the factors change
rapidly, it is good practice to repeat the study in the future rather than
conducting it only once; the scenario approach is a continuous assesement.
5.7 The Global Business Network
5.7.1 Background
In 1987, when Peter Schwartz left Shell, he formed the Global Business
Network (GBN) with Jay Ogilvy. Their aim was to help people reorganise their
perceptions about alternative futures; Peter Schwartz himself is a pioneer in this
field (Ringland, 1998: Schwartz, 1998).
GBN had very large companies as clients pretty soon; AT&T and the
International Stock Exchange are just two examples. The company moved
further, however, and wanted to create a form of club. Among the first members
of this club were AT&T, Volvo, Shell and many other companies.
5.7.2 Methodology
The GBN’s methodology is based on the following eight steps
(Ringland,1998: GBN International, 1999: Schwartz, 1998):
Chapter 5- Methodologies for constructing scenarios
84
Table 23 The GBN methodology
(Source: Ringland, 1998)
It is very important to make sure that the scenarios we will develop will be of
relevance to our company, to its business idea; for example if the client is an
automobile company, it might be interested in the variations in energy prices. A
good way of complying with that rule is to start with the decisions that the
company will have to take in the near future.
The second step is about listing the forces in the local environment that
influence the decision. We will have to think of what will influence our
decision- these could be, for example, customers or suppliers.
Once the second step is completed, we need to find the driving forces in the
macro-environment- political, social, economical and technological- that
influence the factors previously mentioned. In addition, we should identify the
forces in the microenvironment influencing the factors identified in the second
Identify the issue we will focus on
Identify key forces
Decide on driving forces
Rank by importance and uncertainty
Selecting the logics
Developing the scenarios
Study the implications
Select the leading scenarios
Chapter 5- Methodologies for constructing scenarios
85
step; some of them could be predicted and the development of some others
might be uncertain.
We should, then, rank them against two factors; the first factor is their degree
of importance and the second factor is their degree of uncertainty. At the end of
that, we would be able to identify those factors that are both critical and
uncertain; scenarios will not differ, anyway, towards the predetermined
elements.
As mentioned above, we want to end up with scenarios that make a
difference to our decision-making process. The differences between scenarios
should be few so that we can develop them in detail. In order to achieve that,
we have to go through the variables many times until we reach the most
important ones; a graphical representation of those is, undoubtedly, a good idea
since it facilitates the communication process. The best plot is the one that
shows better the dynamics of the issue and communicates it effectively.
The development of scenarios is the next step. We can do that by going back
to the list of factors and trends we have identified in the previous steps. We
decide on the development of each trend and factor within the scenario we are
building and then we gather these developments in the form of narration. The
narration should describe the path that connects the present with that future as
well as the events that need to take place in order for the scenario to become
reality; on the other hand it should not be very lengthy- two or three pages is a
‘reasonable’ length.
Chapter 5- Methodologies for constructing scenarios
86
Once the scenarios have been developed we should consider their
implications on the decision we focused on. We should check if the decision is
good enough under any of the scenarios; if it is a good decision under only one
scenario, then the risk we are taking is very high. In the latter case, we should
try to make our strategy more robust so that if the desirable scenario does not
happen, we would be able to adjust the strategy.
The last step is to select the ‘scenario indicators’. These are signs that inform
us that the specific scenario is closer to come true. We should also decide on
certain aspects of the scenarios that will serve as the basis for monitoring them.
5.8 The Copenhagen Institute For Future Studies
5.8.1 Background
Thorkil Kristensen, the former minister of finance for Denmark, along with a
number of companies founded the institute in 1970 as a non-profit organisation.
Scenario planning activities started in 1984 because of an American company,
3M Denmark (Ringland, 1998).
5.8.2 Methodology
The participants were invited to take place in ‘The Futures Game’ (Ringland,
1998). In this game, they were asked to think about the future and compare, on
one hand, existing trends in the society with the development of the business
and, on the other hand, to think about new trends that might come up. The next
step was to spot out, through discussion, which future they thought most
probable for the country the company is operating in.
Chapter 5- Methodologies for constructing scenarios
87
The second phase of the game is for every person to try and ‘fit’ the company
into the chosen future. Nowadays, however, statistical software packages are
used for the analysis of trends.
5.9 Computer-Driven Simulations
5.9.1 Background
The usage of simulation models is a powerful approach for companies in
order to answer ‘what-if’ questions. A company that offers such a facility is the
Strat*X, which was founded by Jean-Claude Larreche in 1984 (Ringland,
1998).
5.9.2 Methodology
The latest version of this software package is the MARKSTRAT 3. It is used
by groups of sixteen to thirty people who are divided into teams of four to six
members. Every team manages its own company; the other teams represent the
competitors.
The game can last for seven to eight decision periods- usually represented by
years- with every decision taking around two and half-hours. In order, however,
for a decision to be taken we need information on factors such as the market we
operate in, our competitors and the company’s environment; financial
information is required as well.
At the final stage, the performance of each team is measured against a
number of factors like financial measures- share price for example- and the
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88
productivity of investments made in research and development (Ringland,
1998).
5.10 Comprehensive Situation Mapping (CSM)
5.10.1 Methodology
This tool includes some properties of systems dynamics and systems
thinking. It is very useful since we can model the argumentation process
(Ringland, 1998). The technique is a simple modelling technique that simulates
the environmental factors that affect a company’s situation.
Finally, it can be used to bridge the gap between qualitative thinking and
quantitative operational research (Ringland, 1998).
5.11 Battelle’s Basics
5.11.1 Methodology
The Battelle’s process is described in the following figure. (please refer to
the next page)
Chapter 5- Methodologies for constructing scenarios
89
Figure 10 The Battelle’s methodology
(Source: Ringland, 1998)
The method consists of seven steps (Huss, 1988); these are shown below
According to that method, we first define the topic under consideration and s
Table 24 The Batelle’s methodology
(Source: Ringland, 1998)
Define the topic under consideration
Identify the areas of influence
Define descriptors and calculate their probabilities of occurrence
Fill in the cross impact matrix
Select scenarios for further development
Conduct sensitivity analysis
Forecast and conduct implications
Chapter 5- Methodologies for constructing scenarios
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According to that method, we first define the topic under consideration and
create a list of factors that influence this event- these factors are not only events
but can be a range of outcomes like growth of the Gross National Product at a
rate higher than four percent.
We, then, assign a probability of occurrence to each factor within the time
limits of our study. The next step is to write detailed reports on each descriptor;
this should include the background of the descriptor as well as any future
forecasts.
A cross impact matrix is built afterwards. This matrix shows the impact that
the occurrence of a descriptor state has to all the others; in order to do that a
numerical range from –3- strong negative impact- to +3- strong positive impact
– is used. We, then, make use of a software package to create consistent sets
and combinations of these descriptors in order to fulfil the internal consistency
requirement.
A scenario consists of the occurrence of one state from each descriptor. The
most important scenarios are then selected for further development; the reports
previously written as well as the outcomes of the software package are used for
that purpose.
Once they are developed, sessions are held with the managers of the
company to discuss the implications that the realisation of each scenario would
have for the company. The aim of these sessions is to well position the
company against all those alternative futures; in other words to adjust our
strategy so that we can benefit from all possible developments.
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91
Chapter 6
Setting up the scenario agenda in a company
6.1 Introduction
This chapter will deal with the ‘practicalities’ of scenario planning; in other
words the main issue that will concern us here is the way the scenario agenda is
set in organisational settings. We have looked, so far, at scenario planning with
respect to other planning methods and we have concluded that it is a suitable
method for long-tem planning; it was from the seventies that many authors
dealt in their articles with scenario generating methods (Durand, 1972:Duperrin
and Godet, 1975:Gazes, 1976:Geshuny, 1976:Chapman, 1976: MacNulty,
1977) . On the other hand, forecasting, portfolio analysis and simulation models
are not appropriate for that purpose given that the longer we look into the
future, the higher the uncertainty is.
We have looked, also, at certain methodologies for developing scenarios;
these were divided into three main categories: intuitive logics, trend-impact
analysis and cross- impact analysis. The one thing that these methodologies
have in common is that they consist of a step-by-step methodology; each step
was characterised by a headline such as identify the key issue or identify the
driving forces.
We have not, however, looked at the practical side of scenario planning to
the extent that no attention was paid to how all these are implemented within an
organisational context. This is the role of this chapter- to illustrate how this
Chapter 6- Setting up the scenario agenda in a company
92
issues are processed in an organisation as well as what ways we use in order to
get the information we need.
6.2 Overview
Before getting into the questions mentioned above, we have to observe that
scenario planning is rather a craft than a science (Ringland, 1998: Van der
Heijden, 1996). By that, we mean that each practitioner has his own rules;
however, during the years that scenarios are used a set of principles has come
up. It is, nevertheless, the case that practitioners have to learn from their own
mistakes and make alterations to their techniques so that they have better
results.
Another important thing we have to bear in mind as far as scenario planning
is concerned is that scenarios are always used in order to test something, that
being the fit of our strategy to various future developments or any changes in
the business’s environment. A scenario project should, therefore, involve an
area of interest along with future developments around that issue; these
developments will be described by a number of scenarios. In addition, in most
of the cases there is no specific issue to begin with but the aim is to have a
better understanding of what is going on in the business environment
(Ringland, 1998: Van der Heijden, 1996). It is, however, better to have a
question to focus on early in the process (Ringland, 1998) since that helps to
put scenarios in a context. We can leave that to emerge from the process but,
then, the whole team should have an in-depth knowledge of the organisation- it
should consist from people within the organisation in other words.
Chapter 6- Setting up the scenario agenda in a company
93
The technique mentioned above could be proven useful; on the other hand
there is a danger especially for big and successful organisations that they will
not be able to recognise the trends-breaking signals. It is for that, that many
scenario projects involve both internal staff and external consultants so that
introversion will be avoided. We,
therefore, have to communicate the most important characteristics of our
organisation. A way of doing that is through the ‘business idea’; this can be
defined as the answer to the question “ What is unique about this particular
formula, and why are others unable to emulate it?” (Van der Heijden, 1996,
p.62). If, however, we choose not to communicate the business idea we need a
scenario agenda in order to make sure that what we study is relevant to our
project.
6.3 Towards the scenario agenda
6.3.1 The two players
Before proceeding further with the scenario agenda, it is a good idea to
define the two participants in a scenario planning project, the scenario planner
and the client (Van der Heijden, 1996). The scenario planner is the person
responsible for facilitating the scenario process. He can already be working for
the organisation or he can an external consultant who will work in close
association with the internal organisation’s staff throughout the project. Since
he will be responsible for running the process, he should be dealing with
tactical issues most of the times.
Chapter 6- Setting up the scenario agenda in a company
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The second player is the client. By that, we mean those people who are trying
to answer a strategy’s type question through the process; most of the times the
client is the management team of an organisation.
6.3.2 Defining the scope of the project and getting the information
In order for the scenario planner to proceed with the project, he needs to
collect data. He has to ensure, however, that these data are relevant to the issue
under consideration; it is so easy for anyone to collect large amounts of
information since the business environment is so wide. In addition to that, a
way should be found for the strategic agenda to be communicated; the concept
of business idea, which was previously discussed, might serve this purpose
quite well.
As mentioned above, the first step the scenario planner has to undertake is
that of collecting data on issues that are of strategic importance to the company.
This information can be connected either by conducting a SWOT analysis-
through which a group brainstorming takes place- or by individual interviews.
These two ways are further analysed and discussed below.
6.3.3 SWOT Analysis
A SWOT analysis is a method for gathering information from the team; it can
be conducted within half a day and the initials stand for Strengths, Weaknesses,
Opportunities and Threats (Van der Heijden, 1996).
This form of analysis is conducted, most of the times, at a workshop where
the scenario planner should be the facilitator. It usually has three parts:
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Table 25 Parts of a SWOT analysis
(Source: Van der Heijden, 1996)
At the introductory stage, the facilitator gives a brief description of the
method. He, also, has to emphasise on the purpose of the exercise.
The introduction is followed by a brainstorming session, where participants
are asked to think of any aspect of the business they consider as either good or
bad. The second task would be to categorise them under one of the letters S, W,
O or T. A certain time allowance has been made for that.
Once this time limit expires, participants are asked- one in turn- to reveal
their points. We should note that at this point no discussion is allowed but one
can only ask questions if he considers that his partner’s suggestion meaning is
ambiguous. The group undertakes the task to decide whether this point fits in
and how it can be described in a few words so that it can be written on the flip
chart. When this process is finished, the flip charts are reviewed to make sure
that nothing of interest was left out.
The opening or introductory part, where the importance and the target are
explained to the participants
A brainstorming part, where participants are requested to identify the
strengths, weaknesses, opportunities and threats of the company
A feedback and analysis session
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The analysis of what is written so far is the last stage of the SWOT
workshop. This consists of five steps- one for each letter and one for the
formulation of the scenario agenda.
The first step deals with the strengths of the organisation. We should pay
attention here to identify those strengths that make our clients prefer us rather
than our competitors.
