Strategic Framing

On December 3rd and 4th, John Austin will be facilitating a strategic planning workshop in Singapore for the Centre for Management Technology.

The workshop is targeted to those with interests in the Energy and Petrochemicals sector but is valuable for anyone interested in learning more about the scenario planning approach to strategic planning. The workshop is designed to leave participants with clear, actionable strategies for their organizations moving forward.

Some topics we will be covering:

• Increasing your organization’s competitive agility against industry challengers.
• Identifying and avoiding common decision traps that derail sound, strategic decisions.
• Evaluating robust investment options in the face of multiple, potential futures.
• Evaluating major forces of change to “future-proof” the enterprise.
• Monitoring & adapting to environmental and industry changes.

For more information and to register for this workshop follow this link:

Singapore Scenario Planning Workshop: Energy & Petrochemical sectors

One often heard criticism of scenario planning is that,by itself, it does not lead to strategic action.  This is true and the true power of scenario planning is in the follow up.  How will you use the insight gleaned from the scenario building process?

At DSI, scenario building is not the primary end point of a planning process.  The scenarios are simply one input into a strategic options and monitoring process.  Depending on the needs of the client, the strategic options could focus on short-term risk mitigation, organizational design implications, or longer-term product innovation.  In all cases, we use the scenarios to help build adaptive capabilities into the planning process.  Scenarios also build a framework for environmental monitoring.  Such monitoring also provides a natural way to keep decision makers honest about changes they are seeing in their industry…even changes they would prefer to ignore.

Here are some questions your group can work through for each scenario after completing a scenario planning exercise:

1. What actions can your company take today to prepare to navigate the future as depicted by this scenario?
2. How can the your company reduce our strategic risk exposure and capture some of the emerging opportunities?
3. How does your company succeed in this scenario?
4. What is the winning business model?
   -Where do we source our revenues from?
   -What are our significant expenses?
   -Where do we invest our resources?
5. What types of products and services are most in demand?
6. What business lines are most attractive?
7. What is the appropriate HR strategy? Who do we hire and how?

For more on scenario planning see:

1. Scenario planning in finance
2. Implementing scenario planning in your organization
3. Interesting output from 1997 scenario planning exercise

Was it possible to predict the current financial crisis as far back as 1997? It turns out at least one group of planners did describe the current state of the world with eerie accuracy.

Look at this chart from a 1997 scenario planning project and see more details about the Global Malaise scenario below.

Fast forward to October 23, 2008 and Alan Greenspan testifying before congress:

“I mean, you point out quite correctly that the Federal Reserve had as good an economic organization as exists, and I would say, in the world. If all those extraordinarily capable people were unable to foresee the development of this critical problem, which undoubtedly was the cause of the world problem with respect to mortgage-backed securities, I have to — I think we have to ask ourselves, why is that?

And the answer is that we’re not smart enough as people. We just cannot see events that far in advance. And unless we can, it’s very difficult to look back and say, why didn’t we catch something?“

Global Malaise

In 1997, the Dow was at 7,000 and well into a steady rise to 11,000.  The sky seemed to be the limit.  A group of scientists,  planners, engineers, and government managers assembled for a scenario planning project facilitated by Decision Strategies International.  The group identified four future scenarios explaining the arc of events leading to 2020.

Here is an excerpt from one of the future scenarios, entitled Global Malaise, created by that group in 1997:

“Several western governments had initiated tax cuts favorable to big business.  This policy concentrated wealth and lowered income into government treasuries.  Bank credit became ever tighter.  Stocks and real estate prices fell sharply. Governments hungry for reelection panicked as asset [price] deflation gathered force.  They attempted to counter the contraction with easy money.

The United States Federal Reserve and other central banks, especially the Bank of Japan, bought up the bad debts of insolvent institutions, including some major banks and corporations.  Central banks around the world become holding companies of insolvent institutions.  They ended up owning many banks, a few insurance companies, and a great deal of real estate. . . .

By 2008 the country was in recession. The middle class diminished as millions lost their life savings in the market crash.  The poor grew desperate as many social programs such as energy support, housing, medical, and childcare was eliminated or reduced to token levels.”