Moving on to the second category, we should note that there are three
categories of weaknesses (Van der Heijden, 1996)
Table 26 The three categories of weaknesses
(Source: Van der Heijden, 1996)
This distinction is essential in order to look at the real problematic areas of
the company. The term symptoms is used to describe temporary weaknesses,
which will disappear as soon as their causes stop being present; we can think of
a decline in sales as an example. Hygiene factors are those weaknesses that are
needed for running the business; an example of that type of weaknesses could
be the expenditure for information systems. They do not provide a competitive
advantage to the company but without them it would be very difficult for the
company to resist to competition (Van der Heijden, 1996). The third type of
weaknesses- the structural weaknesses- is the area the company should focus
Symptoms
Hygiene weaknesses
Structural weaknesses
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on; these are the factors that should be corrected if the company wants to gain a
competitive advantage.
The third step is about analysing the points that came under the opportunities
headline. These can be further subdivided into two types: portfolio areas and
capability areas. The first are areas where the company can have profits by
expanding a number of its strengths whereas the latter are areas where could
develop new skills that are related to future success.
The assessment of threats is the one before the last step of our analysis. It is
about analysing the threats and taking actions against them since otherwise the
strengths of our company might be in danger.
The last step is the direct formulation of the scenario agenda. We can derive
it by spotting from those data the areas where we should pay attention. If we
want to proceed even further, we can rank those issues in terms of importance;
the result, however, should not be more than, for example, four- broadly
defined- areas so that it would be easily to tackle with them.
6.3.4 Interviews
As mentioned above, the first step the scenario planner should undertake is to
obtain an insight view of the organisation’s culture and views. We should,
however, remember that the work is done under certain time limits; in other
words the desirable number of iterations should be as small as possible. An
effective way of doing that is through interviews (Van der Heijden, 1996). In
order to get that insight, we should be aware of certain rules; these rules are
presented below:
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Table 27 Rules for having a successful interview
(Source:: Ringland, 1998: Van der Heijden, 1996)
With respect to the first rule, it is important for the interviewer to go for the
interview without having a fixed agenda. It is good practice to ask general
questions concerning the business situation and just follow the flow of the
conversation.
The second rule is about making sure that the interviewee will be willing to
share information. This will be achieved by explaining to him that the
information will remain confidential and that it will be processed by subject;
this way his anonymity is guaranteed.
Another important factor is that the facilitator should be a ‘good listener’ of
what the other person says. Moreover, he should repeat those to the interviewer
as a signal that he is interested in the conversation. There is a danger here, that
the scenario planner might dominate the conversation by doing that; a ‘trade-
off’ has to be found depending on the individuals involved in the conversation.
There should not be any constraints in the process
The purpose of the interview should be explained and fully understood by the
interviewee at the beginning of the process
The interviewer should pay attention to what the interviewee says during the
process and feed it back to him
Mutual trust is very important and should be established right from the
beginning
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The final rule is about establishing a mutual trust relationship. As mentioned
above, it is very important that the interviewee will feel free to speak; otherwise
the person who conducts the interview will not get the information he wants. In
order to establish that feeling it is absolutely necessary to gain the other
person’s trust.
As far as the interview process is concerned, it can start by asking the other
person how the company arrived at the present; this way we achieve both to get
the personal view of the person as well as to involve him in the process. It is
good practice that this question is the second one, following the introduction.
Once this is done, we can start the interview process by using the so-called
‘trigger questions’. These are questions that form the starting point for a
conversation but, on the other hand, the agenda of the conversation is
influenced at a minimal level (Van der Heijden, 1996: Ringland, 1998). A set of
questions of that kind, known as ‘ the seven questions’, was found to be very
effective towards that (Van der Heijden, 1996: Ringland, 1998); these are
presented below.
The first three questions are designed so that we can derive from the
interviewer his concerns about the business environment as well as their beliefs
about the uncertainties of it. These questions can be either asked directly or by
using the method of the clairvoyant. The clairvoyant is a person who can see
into the future; all we have to do is to ask the client to name three questions he
would ask a clairvoyant if he had one in front of him. The advantage of the
latter way of asking the questions is that it makes the process ‘lighter’ without
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losing the amount of information we want. The second question is introduced as
soon as there is nothing to be added at the first question and, in essence,
requires the development of a ‘good’ scenario on behalf of the interviewee. In
order to obtain that, the facilitator asks him to answer the three questions
provided that the future turns out to be good in favour of the company. The next
question is pretty similar; the only difference is that the interviewee is asked to
answer those questions in case that the future develops in a unfavourable way
for the company- this way the client reveals his worst fears about the future. We
should, finally, note that the ‘good’ and ‘bad’ scenarios are adopted as terms
only because they trigger ideas; generally, this method leads to poor quality
scenarios.
Once the previous questions are answered, we can move on to the next
question that concerns the culture of the organisation. The client is asked to
identify those events from the past that he thinks are useful and worthy to be
kept as guidelines in the future. The facilitator might find details about existing
organisational ‘myths’; these are stories known to everyone in the organisation
and characterise its culture being, at the same time, a very effective way of
communicating the organisation’s values.
The fifth question is about the important decisions that the organisation needs
to take in the short term. We should note here that there is no clear definition
about the length of that period; it should be, however, sufficient to cover any
major decision the company has to take. By this question, we aim at finding
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what is troubling the client’s mind at the present; these are areas that scenario
can help.
The major constraints imposed on the organisation, both from internal and
external factors, are of interest as well. The internal constraints might be due to
political issues or they might be because of the organisation’s culture whereas
the external constraints might be from the competitors, for example. Those
constraints are very useful in order to set the context for the scenario.
The last question aims at spotting of the values system of the interviewer. In
order to identify that, he is asked to think of a period in the future when he
would have left his current position, due to either retirement or promotion, and
name what he wants to be remembered for. Furthermore, if we want to remove
all constraints, we can ask the client to imagine that he is in total control of the
situation and answer the same question.
6.3.5 Interview techniques
As far as the interview process itself is concerned, there are some issues
related to it we should take into consideration. First of all, as mentioned above,
the conversation should be as relaxed as possible in order for the interviewee to
feel more comfortable. This raises an issue since there is a need of recording
everything said for the formulation of the scenario agenda afterwards.
A way of doing that is to directly record on a tape the whole conversation.
The efficiency, however, of this method is under question and whether it is
suitable or not for the specific situation depends very much on the culture of the
organisation. The person who is interviewed may feel uncomfortable in front of
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the tape, thinking of unpleasant situations that will emerge if tapes go to wrong
hands.
Another technique, which is by far the most popular, is to take notes during
the interview process. In order to make it easier for the interviewer, two persons
conduct the interview. They can even change roles during the interview. It is
good practice for the two interviewers to compare their notes after the end of
the interview; most of the times someone would have written something else
than his colleague.
A second issue is that of the identification of the most suitable persons for
being interviewed. The problem becomes even bigger, if we think that all
projects have certain time constraints. There is no ‘magic’ number; however if
we conduct between ten and fifteen interviews, in most of the cases this will be
sufficient (Van der Heijden, 1996). Sometimes, it is better to interview more
people; for example, when we want to create a sense of ownership across the
management team.
The analysis of the interview notes is another critical point. This includes the
process of the interview notes as well as the judgement for which of them
should be further processed. The criterion for this could be their relevance to
the way the company reacts to signals from the outside environment.
6.3.6 Interview analysis
The next step is the analysis of the interview results. The analysis is
conducted in several stages. The first stage is to divide the interview notes into
two categories: those concerning the organisation and those concerning the
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environment; the criterion is whether the organisation has control over that
issue or not. This division is necessary since almost every project deals with the
organisation’s reactions to environmental changes. We should, note, here that if
some statements have both an organisational and an environmental aspect, we
should classify them under the environment headline.
Once this step is completed, we have to further sort, cluster and link them. It
is important not to have any clustering rules in advance, but do that through a
cause and effect relationship. We, then, can go through the clustering process
again and look for further similarities and patterns. Finally, in order to do the
grouping we can make use of, for example, post-its if the number of statements
is relatively small; in the opposite case a computer software package is needed.
The process described above is continuously repeated until results are
satisfactory; one way for checking it is whether the clusters formed are
independent- in other words if an idea belongs to one and only one cluster. The
analyst should illustrate any common and different views within the same
cluster, as this will form the base for further discussion.
6.4 The scenario agenda
The scenario agenda is the first outcome of the process mentioned above. It,
generally, consists of five broad areas (Van der Heijden, 1996). These are
problematic areas for the client where scenarios can be proven useful. In fact,
there is no need to go beyond this number given that the areas have been chosen
in a way that they are independent. If more than five themes have emerged, it is
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good practice to involve the client in a ranking exercise so that the most
important areas would be spotted.
Another debatable issue is that of the ‘organising question’ (Van der Heijden,
1996). This is the case since there are advantages and disadvantages associated
with it. The obvious advantage is that it gives a strong focus on the project and
ensures that the outcome is of high relevance to the client’s concerns. On the
other hand, it might cause restrictions to the thinking process since the purpose
of the project is to consider alternative views of the world.
Apart from the scenario agenda, a second outcome of the process is the
internal agenda. This is the case since in most of the interviews, the
interviewees talked about the ‘goods’ and ‘bads’ of their company- concerning,
for example, their colleagues or the culture of the organisation- as well; this
data can be used in order to understand the so-called ‘business idea’ of the
organisation.
Finally, the team should decide on the horizon of the project; in other words
how many years in the future should the project look into. This will depend on
the impact that the decision will have on business; in most of the cases,
however, it is around twenty years (Van der Heijden, 1996).
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Chapter 7
Uses of scenario planning
7.1 Introduction
Scenarios, as opposed to other planning methods such as forecasting,
simulation and portfolio analysis, give us the opportunity to look in the far
future where uncertainty is very high. It is because of that fact that scenario
planning was introduced and adopted in a wide range of applications; from the
formulation of the corporate planning of a company to customer-driven
planning and from planning for technology investments to innovation planning.
In this chapter, we will focus on three areas where scenario planning is
applied: the area of corporate planning, the area of technology investments and
the area of customer-driven planning.
7.2 Scenarios in corporate planning
7.2.1 Introduction
We are living in a rapidly changing world; the environment changes at a very
fast pace, a fact recognised by every organisation. In order to cope with these
changes, companies are reorienting their planning processes; there is a move
from forecasts- with a strong quantitative element- that have difficulties dealing
with discontinuities to more qualitative techniques (Klein and Linneman, 1981).
In the context described above, the use of scenarios is constantly increasing.
As an example for illustrating their utility, we can think of someone wanting to
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climb a mountain (Schoemaker, 1995). A traditional planning method would
have equipped this person with a detailed map of the region; however, this is a
two-dimensional map. In addition, further variables like weather conditions and
any dangerous animals living in that area are ignored. Scenario planning, on the
other hand, will provide this person with stories about how the elements of the
system will interact so that he will be able to prepare himself in a better way
against the difficulties he will face.
The importance of corporate planning for a company was realised in
seventies; the oil crisis was the critical event that made companies realise they
had to look far into the future and formulate their strategy respectively. The
emphasis on long-term planning contributed to the spread of scenarios; the first
companies that applied the method were companies from the oil industry- like
chemical companies- followed by the car industry since they were the first
industries affected by the oil crisis (Ute von Reibnitz, 1988).
7.2.2 The business corporate planning strategy system; the five
planning levels
In order to describe the applications of scenarios in corporate planning it
would, undoubtedly, be useful to describe a typical corporate strategy system.
An illustration of this system is shown below (Millet, 1988).
The first stage of this model is the corporate definition and purpose. It is
essential for every company to have an identity. It emerges from the answers to
the following questions: (please refer to the next page)
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Table 28 Three questions to ask for formulating the business’s identity
(Source: Millet, 1998)
Furthermore, we should note here that this identity should derive as the
combination of the external environment, which includes the customers as well
as political, social, technological, legal and other issues, and the internal desires
of the company’s owners; these two should be identical in an ideal situation.
As far as the corporate definition is concerned, we have to note that its
‘success’ is measured by the degree to which it is understood by the staff and
put into action. Likewise, with respect to the characteristics it should have it is
important not to be too detailed and lengthy; it should be accessible to anyone
in the company and it should be recognised from the moment someone enters
the reception area (Ute von Reibnitz, 1988). Despite those elements, however, it
is a common mistake for many companies to produce too comprehensive
identities, which are very complex and the essence is lost.
Once this step is completed, there is a need for defining certain goals as well
as measures of performance to monitor its progress. The goals could be both
long-term and short-term; they can also be qualitative or quantitative. The
measures of performance can, for example, be the market share of the company,
the sales volumes or the profit margins.
What business are we in?
Who are our customers?
Why are we in that business?
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The next step in the process is the identification and evaluation of strategic
options. These should be in compliance with the goals set in the previous step
and mainly involve the product mix and the marketing strategy of the company.
The evaluation of those options comes next; this is more difficult since the
options, in their generic forms at least, are more or less predetermined. In order
to evaluate the options available, we can test them against macro and micro
models as well as against qualitative and quantitative criteria; the culture of the
company and the mix of different peoples and ideas are additional criteria for
our choice. In general, however, there are eight factors against which we can
select the optimal strategy; the first four are related to the external environment
while the last four are related to the internal environment (Millet, 1988)- these
factors are presented below.
Table 29 Eight factors for evaluating our strategy
(Source: Millet, 1988)
Customers response (acceptance or rejection)
How it responds to predictable market conditions
How competitors react to it
How our allies react to this strategy
If it is in compliance with the corporate definition and the goals set
If it can be successfully implemented given the current resources of the
company
If it ‘passes’ the financial risk test
If it is in compliance with the management’s priorities
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After this step, one strategy is chosen to be put forward. This is done, in most
of the cases, by the top management. On the contrary, everyone should be
involved in the implementation of the strategy. This is, in turn, put in action and
the reactions from the business environment serve as feedback to the process.
An alternative model for corporate planning is the ‘five levels planning’ (Van
der Heijden, 1996)- this is presented below.
Figure 11 The five levels of corporate planning
(Source: Van der Heijden, 1996)
Strategic planning is at the top level. It is the equivalent of corporate
definition and purpose in the previous model as it involves the exploration of
the future and the expression of results through the business idea, which
answers the three questions previously mentioned. Strategic planning takes
place at both the corporate and the business level; in fact it is better to develop
the business idea first and then deal with the corporate business idea- this is the
case since the corporate competitive advantages are based on the businesses’
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ones. The outcome of this procedure is a set of strategic objectives, which is the
second step of the model described above. Each one of those objectives should
be expressed in a short sentence and describe where the company would like to
be at the end of the horizon year.
Masterplanning is the second level of planning; it is mainly related to the
‘strategic options’ part of the first system but it incorporates the ‘management’s
priorities’ part of the second step of the first model as well. It is about linking
projects together so that economies of scale can be achieved. The result of that
stage is the allocation of resources across the organisation.
Once this stage is completed, we can move on to project planning. The latter
is conducted with project planning and incorporates parts of the two last stages
of the corporate system model. In general, the team of people who would be
responsible for the projects is brought together in a workshop and a facilitator is
used (Van der Heijden, 1996). The process followed can be divided in the
following steps:
Table 30 The process followed in project planning (Millet, 1988)
The objectives of the workshop are explained
The team discusses the objectives they have to meet as well as to identify
areas where action plans are required
A gap analysis is conducted
A list of actions need to be taken is formed
Action plans are formulated
The result of the workshop is reported
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The next level in the planning cycle is budget planning. It involves the
setting of targets as well as the development of a quantified plan for the results
of the previous levels of the cycle. It incorporates every step listed in the
previous model except the corporate definition step and is needed for a number
of reasons. These involve the availability of resources and the need for a
business plan to be presented to the stakeholders- who are the people we need
to ‘keep happy’- as well as for expenditure limits.
Appraisal is the last level involved; it is about the efficiency of the actions
taken and is linked to the last stage, the strategy stage, of the first model. It uses
the performance measures set earlier and if a significant difference occurs from
the targets set, it is an indication that corrective actions should be taken.
7.2.3 Uses of scenarios in corporate planning
In the previous chapter, a typical model for formulating the firm’s corporate
strategy was, in brief, described; likewise, a similar planning model consisting
of five levels was highlighted in order to indicate the planning cycle. Scenario
planning is proven to be a very effective tool, which we can use at various
stages of this process.
The first stage where scenarios can be used is at the development of a
company’s master strategy; in other words the identity of the company- its
definition and purpose (Ute von Reibnitz, 1988: Millet, 1988: Van der Heijden,
1996: Fahey-Randall, 1998). In order to do that, a manager needs information
on how the future business environment will unfold; how the external
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environmental factors- political, economical, technological and social- will
affect the company’s businesses. The method of scenarios can be employed in
order to ‘forecast’ to some extent the future developments; it will provide us
with alternative, internally consistent, futures. We should note, here, that the
purpose of scenarios is not to provide accurate answers to short-term questions;
it provides us, as mentioned above, with a set of future conditions against which
the company should secure itself. The utility of scenarios in that stage lies,
therefore, in the fact that we reduce future uncertainties to some extent.
The second area where scenarios can be used is that of evaluating goals and
strategies as well as assessing the current ones (Ute von Reibnitz, 1988: Millet,
1988: Van der Heijden, 1996: Fahey-Randall, 1998). As far as the first is
concerned, every company needs to test its strategies and develop, at the end, a
core strategy, which would be compatible with the environmental conditions.
Scenarios, as mentioned above, can be used in order to generate ‘alternative’
futures; the same events can be chosen from all scenarios and build a strategy
based on them. In addition, for the strategy to be more flexible, we can test our
innovative actions decided after examining the first scenario against the next
one; if they can be applied against that scenario as well, then we can introduce
them in the core strategy. It is the case, sometimes, that we will have to modify
the activities before transferring them into the other scenario; however, around
two thirds of activities are, this way, transferred to the core strategy (Ute von
Reibnitz, 1988).
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With regard to the assessment of current goals and strategies, it is important
for every company to check on a continuous basis its strategies against
developments taking place in the business environment. In order to do that, we
can develop the scenarios on an individual basis; once this is done, we can
check our strategy against them. This is done by the aid of the so-called
scenario descriptor list (Ute von Reibnitz, 1988); that consists of the
descriptors- the driving forces in other words- of each scenario along with their
possible development. We can, afterwards, rate our current strategy against
each scenario; the rating procedure should not be strictly quantitative but it can
include qualitative elements as well such as our beliefs on the degree to which
the strategy will be sufficient against the scenario under consideration.
Because of their use in the evaluation of the company’s strategy, scenarios
can provide us with information on various subjects (Millet, 1988). The first
area in which we can get additional information on is the area of marketing. In
particular, we should be able to identify any trends in demand for the existing
products and services of the company. If the results from different scenarios
show a high variation, then actions should be taken against it; this issue should
be addressed in parallel with the formulation of the company’s master strategy.
A second important area we should consider is that of the external
environmental conditions; companies do need to know whether market
conditions, for example, will favour them in the promoting of their products or
not and formulate accordingly their market strategy. A company that produces
alcoholic drinks for example should go through scenarios where regulations are
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very strict for its products and an official campaign is launched against the
effects of alcohol in our health.
Furthermore, scenarios can be used for the identification of new product
opportunities. It might be the case that the demand for a product is not growing
or, even worse, is declining; in that case, a substitute product might be found.
This will be done by considering the customers needs in the future so that we
can adjust our strategy.
An important factor that can give competitive advantage to a company is the
use of new technology; however this is related to high levels of expenditure
along with human resources management and plant layout issues that need to be
resolved. These technological considerations should be included in the firm’s
strategy and can be addressed by scenarios.
Furthermore, it should be-undoubtedly- useful if the company could have
information on competition; this includes both similar products or services as
well as substitute ones. We can develop scenarios where we would be able to
incorporate our competitors major strengths and weaknesses and ‘foresee’ how
the future will unfold; it is a good idea to view those scenarios in combination
with the scenarios on the business environment so that we will have the whole
picture.
Finally, scenarios can give us an idea about the uncertainties that a company
will face in the future. This type of information is essential in order to decide on
the amount of flexibility we should allow for in our master strategy; this will, of
course, depend on the company’s culture as well (Millet, 1988). If the
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developed scenarios show a high level of variation, then its strategy should be
characterised by a high level of flexibility as well. It is, however, good practice
to keep a close eye to the developments and formulate a contingency plan in
order to respond to changes.
7.3 The scenario method for technology investments
7.3.1 Introduction
Technology is a very important asset for a company; therefore, any decision
concerning its technological infrastructure is crucial and needs to be carefully
examined. This is the case since if the choice of investing in a new technology
is correct, the company is gaining competitive advantage against its competitors
by using state-of-the-art technology; on the other hand, if we take the wrong
decision the company’s future is in risk.
The best choice, however, we can make is a technology that can be
successfully used by the company in several future markets (Fahey-Randall,
1998). If the choice is made only on the basis of some either financial or
production capacity measures, it is highly probable that those responsible for
the project will fail to anticipate potential future market opportunities. This is
the role that scenarios will play; to help managers evaluate the technology
needed for ‘future products’.
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7.3.2 The scenario method for technological decisions
The first step we need to undertake in a scenario-based technology
investment project is to scan the business environment- political, technological,
social and economical- in order to identify trends, issues and factors that could
affect our business; these factors are called business drivers (Fahey-Randall,
1998). It is important not to place borders on that initial activity; it is, also,
important not to ‘judge’ the influence of the factors at this stage.
Once this is done, the results need to be clustered in order to define the
dimensions around which our scenarios will be built. These are macrolevel
issues that will define the planning environment (Ute von Reibnitz, 1988:
Fahey-Randall, 1998). Furthermore, there are certain rules associated with
dimensions; these are presented below (Fahey-Randall, 1998). (please refer to
the next page)
Table 31 Rules associated with dimensions
(Source: Fahey-Randall, 1998)
The next step after the spotting of dimensions is to put them in a matrix from
where we will be selecting the scenarios. It is, also, important to select the
They should be defined at the macrolevel
We should not be able to predict how they will unfold in the future; their
development should be characterised by uncertainty
Our organisation should not be able to control these factors
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smaller possible number of scenarios that incorporate both the opportunities
and the threats that our business will face in the future.
We should, note, here that including technology in the business drivers
category can create many problems; this is the case since we face difficulties
defining the technology dimension when the developed scenario will be used
for technology decisions. This is the case since it is very difficult to define that
dimension; we can try some headlines like ‘high growth of technology’ or ‘low
growth of technology’ but it is highly unlikely that all future technologies will
grow at the same pace.
Scenarios, on the other hand, should provide us with information on the
businesses’ and customers’ needs so that we can anticipate the product’s
demand as well as the emerging technologies. If the project horizon is,
however, extended- about ten to twenty years- then specific information on
technology decision making is required (Fahey-Randall, 1998). In addition,
there are certain trends that should be included in every scenario- these are
issues like interest rates and inflation. Moreover, effort should not only be put
in finding numerical expressions for those drivers but in assessing any existing
interrelationships as well. The culture of the organisation should also be tested;
it should not be an obstacle for certain assumptions- that competitors will need
to invest heavily in information technology in order to enter the market (Fahey-
Randall, 1998).
The next step is to take those alternative worlds as reality and to anticipate
which products should the potential customers want. They should, then, try to
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work out technologies for producing those products. The latter can be achieved
in two ways.
The first way of doing that is to identify a common set of technologies in
order to produce the common products in all scenarios. However, it does not
allow us to understand the route followed in order to end up with this product
list.
Another approach to that issue is to identify a set of totally new products;
these products should be needed in all scenarios. This is, then, used to evaluate
alternative technology solutions. We should end up with a core set of
technologies which will accommodate the future demand; our finally step is to
link that set to the strategic objectives of the company.
Summarising, we see that the scenario approach for technological decision
making can offer many benefits to the company under consideration. It gives
the company the opportunity to incorporate the future customers’ needs to their
technological planning. Moreover, in the case of big changes in technology-
technological discontinuities- those companies will act at a much faster pace
and with much higher confidence than its competitors. Scenario planning can,
therefore, give companies a competitive advantage.
7.4 Customer-driven scenario planning
7.4.1 Introduction
As time goes by, we are experiencing major changes in markets; especially
nowadays the development and popularity of Internet has made possible for
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everyone to make his shopping from anywhere around the world. The effect of
markets globalisation has attracted the attention of many companies and can be
viewed as an opportunity for a company to expand its business; there are many
questions, however, raised- for example about the security of transactions over
the Internet. In addition to that, changes have taken place in the area of
customers’ needs.
The role of customer-driven scenario planning is to help companies
overcome such difficulties as well as communicating these changes within the
organisation, making it capable of taking actions against them.
7.4.2 Customer-driven scenario planning
As mentioned above, customer-driven scenario planning address issues like
how market segments or distribution channels will change and unfold in the
future; in addition we are interested in knowing the impact that changes in our
customers behaviour in the future will have on our business. Finally, we would
like to know who would be our new ‘future competitors’ to whom our loyal
customers will turn to (Fahey-Randall, 1998).
This planning approach is different from the traditional one; this
distinguishes between predetermined events and critical uncertainties. The
distinction is done on the basis of the extent to which the development of a
factor is predictable or not; critical uncertainties, on the other hand, can not be
predetermined but can be thought of as questions requiring answers (Wack,
1985a). In order to get best results, it is better to concentrate on a small number
of uncertainties, which have a heavy impact on our business.
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We, then, use those uncertainties as the basis of our scenarios. In order to
construct our scenarios, we combine different developments for each one of the
key drivers; we should, of course, be careful so that these scenarios are
internally consistent- in other words, the developments of the key drivers do not
contrast. One of those scenarios, however, should be ‘surprise-free’; in other
words the development of the key drivers will be according to the corporate
planning. This is necessary in order to keep the scenario planning project going
– if we present totally new to the managers the most probable development is
that they will lack confidence in the method, as in the Shell’s case.
As far as customer-driven scenario planning is concerned, we can distinguish
between three phases: those are the constructing, exploring and responding
phases (Fahey-Randall, 1998). These are illustrated in the following figure.
At the first phase, we are at the beginning seeking answers to questions
related to our customer base; these include questions on the spotting and
definition of our customers and the categorisation of them. Another set of
questions we might address at this stage is about the priorities of our customers’
categories as well as how the identity of the customers belonging in the
category which ‘leads’ the others can change. If we are in the manufacturing of
sports shoes business this category might, for example, be the athletes. We
should note, here, that the best criterion for conducting the categorisation is the
behaviour of customers (Fahey-Randall, 1998).