“The Democrats won the 2012 president election, bringing the first minority to the office of Vice President. The election reflected continued voter demands for social reform.”

To be fair, the planning group did not conclude that the Global Malaise scenario was the most likely scenario. However, the group’s ability to describe a future that few were predicting at the time demonstrates the real power of the scenario planning methodology when done with rigor.

Below is a slideshow put together by Michael Mavaddat, Executive Vice President of DSI and one of the facilitators of the scenario planning project.

What do you do when financial market modeling based on past performance does not work because the market is acting in a fundamentally different way?

An article in today’s Wall Street Journal explains how one Philadelphia money-management firm, Glenmede Trust, turned to scenario planning.  As someone who works with scenario planning on a daily basis, this does not surprise me.  Scenario planning is an excellent choice when facing a highly uncertain future.  When you feel past trends will not continue into the future, scenario planning offers a disciplined way to set strategy.

Using scenario planning as an investment tool is not a totally new idea.  See the 2005 article in The Journal of Wealth Management by Anne Shumadine.

At DSI, we have a team of scenario planning experts with experience in the financial services industry.  If you have more questions about how this process could work for your company, please contact me.

Ah New Years!  A time for predictions.

Predicting pop culture trends, new technologies, political changes….and of course, the economy.

Am I the only one who feels these predictions are particularly quaint this year?  I get the sense journalists and columnists are just going through the motions.  They know as well as we that 2009 is fraught with uncertainty. No one has a clue.  Once you realize that no one has a clue, the television pundits become particularly entertaining because it seems on TV you need to pretend you actually know something that other people don’t know.  Nevertheless, the ‘2009 Predictions’ stories are fun holiday reads.

In the best of times, we are notoriously bad at predicting the future.  Here at the start of 2009 we face an inflection point.  A moment when the recent past does little to help us predict the future. At such moments, rather than trying to predict the future we can focus attention on identifying the boundaries of our uncertainty.  Let’s figure out precisely what we don’t know rather than trying to look into the crystal ball and fool ourselves into believing we can see the future.  Once we identify the range of our future uncertainty, we can begin to monitor the areas of uncertainty to spot weak signals and we can design flexible strategies that enable us to thrive regardless of how the future unfolds.

This whole ‘embrace uncertainty’ thing not for you?  No worries!  I’ll be glad to refer you to an excellent pyschic who will tell you exactly what will happen next year.

Scenario planning has a number of outcomes. As a strategic planning process, it generates a level of creativity that can help a senior team get beyond the obvious, predictable, tired strategies being pursued by all their competitors.

Like any strategic planning process, scenario planning is only as good as the follow through. What is done with the strategy plannng outcome? How is the resultant strategy implemented?

We’ve found value in using an options-based implementation strategy as a path forward from the planning process. In addition, the options approach creates excellent opportunities for leadership development when combined with a change leadership cohort of key executives or high potential employees. I’ve always found my work coaching such cohorts immensely satisfying.

Scenario planning also creates rich insight that can be used as the basis for ‘conversation starter’ articles. Scenarios can spark new thinking by creating vivid stories of possible futures.

One example of such an output is the Scenarios for Credit Unions report DSI completed. This report is a great example of the kind of output our consultants can generate at the end of a scenario planning process.

For more on scenario planning see:

1. Scenario planning in finance
2. Implementing scenario planning in your organization
3. Interesting output from 1997 scenario planning exercise

Strategic planning is only useful to the extent it drives behavior and helps an organization better prepare for the future. Dr. Paul Schoemaker discusses how companies put to use the results of scenario planning processes.

For more on scenario planning see:

1. Scenario planning in finance
2. Implementing scenario planning in your organization
3. Interesting output from 1997 scenario planning exercise

Scenario planning offers a disciplined way to generate valuable, creative new paths for your company. Dr. Paul Schoemaker describes the scenario planning process in the following video.

In this video, Dr. Paul Schoemaker describes a strategic planning process that focuses on anticipating multiple futures rather than attempting to do the impossible and predict the future.

For more on scenario planning see:

1. Scenario planning in finance
2. Implementing scenario planning in your organization
3. Interesting output from 1997 scenario planning exercise