Moreover, we shall consider the possibility of new distribution channels
emerging as this will affect the way our customers reach our product; if they
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change attitude towards the ‘traditional’ distribution channels, we should be in
place to accommodate that change. Finally, we should pay attention to how the
critical uncertainties identified in scenarios will affect our clients.
The second phase of a customer-driven scenario project is, as mentioned
above, the exploration phase. The key questions that need to be answered here
are the identification, on one hand, of ways we can keep on meeting our clients’
needs profitably and, on the other hand, whether we should expect other
competitors’ appearing on the scene’. (Ute von Reibnitz, 1988: Fahey-Randall,
1998).
The analysis should be conducted in each customer segment, as these are
defined by the previous step. We should, now, put ourselves in the place of the
customers and assess any competitive prepositions. We should, though, be
aware of the fact that sometimes the preposition itself is not a threat but if two
or more are combined, this might form a threat- videos and video rental clubs is
a good example (Fahey-Randall, 1998).
The third phase of the project is the responding phase; in that, we are
concerned with ways of responding effectively to the changes identified in the
previous steps. There are three types of response, which can be summarised by
the following headlines: just do it, place your bets and monitor closely. The first
approach is related to issues common in all scenarios that will almost certainly
occur; therefore, we should start thinking about actions needed against them.
The second category consists of issues that are very important in the scenario
they appear; we have to prepare ourselves in case they occur. Finally, the last
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category includes those trends that can not be dealt with at the present due to
very high uncertainty; they should, however, be closely monitored.
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Chapter 8
Case Studies
8.1 Introduction
We have, so far, studied the theoretical aspects of scenario planning; how it
emerged, why it is ‘superior’ to other planning methods, some of its
applications in industries and its main generating methods. On the other hand,
in order to have the whole picture in front of us, we need to study how scenario
planning was applied in a specific company’s context. In this chapter, therefore,
we will concentrate on two ‘real life’ examples; the cases presented are the
British Airways and the Shell’s, which is the pioneer in this field cases
respectively.
8.2 British Airways
8.2.1 Introduction
British Airways was, some years ago, a state-owned company with its
accounts showing that it was losing money; since then many things changed.
The company is, now, generating profit and is a publicly listed airline (Moyer,
1996: Ringland, 1998).
It was, however, due to the Gulf War that a recession appeared; the airline
industry, as a whole, lost £10 billion in that period while British Airways still
had profits. The financial results of 1995 indicated a turnover of £7177 million
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with a profit, before taxation, of £452 million; moreover, it is flying 36 million
people to 194 destinations in 82 countries (Moyer, 1996).
The industry’s environment, however, is very turbulent and is constantly
changing; therefore traditional short-term planning techniques. Likewise, it is
difficult for managers to look far into the future leaving their current job aside;
the official planning horizon is, anyway, four years.
Because of these difficulties, the corporate strategy department decided to
introduce the scenario planning methodology in 1994; a description of the
methodology followed follows.
8.2.2 The methodology
The process was divided into two parts; the first part was called the ‘scenario
development’ phase while the second was called the ‘scenario workshops’.
DeAnne Julius, the chief economist of the company, was responsible for the
first phase. A development team was formulated; it consisted of eight people
whose origins were from the corporate strategy, the government affairs and the
marketing departments- in addition to them an external consultant was used at
that phase of the project. The group of people mentioned above started working
in March 1994 and finished at the end of October 1994.
Furthermore, it was considered important to gain top management support
for the project. In order to obtain that support, a group of fourteen people,
directors and senior managers from all the major departments of the company,
was formed; it was called the ‘Halo Group’. Their task was to review the
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activities undertaken by the development team and give their opinion and
advice at the end of each of the major project tasks.
The first step the development team needed to undertake was the
identification of the external factors that influence their business- the airline
business. The method used was to conduct individual interviews with managers
in charge of various departments; in addition, five group interviews were held
with specialists from areas such as air transport regulation and information
systems for the airline industry (Moyer, 1996: Ringland, 1998). The
interviewees were asked to respond to a set of questions, which was designed
beforehand- detailed notes were taken under the condition that the name of the
interviewee will not be revealed.
These notes were used in order for the ‘Official Future’ to be defined; this
was, basically, a summary of the assumptions already made by the managers of
British Airways. Likewise, the external issues were classified into three main
categories; these were the predetermined elements, the key uncertainties and the
driving forces- the latter being issues that directly affect the industry such as
developments in information technology. A debate followed and eleven of
those issues were chosen for further research. The Halo Group ‘approved’ that
findings- to the extent that they reflected the official thinking of the company
about how the future would look like.
Once the issues were identified, there was a need for ‘predicting’ how they
will unfold in the future; the understanding of the critical points that contribute
towards a certain development direction was essential. Every member of the
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development team was assigned one or more issues for further investigation;
they were supposed to conduct more research as well to contact consultants in
order to develop their theory about how the specific issue will emerge in the
future.
The next meeting of the development team took place in the middle of July
in 1994; they discussed what they have found so far and decided on the
relationship between growth and governance being the main issue. They, also,
decided that two stories would be developed covering a time horizon of ten
years; the writing started in July of 1994.
The outcome, at the beginning, was draft stories as well as some slides that
highlighted the main points in a graphical format. The initial audience was
other team members and experts on these issues; a presentation took place at
the Chairman’s Committee as well in order to ensure approval. As internal
consistency is a major request for scenarios, the final version of the stories was
written by the consultant and finalised and approved by the Chief Economist
who was in charge of the project. The Halo Group gave its approval to those
stories as well.
In the meantime, numerical data were collected in areas like traffic and
economic growth in order to see how they will unfold in each story. The
development team decided that the levels of world economic growth would be
similar at the end of the horizon year; the decision was taken in order to avoid
people from thinking that the stories built are each other’s opposite- a major
pitfall in scenario planning projects.
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Finally, two scenarios were produced; both had as starting points four driving
forces- these were technology, education, world trade and finance.
Figure 22 The driving forces
(Source: Ringland, 1998: Long Range Planning, 1996)
The first scenario was given the title ‘Wild Gardens’ (Moyer, 1996:
Ringland, 1998); in that it is not possible to build new structures of governance.
The shape of the future is the result of a continuous battle between winners and
losers; a schematic illustration of this scenario can be found in the figure below
(please refer to the figure below).
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Figure 13 Schematic illustration of the ‘Wild Gardens’ scenario
(Source: Ringland, 1998: Long Range Planning, 1996)
The second scenario was given the title ‘New Structures’ (Moyer, 1996:
Ringland, 1998); in that it is possible to find shared values and new ways of
organising. The latter ensures that growth will continue at a manageable way. A
schematic illustration of the second scenario can be found in the figure below.
Figure 14 Schematic illustration of ‘New Structures’
(Source: Ringland, 1998: Long Range Planning, 1996)
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The second phase of the project comprised the scenario workshops; these
were lead by Rod Muddle who was the Head of the Planning Department and
the representative of Corporate Strategy in the planning process (Moyer, 1996:
Ringland, 1998). In order to design and run the workshop phase, a team of five
facilitators was employed; work begun in June of 1994. The following two
months were devoted to training and the first four trial workshops took place in
October 1994.
The participants in those workshops were supposed to hear and discuss the
scenarios; these should be used in order to test current strategies and develop
new ones. This was accomplished by making use of brainstorming or other
ideas generating techniques; the ideas were recorded and the most ‘popular’
were summarised into short strategic statements. Once this was done, the
established strategies were checked against both scenarios; if a strategy worked
well against one scenario but not as well against the other, a discussion session
followed about how it could be improved. A discussion, finally, on actions
required for this strategy to take place followed and feedback was gathered.
The first potential participants were directors and senior managers who were
responsible for the major areas of the business plan. They were targeted and,
then, the facilitation team met with them in order to explain the benefits and
volunteer to organise the workshop. Everyone, however, in the company could
attend the workshop and plan its objectives; on the other hand targeted
customers had priority over other individuals. The output of the workshops was
confidential and the notes were received about a week after the workshop. The
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feedback was received after about one month of the workshop and a meeting
with the client was held in order to prioritise actions, if needed.
Finally, with respect to the Halo Group it continued to play an important role
at this phase too. The workshop process had to get their approval as well as the
targeted clients’ approval. In addition, they received feedback on the progress
of the workshops; many of its members were early clients anyway. The amount
of effort, finally, required to set up a workshop was about four to five man-
days.
8.3 Shell
8.3.1 Introduction
Shell, most specifically The Royal Dutch/Shell group of companies, is the
pioneer of scenario planning. It was its planning department, led by Wack and
Newland at the time, in early seventies that introduced that technique as a
response to the high uncertainty that characterised the oil business and made
things very difficult for traditional forecasting methods. At the following pages,
a description of how the company moved from the ‘Unified Planning
Machinery’ (UPM) planning method to scenarios can be found.
8.3.2 The methodology
First of all, we need to understand that the uncertainty is not a statistical
deviation from a known distribution of events; it is rather a basic feature of the
business environment (Wack, 1985a). An appropriate planning method should,
therefore, be found.
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As far as Shell is concerned, a new planning system- the Unified Planning
Machinery- was introduced in 1965; its task was to provide planning details for
the whole of the company’s activities- from drilling for oil till delivering it to
the gas station. The planning horizon of the system was six years; the first year
should be planned in detail whereas the next five years in more general terms.
It was very soon realised, however, that due to the long lead times that
characterise the oil business the planning horizon should be expanded. The
company, therefore, decided to conduct a study about the business environment
till the year 2000. The study revealed that many changes will take place in the
oil’s market; some of them were that there will be a switch from buyer’s market
to seller’s market and that the oil companies will become less flexible and
reactive to changes (Wack, 1985a).
A new planning method had, therefore, to be used. As a response to that,
twelve of the major companies in the Shell group were asked to look ahead for
fifteen years as a planning exercise. Pierre Wack was at the time working for
the French department of Shell; in addition he was familiar with the scenario
approach of Herman Kahn, the president of RAND corporation (Wack, 1985a).
It was then that the first scenarios were generated. There were, first of all,
two uncertainties associated with France; the first was the availability of the
major oil competitor- natural gas - and the second uncertainty was the way the
French government would manage energy which at that time was in favour of
the national companies against multinationals. On the other hand, as a member
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of the European Community it would have to comply with the European
Community’s policy, which was characterised by liberalisation.
We, therefore, have two options available for the government’s policy- stay
as it is or adopt the liberalisation policy- and two options for the availability of
gas- low or high. By combining those we can get four scenarios; these were the
first scenarios produced in 1970. It was, however, only in 1972 when the
methodology of scenario planing was expanded to the central offices and some
large companies of the group. In 1973, it was recommended as the official
planning procedure and the old planning system- the Unified Planning
Machinery- stopped existing.
The scenarios previously mentioned fulfilled the basic request; they were
internally consistent. On the other hand, no action could be taken on behalf of
the management team; the reason for that was that only the raw uncertainties
were presented and combined without the forces that drive their development.
This is the reason why they should be restructured in order to incorporate those
forces- these are the so-called second generation scenarios.
The first step undertaken was to study in further detail the important factors
for Shell businesses; those were the oil producers, the consumers and the
companies. There were important behavioural differences since self-interest
determined their concerns and actions (Wack, 1985a). In the case of Saudi
Arabia, for example, the income for the oil production would have been so high
that it would have not been possible for the government of that country to spend
all of it. A certain amount of money would, therefore, have to go to the bank
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where it is, by far, more insecure than ‘being’ under the ground in the form of
crude oil. (Wack, 1985a)
The oil producers were, then, analysed one by one according to their oil
reserves and their ability to spend the money they get in a productive way. It
was clear that their interests were different; those conflicting interests will, of
course, be reflected to their strategies. The results are shown in the following
matrix (please refer to the following page) .
Figure 15 The major oil exporters
(Source: Wack, 1985a)
Reserves
Limited Ample
Absorptive
Capacity
Limited
Ample
Group I
Libya
Qatar
Group II
Saudi Arabia
Abu Dhabi
Kuwait
Group III
Algeria Nigeria
Venezuela Iraq
Indonesia Iran
Group IV
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Further to that analysis, two families of scenarios were produced each one
consisting of three scenarios. The A-group of scenarios projected that a
disruption in the oil supply will happen at the same time with the Teheran price
agreement in 1975- apparently the timing was wrong since it occurred in 1973.
The reasoning, however, for this prediction was very well structured; on one
hand the oil producing companies would have either reaching their technical
limits or it would be better for them to leave the crude in the ground for
financial reasons. Likewise, by the end of 1975 the oil price would significantly
increase.
This predetermined element was the cause for the development of three
scenarios, which comprised the A-family of scenarios. These were the most
probable outcomes; however, because they were not in line with the official
view at the company they were not so effective; an indication of how important
is for the ‘Official Future’- or surprise-free scenario- to be incorporated in the
family of generated scenarios.
In response to that, the B-family of scenarios was developed. The basic
assumption was that somehow a sufficient energy supply would be available
(Wack, 1985). The first scenario of that family- the B1 scenario- projected that
it would take ten years of low economic growth in order for oil supply and
demand to match. On the other hand, this was impossible since the
industrialised countries considered the rise of unemployment unacceptable and
from 1972 onwards signs of an economic boom were evident.
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The second scenario of this family was based on the words of William
Ogburn (as cited in Wack, 1985, p.83): “There is much stability in
society...Social trends seldom change their directions quickly and
sharply...Revolutions are rare and evolution is the rule”. It was a rather
simplistic scenario where everything possible would happen; the oil producers
will keep on producing the oil and the consumers will lower the consumption
rates.
The third scenario was called the ‘three miracles scenario’; this was the case
since in order for that to come true three miracles were needed (Wack, 1985).
The first one was that the reserves necessary to meet the 1985 demand would
be found in each of the oil producing countries simultaneously; the chance
assigned to that event happening by the company’s experts was almost equal to
zero. The second miracle was associated with socio-political reasons; it was
stating that the oil producing countries would produce as much oil as was
required by the customer. The third miracle, finally, stated that there would be
no need for oil above the forecasted demand.
The above mentioned scenarios were quantified in terms of volume, price
and impact on both producers and consumers. The management team decided
to take actions immediately; they asked the operating companies of the group to
assess their strategies against two A-family scenarios using B2 scenario as a
sensitivity check. The scenarios were, also, presented to other managers within
the company as well; at the beginning there was a feeling that most of them
appreciated the technique but after a few months there was no change in most
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of the decision centres of Shell. This lead the people in charge of the planning
department to realise that the scenarios they had to produce would have to
challenge the manager’s microcosm.
The next generation of scenarios was the 1973 scenarios; as time passed by.
The disruption in oil supply seemed to be a predetermined event; more details
were not known- such as the time it will occur and the future price for a barrel
of oil- but all the signs indicated it will occur. It was, therefore, incorporated
into the surprise-free scenario.
In addition, some of the previous generation’s scenarios were abandoned;
more specifically the B-family. This was the case since the first scenario was
impossible to take place since a boom in the economies was the main
characteristic of this time. Furthermore, the three-miracle scenario- the B3- was
also abandoned since, as the name suggests, in order for it to take place three
highly unprobable events had to happen. The B2 scenario was an artificial
construct anyway.
Because of that boom in economies, it was difficult to convince managers to
stop the expansion strategy, two ‘phantom’ scenarios were created- those were
considered illusions by the planning team (Wack, 1985). In the first scenario
the discontinuity would delay for five years while in the second scenario it
would delay for fifteen years- the choice of times was not made in random
since they were representative for the oil business. A five years period is needed
for a new oil facility to produce results whereas fifteen years are needed to
amortise it (Wack, 1985). They were developed to serve as a utility loss
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function for Shell if in the name of planning for the discontinuity it did not
build the refineries. There were only two alternatives which could prevent
discontinuity from occurring; the first was the discovery of new oil resources in
places when absorbing revenues would not be a problem and a control- either
political or military- of the oil producers countries from the consuming
countries. Both had a very low, almost equal to zero, probability of occurring so
they were not considered further.
Finally, attention was focused on three elements of the business environment;
the first one was that alternative fuels options will develop at a very slow pace.
Moreover, even if other fuels were used for generating power this would not be
bad news for the oil producing countries since it was a low-value market.
Furthermore, the use of coal for heating would result in very high expenses and
the possibility of using oil for transport was very low since the expenditure
associated with it was very high. The second element was accidents that occur
due to many reasons- political, internal even physical events such as
earthquakes- were considered as being ‘part of the game’. The final element
was the relationship between the price and the volume of oil produced.
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138
Chapter 9
Discussion on findings
9.1 Introduction
It is commonly accepted that we are living in a turbulent environment where
change occurs at a fast pace. The same applies to the business environment as
well since many of the factors that contribute to its shape keep changing. As an
example, we can think of the wide spread of Internet- an application originally
developed for military purposes in sixties- which has now become part of our
everyday life. Many businesses have adopted Internet for doing business and
their products are accessible online - Argos is a good example. Furthermore,
many companies have adopted this method as complementary to the traditional
way of selling whereas for others this is the only way for contacting their
customers.
In addition, technology- in general- is advancing at a very fast pace. We are,
nowadays, capable of setting and achieving targets that we did not even dare to
think of in the past- the first tourist trip to the moon scheduled for 2010 is a
perfect example of such a situation. The situation is not different in the case of
business technology as well; automation and robotics is replacing manpower in
almost every task; the purpose for that is, however, a debatable issue.
In an environment like the one described above, managers need to
understand that forecasting techniques are not able to assist them any more in
the planning process on their own. This is the case since- no matter how
Chapter 9- Discussion on findings
139
sophisticated these techniques are- they extrapolate the past into the future
making the silent assumption that tomorrow will be like yesterday. A new tool
has, therefore, to be used.
Scenario planning, despite the fact that it was known since the Roman times
(Ringland, 1998), it was ‘reinvented’ as far as the business context is concerned
after the oil shock in 1973; between 1977 and 1981 the use of scenario as a
business forecasting tool was widely accepted (Schnaars, 1987). Pierre Wack,
as the head in the planning department of Shell, managed to transform the
company from the weakest oil multinational before the oil shock to the
strongest one after it (Mercer, 1995) by introducing scenario planning.
Despite that, there is still space for scenario planning to expand as a method.
In a survey conducted by the Turku school of Economics (Malaska et al, 1984)
among 1100 companies, it came out that only 36% used scenario planning. This
figure is smaller than the respective one for U.S. companies in 1981 but higher
than the figure in 1977, which was 22% (Linneman and Klein, 1983). In this
chapter, we will discuss the advantages of the scenario method compared with
forecasting and we will try to answer the question about which scenario-
generating method is the best. In addition, we will be discussing the benefits an
organisation can get by employing scenario planning as well as any pitfalls
involved in the method.
9.2 Scenarios compared to forecasts and simulation
Since the end of the Second World War, there was a very powerful trend in
favour of forecasting as far as business planning was concerned. It was a strong
Chapter 9- Discussion on findings
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belief that through forecasting methods- either quantitative or qualitative- we
can get answers to every question that is troubling us. Moreover, our answer
can be even more accurate if we combine a number of forecasting techniques or
if we take advantage of the advances in computers technology in order for the
calculations to be performed in a faster and more accurate way. We would,
thus, be able to have a picture of what the future is going to look like and adjust
our planning accordingly.
In real life, however, things are quite different; forecasting techniques, as a
whole, extrapolate the past into the future- they make the vital assumption that
trends will not change. On the other hand, the oil embargo came as a proof that
this is not always the case; likewise, many other examples of forecasting
failures are known (Beck, 1982: Zentner, 1982).
The reason for that is that the business environment is characterised by high
uncertainty as opposed to the stable environment that forecasting techniques
need in order to deliver ‘good’ results. There is, therefore, a need to look for
alternative planning techniques.
Scenario planning is a technique that let us cope with that uncertainty. This is
the case since it provides us with a framework of possible alternative futures
against which our strategy can, and should, be tested. British Airways and
Shell, as mentioned in the previous chapter, used it for that purpose and the
implementation was successful for both companies. Shell became the strongest
oil multinational company after the embargo (Mercer, 1995) and British
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141
Airways came out of the recession profitable while the other airline companies
have lost a lot of money.
It happens many times, however, that scenarios are misinterpreted and
considered as forecasts. This is not true for a number of reasons (Beck, 1982).
First of all, the results of the forecast are based on probabilities’ distributions-
either theoretical or defined by the user- whereas a scenario is a description of a
possible future on the basis of grouping internally consistent developments of
some of its variables.
Furthermore, in the case of forecasting the ‘silent assumption’ that we have
taken into consideration every possible variable is made. On the other hand, this
is not the case with scenarios which present a number of the key factors that
will influence our business in the future as well as the way this is going to
happen.
Another difference between forecasting and scenarios is the ‘ proportion’ that
each has in the decision making process. A forecast is regarded as an expert’s
judgement, a ‘black box’, which should be either accepted or rejected. On the
contrary, scenarios play an educational role; they help the manager
understanding the drivers of the future, by understanding what causes the
change and not just spotting it, and test the company’s strategy against a set of
possible future outcomes.
We shall note, however, that what mentioned above does not imply that
forecasting should not be used. On the contrary, forecasting was applied in the
British Airways case study as a mean to see how data will evolve in the future
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once the framework was set; we can predict the predetermined elements and
quantify the decisions taken for the alternative developments of the other
factors. We should, on the other hand, be aware of the constraints of the method
and use it in the appropriate framework.
As far as simulation models are concerned, they are useful and within a
certain context they can be of value to a company; as we saw in the previous
chapter, Shell used simulation models once the scenarios framework was set. It
is, on the other hand, not advisable to use simulation alone since that will give
us only one possible future outcome. We can make use of simulation models as
a learning tool, so that managers can experiment with the scenarios developed
and specify courses of action to be taken.
9.3 Advantages of introducing scenario planning to a company
As mentioned earlier, it was only after the oil shock that scenario planning
gained wide acceptance in the business world. A few, only, years earlier in a
survey of forecasting methods conducted by three researchers-Chambers,
Mullick and Smith- and published in the Harvard Business Review, scenarios
were included as ‘visionary forecasts’ (Chambers, Mullick and Smith, 1971).
The authors of the survey define scenarios as (Chambers, Mullick and Smith,
1971 ):” subjective guesswork and imagination: in general the methods used are
not scientific... a set of possible scenarios about the future prepared by a few
experts in light of past events”.
Since then, two decades have passed and the popularity of scenarios has
dramatically increased. According to a survey carried out among the Fortune
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1000 companies (Linneman and Klein, 1983), thirty five per cent of them used
scenarios- allowance was made for bias caused by non-respondents to the
questionnaire. This widespread of the scenario technique came as a result of the
many benefits it delivers to an organisation (Thomson, 1999).
The first advantage is related to the external business environment. By
applying scenario analysis techniques, a company would be able to identify and
interpret any ‘dangerous’ trends and signals and take actions against them. This
was the case for both Shell and British airways, whose case studies were
mentioned in the previous chapter; Shell became very early aware that it will
face the oil embargo situation and actions were taken against it. The result was
that, after the embargo, the company was the strongest multinational oil
company worldwide (Mercer, 1995). Moreover, British Airways managed to be
a profitable company at the end of the recession period before the Gulf War
(Moyer, 1996). The company’s planning procedure, in essence, changes from
being reactive to changes in the external business environment to being
proactive, shaping the organisations strategy so that it will benefit from these
changes; in other words it gives the company a competitive advantage.
Apart from those actual examples, we can back up that argument with the use
of statistical data as well. According to a survey (Malaska et al., 1984) twenty
four per cent of the users believe that scenario’s planning contribution to
strategic planing was essential, while fifty nine per cent finds it helpful. In other
words, a percentage of users as high as eighty four percent have a positive
opinion about scenarios in relation to strategic planning. Furthermore, forty six
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per cent of scenario users stated that they would enhance the use of scenarios
within their company (Malaska et al., 1984).
A second advantage of scenario planning is that it allows for users to test
their existing strategies and decide upon whether they fit the future conditions
of their businesses or alterations should be made to them. It can serve, in other
words, as a ‘test-bed’ for the existing strategies (Van der Heijden, 1996: Bood
and Postma, 1997). We should note, however, that in order for scenario
planning to succeed as far as this target is concerned, there is a need on behalf
of the company to establish a close link between the environmental monitoring
system and the planning procedure (Ute von Reibnitz, 1988).
One of the most important advantages a company can get from scenario
planning is that it stretches and challenges the mental models of the managers.
It is natural for every person to form a ‘microcosm’ in his own mind and view
the outside world through this model. This personal view of the future
eliminates the possible futures one can conceive (Fahey-Randall, 1998: Bood
and Postma, 1997). This is the case with Shell where the first scenarios were
not paid the attention they should; Pierre Wack’s experience (Wack, 1985a,b) is
that in order for a scenario to be successful, it should aim at changing the
manager’s microcosm.
Moreover, the scenario technique allows managers to fully understand the
key drivers. This is the case because when a key factor is identified, the logic of
scenarios is to look behind that trend and identify the forces that drive its
development. We need to understand that this is a crucial element of the
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process. In the British Airways case study, once the key issues were identified,
further research was conducted for each one of them in order to identify and
quantify to some extent the forces that drive their outcome- the same applied
for Shell as well.
A scenario project can, also, give early warnings about future product
opportunities (Ute von Reibnitz, 1988); this is the case since during the scenario
project, we are identifying the forces that ‘are responsible’ for the development
of the key drivers, as stated above. In fact, there are certain scenario projects
that are especially developed for marketing purposes (Ute Von Reibnitz, 1988:
Fahey-Randall, 1998: Meijer, Van der Duin and Abeln, 1998). British Telecom
and Philips are two very good examples of companies that looked ‘into the
future’ for bringing tomorrow’s products today and cultivate the demand for
those products.
The area of communications within the company is another area where a
company can benefit from the use of scenario planning methods. First of all,
many people from several departments within the company take place in a
scenario project where the interrelations between the key forces are explored
and discussed. This, therefore, allows for people in different departments to
understand the effects of factors, whose control might be not their
responsibility.
Secondly, the communication process itself between the departments is
improved. It is the case in many companies that the departments work in
isolation, a fact that makes things even more difficult. In a scenario project,
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however, people from all departments participate; intercommunication is, thus,
facilitated. This is, also, very helpful for changing managers’ mental models ,
since they can realise the effects of a factor on other departments as well, which
is essential in order for the project to be successfully completed (Wack,
1985a,b).
Another benefit we can get from scenario planning is that there is a wide
acceptance of the results. If forecasting methods are used, then doubts might
exist since the predicted figure came out from a ‘black box’. It was the result of
a sophisticated mathematical technique that few people are able to test and
understand. Moreover, an outside consultant who looks only at numbers and
ignores- or, simply, is not interested in- some important aspects of the
company, the so-called insights, conducts many times this task. Likewise, there
are many factors that can not be quantified and the latest failures of these
methods (Beck, 1982: Zentner, 1982) gave forecasting a bad reputation. On the
other hand, everyone is involved in a scenario project, especially the managers-
this is crucial for the success of the project. As a result of that, the process is
transparent to everyone and all in the company have a chance to make their
contribution which gives to the scenario’s results a global acceptance within the
company’s context.
Finally, scenarios can assist in the articulation of the business idea- we can
think of it as something broader than the mission statement of the company. An
essential requirement for scenarios, as it will be discussed later, is to comply
with the business idea. However, this is many times only expressed by the
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mission statement and is misunderstood. During a scenario project, the business
idea is explored and communicated to the participants, either in the scenario
workshops or during the interview process.
9.4 Pitfalls in scenario planning
As mentioned earlier, the implementation of scenario planning on behalf of a
company can deliver many advantages to it as far as a wide range of activities is
concerned; from testing alternative strategies to stretching the managers’ mental
models. However, there are certain pitfalls associated with a scenario project
(Fahey-Randall, 1998). These can be further distinguished in process pitfalls
and content pitfalls, the difference being that process pitfalls refer to the way
the project is conducted whereas the content pitfalls refer to where scenarios are
focusing.
Before analysing these pitfalls, we should notice that scenarios are to be used
in situations where the high levels of uncertainty almost ‘prohibit’ the use of
other techniques. This was not the case, unfortunately, with the Greek
Telecommunications Organisation where the implementation of scenario
planning was rejected on the grounds of uncertainty that dominated the
telecommunications industry. The organisation made use of the Delphi
technique instead; however, we should be aware of its constraints- a short time
before the oil embargo experts were sure that the price of a barrel of oil would
never exceed the amount of two dollars (Van der Heijden, 1996).
With respect to the process pitfalls, it is crucial to gain top management’s
support for the scenario project in order to have the best results. In addition,
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these are the people who will take the critical decisions at the end of the
process, these are who will develop the company’s strategy. If they are not
convinced that scenario planning can deliver benefits to the company, there is
no meaning in going on with it. As an example of that, we can recall the Shell’s
case (Wack, 1985a,b); the first six scenarios did not get the necessary attention
from the managers resulting in their ignorance with regard to the planning
process. On the other hand, in the British Airways case study (Ringland, 1998:
Moyer 1996) the people responsible for the project formed the Halo Group
managing, this way, to get top management’s support. In fact, this is the
solution to this problem; to get the senior managers involved in the project as
early as possible.
A second process pitfall is associated with the lack of creative thinking,
resulting in poor inputs. As mentioned above, one of the advantages of the
scenario process is that it stretches the mental models of the managers.
However, many times it is difficult for people to think effectively about the
outside environment; on the other hand this may be due to the microcosm they
have built into their minds (Bood and Postma, 1997). The people in charge of
the scenario project- either internal staff or outside consultants- should be very
careful avoiding this pitfall otherwise scenarios’ contribution to strategy will be
very small. A way of doing that could be to expand the project’s information
resources; in other words other people than managers who have a relationship
with the company under consideration, like suppliers or workers, could be
interviewed about the factors that shape the external environment of the
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company in the future. This is the case with British Airways, where interviews
involved outside experts as well -the technology experts (Ringland, 1998:
Moyer, 1996).
Another pitfall is that many times the proportion of staff personnel and line
managers in the scenario team is not equal but the number of staff personnel in
the team is bigger (Fahey-Randall, 1998). This is not so effective and may
mislead the scenarios since it is the line managers who know their area better
and they can address the main areas where the scenario should focus. It is,
therefore, important that line managers are approached and their support is
gained. This can be accomplished by referring to the various benefits
concerning the decision-making procedure as well as the placement of the
company in a competitive position against its competitors.
It is sometimes the case that people expect from the scenario method to
deliver much more than possible or have misunderstood the role of scenario
planning. It is sometimes, for example, expected that results will occur within a
short period of time. On the other hand, it is expected that plans will come out
of the scenario process, which is not true. That is not true, since the change of
managers’ microcosms is needed (Bood and Postma, 1997: Fahey-Randall,
1998)- which, in most of the cases, is a lengthy task. In addition, we should not
forget that scenarios aim at making decision-makers realise how the critical
factors will unfold in the future; they can be used as ‘test-beds’ for the various
strategies (Van der Heijden, 1996) but they do not produce plans- the decision-
makers should undertake that task.
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Since the scenario planning is a new experience for many organisations- as
mentioned earlier the increase in scenarios’ popularity took place after the oil
shock- many times people are confused about their roles. In order to avoid that,
it is advisable to hold an introductory workshop at the beginning of the process
when we will explain to the participants their role within the project’s context
(Van der Heijden, 1996). In addition, we can guide the members of the
workshop by assigning several tasks to them.
We should not forget that the managers who participate in the project are
busy people whose time is valuable (Meijer, Van der Duin and Abeln, 1998). In
order to commit them in the project process, we need to provide those people
with a clear plan where the various steps should be identified in terms of their
duration. On the other hand, we should be careful with the duration of certain
tasks, like the time needed for collecting data; it should not be underestimated.
An example for that is the experience that British Airways encountered with
their scenario project; they realised that allowance should be made for the
collection of data and the development of models for those data (Ringland,
1998: Moyer, 1996).
A debatable issue in the scenario literature involves the number of scenarios
that should be generated. In most of cases, many scenarios are needed in order
to cover all the possible developments of the factors that influence the
organisation that is undertaking the project. However, it is very difficult for the
human brain to handle many scenarios (Schnaars, 1987: Mercer, 1995: Beck,
1982: Fahey-Randall, 1988:Wack, 19885a,b); the ‘best’ number of scenarios to
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be generated is ‘around’ three. We should, however, be careful since three
scenarios might be conceived as the pessimistic option, the ‘forecast’ and the
optimistic one whereas two scenarios might be considered as the good and the
bad case. In the case of Shell (Wack, 1985a,b) the initial number of scenarios-
six- was too big and was reduced on the way whereas in the British Airways
case the number of scenarios generated was only two.
Finally, it is observed that companies fail linking scenarios to their planning
process; in 1981 six per cent of the Fortune 1000 United State firms were using
scenarios only on an experimental basis while thirty five per cent did not use
them on a regular basis (Linneman, 1983). In addition the first scenarios at
Shell were developed on an experimental basis (Wack, 1985a,b). The solution
lies on persuading managers about the advantages their company can get by
fully integrating scenario planning in its planning process.
Moving on to the content pitfalls, the first one is related to the time in the
future scenarios are looking into. In general, they should be looking in the long-
term, where this could be defined as the period of time in which if changes
occur, these will affect the business of the organisation we are looking at. There
is no predetermined length, however; it can be anything as small as one week if
it is a financial firm or some years if it is a chemical or an oil company.
A second content pitfall is that sometimes participants pay much attention to
current trends resulting, this way, to simply extrapolating the past into the
future. This might be due to the fact that they sometimes feel uncomfortable
addressing unknown issues; in order to avoid that- this was the case in both our
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case studies- the brainstorming process is followed. However, we have to make
sure that the rules underlying the validity of the process are faithfully followed.
Another pitfall, closely related to the one discussed above, is that many times
the view expressed by the company’s managers is not as diverse as it should be,
to the extent that the full range of developments has not been fully covered. The
problem is most of times, located to the manager’s microcosm and to the
mental models they have built about the outside world (Fahey-Randall, 1998:
Bood and Postma, 1997).
During the scenario process, one step is to combine the likely future
developments of the key factors in order to get the whole picture. We should,
however, be careful so that the developed scenarios are internally consistent.
This means that two or more future developments should not be contradictory
both in terms of logic as well as in terms of the relation of the resulting actions
with the business idea of the organisation (Van der Heijden, 1996).
9.5 The scenario generating method
The task of anticipating the future is closely related to management tasks;
moreover, it is essential that planning is conducted in a way that short-term and
long-term goals are balanced. It follows that any short-term action should not
be decided in isolation, but should be viewed as part of a project that serves a
long-term objective (Zentner, 1982).
In order to fulfil this requirement, managers should be, somehow, able to
anticipate the future; they should be able to recognise the changes taking place
in the company’s external environment and adjust accordingly its strategy.
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Scenario planning is a tool than can assist managers in this task; its record, as
far as long-range planning is concerned, is much better than that of forecasting
techniques (Van der Heijden, 1998:Zentner, 1982:Beck, 1982).
The literature of scenario planning is rich in terms of scenario generating
methods; we can find methods ranging from sophisticated mathematical models
to purely intuitive approaches. These can be broadly classified in three
categories; these categories are the intuitive logics, the cross-impact analysis
and the trend-impact analysis (Ringland, 1998: Fahey-Randall, 1998). In the
remaining of this chapter we will refer to the conclusions drawn after the
review of the literature as well as the two case studies in chapter eight. We will,
also, refer to the appropriate time scope for a scenario, whether the use of
outside consultants is advisable, the most appropriate number of scenarios to be
generated and, finally, the communication of scenarios.
As far as scenario-generating methods are concerned, both academics and
consultancy companies have established many methods. Moreover, many
companies- like Shell- have developed their own methods for developing
scenarios. However, it is not compulsory to follow a certain predetermined
method (Mercer, 1995: Malaska et al., 1984: Linneman and Klein, 1983:
Schnaars, 1987); neither British Airways nor Shell used any method already
developed.
It is, on the other hand, very important for the approach towards scenario
planning that we will adopt to encompass the three basic principles that
scenarios should fulfil. The first principle deals with internal consistency. This
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means that the developments of the various factors within each scenario should
not contradict each other. As an example of that, we can think of a scenario
where the factors are employment, inflation and interest rates. If inflation would
be high, then employment would be high as well; moreover, if inflation is high
then interest rates should be high as well. On the other hand, if employment is
high, then interest rates should be low (Schoemaker, 1995). This means that the
inclusion of inflation, employment and interest rates with the developments
mentioned above would, inevitably, lead to an internally inconsistent scenario.
The second principle that every scenario should encompass is that it should
have a positive possibility of occurrence- by definition negative possibilities do
not exist so what we are really looking for here is the plausibility of the
scenario. In other words, our story should not only be internally consistent but
its realisation should also be possible. A scenario, for example, that projects no
development for Internet should be carefully considered since under present
conditions it seems rather impossible to come true. We should not, of course,
forget that scenarios should stretch our mental models for the future or that a
new technology may replace it; however it looks rather impossible for that
scenario to come true.
Finally, we should not forget that the most important people in a company
are the stakeholders and we need to ‘keep them happy’ since they are investing
their money in the company. Scenarios, therefore, should comply with their
interests; in other words, they should be in line with the business idea of the
company under consideration. In the case of British Airways, for example, the
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scenario team should report to the Halo Group after the end of each phase of the
project.
With respect to scenario generating methods, as mentioned before there are
many methods available in the scenario literature developed by either
academics or consultancy companies. In practice, however, as the two case
studies of British Airways and Shell clearly illustrate there is no best method. A
general method, however, can be derived -consisting of six steps.
The first step deals with the organisational issue scenarios are trying to
resolve. It is very helpful to begin the scenario project with a specific question
in hand, otherwise the project might become very wide. In the case of British
Airways, for example, scenarios were introduced as an alternative planning
method against a highly turbulent environment. However, after the collection of
data further research was needed in order to identify the key organisational
issue around which scenarios will be built. In the case of Shell, the question
was what the future environment for the company will look like.
Once the key issue has been identified, the key external factors that shape the
company’s future should be identified. This task can be carried through by
conducting interviews or by group ideas generating methods such as
brainstorming; there are some hidden dangers involved, of course, to which we
will refer to in detail later in this chapter.
The third step is about organising the issues that arose from the previous task
and categorise them in two categories; these categories are the predetermined
elements and the uncertainties. The predetermined elements can be defined as
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“the events that have occurred or that almost certainly will occur but whose
consequences have not yet unfolded” (Wack, 1985a, p.77). On the other hand
we have the uncertain elements, which are issues we can not predict whether
they will occur or not and, if they occur, what their consequences will be. This
is the approach undertaken by Shell, whereas in the case of British Airways a
further distinction was made between key uncertainties and driving forces, the
difference being that the latter are issues that if they change the whole industry
is fundamentally affected (Ringland, 1998: Moyer, 1996).
Once this is done, we need to project the developments of these factors in the
future. This, again, can be done by collecting data and applying forecasting
techniques to them or through interviews with experts on these issues, either
from within the company or from outside. As far as the two case studies in
chapter eight are concerned, British Airways allocated the further investigation
of the issues to the members of the development team who carried out the
research. In the case of Shell, on the other hand, the analysis of the oil
producing countries as well as that of the oil consuming countries was
conducted by planners analysts.
The fifth step is about combining the outcomes from the previous step. The
objective, here, is to create alternative futures; we should not forget, however,
that these futures should fulfil the three principles previously mentioned-
internal consistency, plausibility and compliance with the business idea. In
order, of course, for this to become true the people in charge of the project
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should have an in-depth understanding not only of the issue but of the driving
forces of it as well. This is the case in both Shell and British Airways.
The final step is about writing the scenarios and describing how from the
starting point, which is the present, we will arrive at the endstate, which is the
time horizon of the project. Once this step is reach, the decision-makers should
decide and formulate the strategy they will follow in order to give their
organisation a competitive advantage against its rivals in the future.
9.6 Remarks on scenarios
The process described above is, of course, a general process that can deliver
results as long as the three principles for the scenarios generated are fulfilled-
these are internal consistency, plausibility and compliance with the business
idea. In addition to those, however, we need to make some more remarks
concerning the process in general.
The first thing we need to observe is the time length of the scenarios, the
period of time they are looking into the future. It is widely accepted that
scenarios perform much better than forecasts in the long run; the question is, of
course, if a strict definition exists for the long run. There is no such definition
and the length of the period of time we need to construct scenarios for differs
from company to company. As a rule of thumb, this period should be long
enough to cover changes that can affect the business; this might be a number of
weeks for a financial services company to several years for an oil company.
The second remark concerns the use of brainstorming as a technique for
generating ideas, details for which can be found in Appendix I. This technique
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is used for identifying the key factors and project how they will develop in the
future. It is a very good way of generating ideas and is many times used in
practice; on the other hand, there are some drawbacks associated with it. We
need, firstly, to ensure that there is no dominant person in the team who will not
the other people express their opinion on the subject. Moreover, no criticism
should be raised against the other peoples’ ideas; this is very important for a
scenario project since people are expected to break the trends and express
revolutionary ideas about the future. Finally, it is good practice to record every
idea heard so that we will not miss anything.
Another equally important method for gaining insights and identifying
possible futures for the key drivers is the interview method; British Airways
used that method extensively. There are, however, certain things we need to
keep in mind considering the interview process. The first is about the trade-off
between not guiding the conversation and having a predetermined set of
questions. The interviewer’s role during the interview process should be that of
the facilitator, feeding back to the interviewee his opinions and asking any
clarifying questions, if needed. The anonymity of the person who is interviewed
is also important in order for him to be able to freely express his opinion.
Furthermore, it is desirable that the interviewers team should comprise of two
people so that at the end of the process they can compare their notes and
analyse them.
As far as the British Airways case study is concerned, several interviews
were held both with people from within the company as well as with outside
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consultants, academics and people from the government. A team of two people
held these interviews and their duration was ‘satisfactory’- about one hour.
Furthermore, the anonymity of the information’s source enabled the persons
interviewed to express their opinions in a more freely way. However, the
interviews were conducted with a predetermined set of questions; on the one
hand this is good since it helps in categorising the answers easily but on the
other hand it might have influenced the flow of the conversation.
The use or not of outside consultants is another debatable issue. In a survey,
whose results were published in 1981 (Klein and Linneman, 1981), carried out
among the Fortune 1000 industrial companies, the use of consultants was not
widespread. A sample of eight companies was chosen from the authors as
representative in order to illustrate the holding concepts. A percentage as high
as seventy five per cent of these companies did not use consultants at all
whereas the remaining two used them mainly for data gathering purposes; we
should not, of course, forget that the survey was carried out almost two decades
from now.
In the case of British Airways, outside consultants were used to some extent
in order to identify the key external issues as well as for projecting their future
development. On the other hand, it would be useful to involve outside
consultants in the scenario process for two reasons. The first reason is that they
can provide us with an outside view, with a more global perspective since they
are not involved in the day to day running of the business; their specialisation in
one subject will, also, be a great help towards identifying how this factor will
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develop in the future. The second reason is associated with the stretching of the
managers mental models (Fahey- Randall, 1998). We need to question things
they take for granted and widen their perspective for the future; outside
consultants can perform that task very well.
Another debatable issue is that of the number of scenarios that should be
generated. (Ringland, 1998: Klein and Linneman, 1981: Moyer, 1996:Malaska
et al, 1984: Linneman and Klein, 1983: Zentner, 1982: Beck, 1982: Wack,
1985a,b). The case of generating only one scenario is, by definition, rejected
since we end up with a single-line forecast. Our choice, however, should be
made on the basis of that, on the one hand, we should include in the scenarios
the most important factors and that, on the other hand, the human brain can not
deal with too many factors. That was the case for the first generation scenarios
at Shell, which were too many-six- to be analysed.
. It is suggested that the maximum number of scenarios should not be greater
than five (Ringland, 1998). However, in the case of three scenarios we risk
them being considered as the forecast, the pessimistic case and the optimistic
case so that people will prefer to go with the middle scenario (Ringland, 1998).
In the case of two scenarios, as in the British Airways case, there is a risk that
they would be considered as good and bad, as the optimistic and the pessimistic
scenario. If we choose to develop two scenarios, we shall emphasise that there
is no distinction like the one mentioned above. This is what British Airways did
when they decided that the world economic growth levels would be the same
for both scenarios, making them complementary. The ‘ideal’ number seems to
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be between two and three; it really does depend on the case under
consideration.
An issue of equal, if not bigger, importance is that of the promotion and
communication of the scenarios. We should not forget that the development
team in Shell spent half of its time promoting rather than developing scenarios,
whereas in the case of British Airways the Halo Group was formed. In order to
communicate better the results of the project we can adopt graphical techniques
for ease of understanding; this would make things easier for people involved in
numerical oriented businesses such as computer business. Another important
fact is the headline of the scenario; this should be representative of its context
and it should not mislead the audience.
In addition, the length of the scenarios is of equally importance. In other
words, scenarios should be written in a narrative style that clearly explains the
path between the starting point and the endstate. The length should neither be
too short that scenario becomes a summary, nor too long so that scenario
becomes a book. A length of around five pages should, in most of the times, fits
both requirements.
A common element in many scenario projects is the development of a
‘surprise-free’ scenario or the ‘official future’ scenario; this is the scenario
where every assumption the company made about the future comes true- it is an
extension of the current corporate planning. This is not done in random, of
course; furthermore, it did happen both at British Airways and at Shell. It is a
good practice and the reason behind it is that we aim at stretching managers’
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mental models by scenarios. However, if we present them from the very
beginning something that is totally out of their perspective, then the method
would be rejected and we would not have any results.
As mentioned above, in order for the company to be successful, the actions
taken in the short-term should be part of a long-term plan. This stresses that
scenarios should be fully integrated in the planning process instead of projects
being set-up on an experimental basis, as was the case in British Airways and
Shell. In a survey carried out among U.S. industrial companies (Linneman and
Klein, 1983) it was found that only seven per cent of the companies used
scenarios on an experimental basis; however, thirty six per cent stated that they
use scenarios but not very often. Moreover, thirty four per cent stated that they
use scenarios often but they are not integrated in their planning process and
only the remaining twenty five per cent stated that they use scenarios often and
that they are integrated in their planning process. We need to realise that
scenarios can only deliver their full benefits when they become the official
corporate planning procedure.
Scenarios require the support of the top management in order to be
successfully implemented; it is so because these are the people who will be
affected by them. We, thus, need to convince them that it setting up the scenario
project is a good idea. This, in British Airways, was faced by the formation of
the Halo Group while at Shell time was spent for promoting the scenarios.
It is, also, important to create to managers a sense of ownership for the
scenario project, to involve them in that from the very beginning. This way they
Chapter 9- Discussion on findings
163
will not view it as something strange but they will be engaged in it. Moreover,
they will much more easily trust the results of a process in which they were
directly involved. This explains, partly, the formation of the Halo Group where
the development team had to report the results every time a phase of the project
finished.
As mentioned in the scenario generating method, once the driving forces are
identified we need to project their developments in the future. This is a task,
whose length is usually underestimated as highlighted by the case of British
Airways. We, therefore, need to realise that this can be a lengthy task and make
the necessary time allowances.
In the case that scenarios are not fully integrated in our planning process,
then people are occasionally involved in them and then return to their usual
tasks. However, when the communication phase comes they might have
returned to their previous tasks. This creates problems since they need to
commit more of their time in order to revise their notes and do the presentation-
this is what happened at British Airways. The answer to that could be the
formulation of a team, which will constantly be dealing with scenario projects.
We should not forget that managers are busy people with many problems to
resolve; in other words, their time is valuable. This means that if we decide to
commit their time, for example through a simulation game during the project,
we should bear in mind that the best guideline is to keep it as short as possible-
close to half a day (Meijer, Van der Duin and Abeln, 1998).
Chapter 9- Discussion on findings
164
Finally, we have to note that it should be better if scenarios do not include
plans for anticipating future surprises as this is a very difficult task on its own;
neither of the scenarios described in the case studies chapter ended with a
proposal for strategy formulation. In fact, there are two approaches for doing
so; the first is to formulate a strategy taking into consideration the whole range
of scenarios, while the second formulates a strategy for a scenario and then
checks it for the remaining scenarios- the British Airways approach. Since we
want our company to be protected against any potential future development,
maybe the first approach is better.
9.7 The three different ‘schools of thought’ for scenario planning
Scenario planning is, without doubt, a very efficient method for long-term
planning. The years following the oil crisis, which was the turning point for
companies from forecasting techniques to scenario planning, experienced the
formulation of three ‘schools of thought’ for this new technique; these were the
intuitive logics, the trend-impact analysis and the cross-impact analysis. In the
remaining of this chapter, the advantages and disadvantages of each method
will be presented and a judgement will be made as to whether there is any link
between methods and situations; in other words if under a specific situation a
given method delivers better results.
The first approach, the intuitive logics one, is based on the idea that there is a
complex set of external factors influencing the key decisions of a factory
(Fahey-Randall, 1998: Huss and Honton, 1987). There are a number of
advantages associated with this method, the first being that the methodology is
Chapter 9- Discussion on findings
165
relatively easy to follow. It does not involve any mathematical probabilistic
concepts and it becomes, this way, easy to follow and communicate.
It was previously mentioned that the intended audience of scenarios should
be early involved in the process and, this way, a sense of ownership would be
established. The intuitive logics approach fulfil this requirement since they get
involved in selecting and analysing the environmental factors.
Another equally important purpose that the scenario methodology needs to
serve is that of challenging the managers’ mental maps. The approach under
consideration does that in two ways; firstly, discussions on the impact of
environmental factors are encouraged rather than leaving that task to a
computer. Likewise, it encourages lateral thinking, which is essential for
anticipating ‘surprises’ in the future environment (Fahey-Randall, 1998: Huss
and Honton, 1987: Wack, 1985a,b).
On the other hand, there are certain limitations this method has. The first
limitation is related to the nature of the method since it is not ‘mathematically-
oriented’. This may cause math literate people- in industries like the computer
industry for example- to be reluctant against it (Ringland, 1998).
The previously mentioned fact can cause other problems as well. The
forecasting techniques, which were previously used, got employees used in an
arithmetic environment which now has to be changed; there are cultural
problems involved in that transmission.
There is a second limitation related to the nature of the technique. This is that
it requires much of the managers’ time; as mentioned above, managers are very
Chapter 9- Discussion on findings
166
busy people who can not afford spending much of their time on a project
neglecting their remaining obligations.
With respect to the trend- impact analysis, it has the advantage of combining
former forecasting techniques- such as time- series data- with qualitative
factors, making the transmission to the new way of thinking much easier. In
addition, it stretches the mental models of the future by forcing participants to
identify the environmental forces; their importance and likelihood of
appearance are also assessed.
Apart from these advantages, this method has drawbacks as well. It does not
take under consideration the interrelationships between the factors that affect
the business; nothing exists in isolation and the effects of interrelationships may
be of great importance to the company under consideration. Moreover, in order
to implement a method falling under that category we need time-series data as
mentioned above; therefore we will have to implement it for a decision or a
variable we already have historical data.
Finally, with respect to the cross-impact method it incorporates what is
lacking from the trend-impact analysis method; it looks at the interrelationships
between variables. Furthermore, as far as INTERAX- one of the most popular
cross-impact analysis methods- is concerned it has the additional advantage of
delivering scenarios which at the end of each time period can be interactively
modified by the user. Moreover, it has a built-in database of events and trends
forecasts and it can easily be updated. Another popular method that falls under
this category- the BASICS method- has the advantage that it can deliver a
Chapter 9- Discussion on findings
167
number of scenarios that are already distributed according to their possibilities
of coming true and allows for higher degrees of flexibility. The program,
finally, can run on a personal computer.
As far as the disadvantages of this approach are concerned, INTERAX has a
high set-up cost and it does not take into account which scenarios are more
likely to occur (Huss and Honton, 1987). In addition, it bases the events that
appear in the first interval on the probabilities entered by the user and it does
not pay any attention to the likelihood of that combination appearing. The
BASICS method delivers the results at the end of the planning horizon- the user
has to link them himself.
Concluding, the three methods for generating scenarios described above have
their own advantages and disadvantages. The Intuitive logics approach, for
example, might be more flexible and qualitative oriented but on the other hand
one may say that it lacks the rigidity of the other two approaches, which have
the mathematical element in them; the set-up cost for INTERAX, however, is
high. This could be justified by a direct proportional relationship between
expenditure and accuracy. However, there is no best technique for every
application and all of them can be applied in order to solve different problems.
9.8 Further work
This dissertation covered the historical development of scenario planning as
well as its emerging methodologies and the implementation of a scenario
project within a company. Apart from that, there are some questions on which
further research can be conducted; these are presented below.
Chapter 9- Discussion on findings
168
It would be useful to look for a technique that will incorporate the advantages
of the three scenario schools of thought mentioned above and minimise their
differences. Moreover, we can look at whether a specific scenario technique is
best for a certain industry branch.
We can, also, conduct a survey similar to that conducted by Linneman and
Klein and see how the characteristics and the percentage of organisations that
have adopted the scenario planning method has changed. It should,
undoubtedly, be useful to look at how the adoption of this approach changed
those organisations compared to those who have not integrated scenario
planning in their planning process. Moreover, it would be interesting to look at
this issue from a human resources angle: to examine the changes that emerged
from the adoption of scenario planning as the ‘official’ planning technique and
how these can be managed.
Chapter 10- Conclusions
169
Chapter 10
Conclusions
A traditional and very popular, till nowadays, definition of business is that
‘Business is all about making money’. If the previous statement holds truth- and
it certainly does- then the key task of managers is to give their company a
competitive position against its rivals; for that, it is crucial to ensure that the
company under consideration reacts faster to changes than its competitors. In
order, however, to complete this task successfully they need information about
the outside environment; they need to understand the driving forces and how
they are going to unfold into the future.
It was till recently that the only equipment managers were armed with in this
‘business war’ was a number of forecasting techniques; they had to choose
from a wide range of them- from simple techniques to very sophisticated
computerised ones. Despite their popularity, however, they proved to be
insufficient; moreover, they were wrong at the times they were mostly needed.
The methods were not to blame, of course; they were functioning on the basis
that the future will, more or less, be like the past. The reason behind their
failure as planning techniques was the necessity for long-range planning, along
with the resulting uncertainty that the long view causes.
The answer to this problem was a technique that existed from the Ancient
Roman times and was firstly used for military purposes; despite that, the use of
scenario planning by Shell and its success of predicting the oil embargo in
seventies made it popular in the business world as well. It can be used for
Chapter 10- Conclusions
170
many other purposes apart from developing the company’s strategy; these
include the assessment of current strategies, the assessment of risk in
investment and technology decisions, the projection and promotion at the
present of products that customers will need in the future and so forth.
The advantages that the adoption of the scenario technique in planning
delivers to the company are invaluable, the gaining of competitive advantage
being one of them. We, also, have to encounter the real understanding of the
drivers behind the trends- in other words the real understanding of the nature
and the reasons of change- and the stretching of managers’ mental models
about the outside world. Moreover, advantages include the better
communication of results and the sense of ownership, since the result is not a
single number that came out of a ‘black box’ but a list of alternative plausible
futures to the formation of which everyone has contributed.
We should not, on the other hand, forget that the conveyance from
forecasting to scenario planning is not simple; the organisation has to go
through a ‘cultural shock’ and this can, sometimes, cause reactions.
Furthermore, we need to understand that a scenario project can not be
implemented on an experimental basis; we should view our short-term actions
as part of the implementation of a long-term strategy that should be assessed on
a continuous basis. We, therefore, need scenario planning to be at the heart of
the company’s planning procedures.
Moving on to the implementation of a scenario project, there is a question
concerning the persons who will carry out this activity; we have to choose
Chapter 10- Conclusions
171
between internal staff, consultants and a combination of the two. The latter
seems to be the best solution, since the scenario team will be formed from
people who know the culture of the company and from outsiders who, free from
the day-to-day running of the business- will help with their expertise. They will
highlight those aspects that for various reasons internal staff is not able to
pinpoint. Furthermore, the implementation of a scenario project is based on the
interaction among the participants as well as about their ideas about the
company. These will form the basis on which- with the help of historical data or
experts- the alternative futures will be built. We need, thus, to ensure that
through a brainstorming session or during an interview the participants are
freely expressing their opinions and these are carefully and clearly recorded.
The second phase is the phase of constructing the scenarios. In order to
facilitate this procedure, a number of methodologies have been developed,
mainly from consultancy companies and academic institutions. The question,
however, which one is the best does not have a clear answer; my opinion,
however, is that the choice of method does not matter that much as to ensure
that three basic principles are fulfilled by the scenarios. They should not contain
driving forces with contradicting developments, they should have a
‘reasonably’ high probability of occurrence and they should be in line with the
interests of the stakeholders; in other words, with the business idea. We should,
also, take into consideration the number of scenarios we will finally generate.
The last phase, in broad terms, is the communication phase; we need to pass
the results throughout the company as different people took part at different
Chapter 10- Conclusions
172
stages of the activity. As a general rule, we will have to adopt graphical
techniques and be very careful when choosing the headlines of the stories since
they have to truly represent the context of the story. The presentation can be
enriched by some brief scenario games.
Summarising, scenario planning is a useful technique that can be used for
long-range planning as well as for many other purposes and deliver many
advantages to the company that adopts it. We should bear in mind, however, the
inherent weakness of pinpointing scenarios successes; the question, for
example, whether Shell would have done better if it had not incorporated
scenario planning in its planning procedures or not can not easily been
answered. On the other hand, if we all agree that uncertainty will characterise
the future business environment, then another technique than the crystal ball
should be found in order to cope with it. Scenario planning, under a number of
critical issues we should take into account that were discussed earlier, fits all
the requirements to be that technique. We need, finally, to realise Yogi’s Berra
words: “The future ain’t what it used to be” (Ringland, 1998, p.191).
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173
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Appendix 1
184
APPENDIX 1
Appendix 1- Brainstorming
185
Appendix 1
The Brainstorming method We can define brainstorming as being a group activity that is applicable in a
wide range of problems. It is concerned with the generation of as much ideas
possible in a given, short in most of the cases, period of time. We do not
discourage anyone from expressing his ideas; on the contrary every member of
the group is encouraged to elaborate on other people’s ideas.
This technique has a number of advantages. Firstly, it can provide us with a
wide range of ideas on a subject; therefore the chance of identifying the cause
of a problem or a new opportunity is increased. Moreover, with respect to the
way the brainstorming task is carried out, it gives the participants the chance to
generate ideas free of the stress that a formal meeting would have caused.
Finally, most of the times the task involves people from various departments;
therefore all voices are heard and intercommunication is facilitated.
The brainstorming method has certain drawbacks as well. Because of the fact
that it is a rather informal method, participants may think of the procedure as a
casual one. Moreover, since no criticism is allowed we might end up at the end
of the session with a big number of ideas that is difficult to sort out.
The general steps followed in a typical brainstorming project are as following
(Featherstone, 1999: Yazdani, 1998: Betteley et al., 1994): (please refer to next
page)
Appendix 1- Brainstorming
186
Table 32 The eight steps of the brainstorming method
(Source: Featherstone, 1999)
As far as the first step is concerned, it deals with the selection of the team.
The ideal number of persons participating should be from six to ten. In addition,
it should be formed in a way that its members will come from many different
areas- in order to maximise the breadth of ideas- and no excessively dominant
characters or easily influenced people should be included.
Once the team is formed, the person in charge of the project would have the
responsibility of inform the other members of the issue under consideration.
This step will last as long as needed so that every participant has fully
understood the problem.
The process- as every other process- should run under certain rules; the
‘chairman’ would have to communicate them to the members of the group and
make sure they all follow them. We should note, however, that there is no need
Select the team
Define the issue under consideration
Inform the rest of the team on the rules that will be followed
Generate ideas
Record these ideas
End the meeting
Discuss the ideas generated
Formulate action plans based on these ideas
Appendix 1- Brainstorming
187
for him to be over protective since the free-form nature of the technique is
crucial.
Once this is done, everything is ready for the session to begin. We should
allow each member in turn to contribute his idea or, if they wish, to pass. The
ideas should be recorded in such a way that every member of the group has
access to them at any time of the meeting; a flipchart would, definitely, be a
good idea for that.
It is sometimes the case that these sessions are held under specific time
constraints; once the limits are reached, the session has to end. An alternative
reason for the end of the session might be that none of the participants has any
new idea to contribute
There is a need after the end of the session for discussing the results. We
should bear in mind that we should rather seek for new ideas based on the
existing ones than start rejecting them; the latter can be the cause for verbal
fighting between the members of the team. It is, therefore, better to hold this
session at a later date so that the discussion will rather concentrate on the ideas
themselves than on the persons who proposed them.
The final stage of a brainstorming session deals with the formulation of
action plans. This should be done in a way that addressees the key issues.
The brainstorming has, as mentioned above, some rules associated with it;
this happens in order to ensure that everyone will contribute to the conversation
and none will be neglected. These rules are presented in the table below.
Appendix 1- Brainstorming
188
Table 35 Rules associated with the brainstorming method
(Source: Featherstone, 1999)
Everyone should contribute his ideas in turn; this way we ensure that none
dominates the meeting. It is allowed to pass on one’s turn.
During the generation of ideas, no criticism is allowed
We should record every idea heard
No one should dominate the discussion phase
Appendix 2
189
APPENDIX 2
Appendix 2- G.E. planning process
190
Appendix 2
The General Electric’s planning process
Figure 16 The planning process of General Electric
(Source: Georgantzas and Acar, 1995)
Appendix 3
191
APPENDIX 3
Appendix 3- Letter to organisations
192
Dear Sir or Madam:
My name is George Konstantinou Lekeas and I am doing my MSc in
‘Engineering Business Management’ at the Warwick Manufacturing Group,
which is part of the University of Warwick. As a part of my degree
requirement, I am supposed to write a dissertation on scenario planning; I
would be grateful to you if you could provide me with information on that
subject related to your company.
I would be grateful if you could provide me with information related to the
following subjects.
You can mail your answer to the following postal address:
Thanking you in advance for your consideration, I shall be telephoning
you in a few days to ask if it will be possible to have not more than half an
George Konstantinou Lekeas Claycroft 1, Flat 3, Room1 Gibbet Hill Road University of Warwick Coventry CV4 7AL United Kingdom
The use, if any, of scenario planning in your business
Any experience of scenario projects you could share with me
The reason you use scenario planning for
Appendix 3- Letter to organisations
193
hour of your time in order to share your experience of Scenario Planning
implementation.
Sincerely,
George Konstantinou Lekeas Course Member, Full-time MSc in Engineering Business Management
Appendix 4
194
APPENDIX 4
Appendix 4- Letter to consultancy companies
195
Dear Sir or Madam:
My name is George Konstantinou Lekeas and I am doing my MSc in
‘Engineering Business Management’ at the Warwick Manufacturing Group,
which is part of the University of Warwick. As a part of my degree
requirement, I am supposed to write a dissertation on scenario planning; I
would be grateful to you if you could provide me with information on that
subject related to your company.
I would be grateful if you could provide me with information related to the
following subjects.
You can mail your answer to the following postal address:
Thanking you in advance for your consideration, I shall be telephoning
you in a few days to ask if it will be possible to have not more than half an
George Konstantinou Lekeas Claycroft 1, Flat 3, Room1 Gibbet Hill Road University of Warwick Coventry CV4 7AL United Kingdom
The ‘identity’ of your customers
The method you use
Any case studies I could use in my dissertation
Appendix 4- Letter to consultancy companies
196
hour of your time in order to share your experience of Scenario Planning
implementation.
Sincerely,
George Konstantinou Lekeas Course Member, Full-time MSc in Engineering Business Management
Appendix 5
197
APPENDIX 5
Appendix 5-Questionnaire
198
Appendix 5
Questionnaire
QUESTIONNAIRE
Please fill in the following details; they are very useful for our study. (The
Job/Title field refers to the person who will complete the questionnaire).
Company...........................................Date / /
Branch...............................................Job/Title.......................................................
...
1. Has your company used scenario planning in the past? (Please tick the
appropriate box)
Yes No
2. How much time did you spend developing the scenarios? (Please tick the
appropriate box)
1. <6 months 3. <3 years
2. 1 year 4. >3 years
3. Did you use consultants? (Please tick appropriate box)
Exclusively Not at all With
internal staff
4. Which method did you follow? (Please tick the appropriate box)
Appendix 5-Questionnaire
199
1. Intuitive Logics 2. Cross-impact analysis
3. Trend-impact analysis 4. Other(please specify)
5. What reason did you use the scenarios for? (Please tick the appropriate box)
1. Developing strategies 2. Testing existing strategies
3. Technology decisions 4. Marketing purposes
5. Other (please specify)
6. What is your opinion about the forecasting methods? (Rank them from 1-5;
1=worthless, 5=adequate)
Rank Unable to classify
7. How often do you use scenarios? (Please tick the appropriate box)
Experimentally Not regularly
Always
8. Was the use of scenarios a success?
Yes Partly No
9. If no, can you indicate the reason?
1. No customisation of the process 2. Lack of integration with
planning 3. Lack of time 4. Other
(please specify)