Strategic Framing

What can we learn from that meddling volcano?

My colleague, Bernardo Sichel, contributes some key strategic risk management observations drawn from the current disruptions from the Icelandic erruptions.

Bernardo argues that this is not a true Black Swan event if considered from the perspective of its economic effects.  While a volcanic erruption is indeed a rare and difficult to predict event, temporary disruption of the air traffic system is not.  Thus, it is possible to prepare and plan for such disruption even if the cause of the disruption is not known.

Bernardo makes several other useful observations for those with an interest in strategic risk management (or an interest in a certain Jimmy Buffett song).  I am finding the language and tools of risk management have resonance with my work in strategic implementation and change planning and am currently involved in a fantastic project to help change the risk culture of a global company.

I have not updated this page in quite a while.  Thanksfully, that has been because of some challenging projects.

During the first week in May, I will be co-teaching a class at the 2010 GSA Expo in Orlando.  Feel free to drop by and say hi.  I will also be answering questions at the Booze Allen Hamilton booth on Wednesday from 10-12 and 2-4.

Change Management-A Discipline Crucial to Implementation Success

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

This time of year, I try to catch up on all those books colleagues have recommended/given to me.  This is an open post for anyone to recommend a good book with a business theme. Just leave your recommendation as a comment on this post.

There are some great books out there about investing, leadership, entrepreneurship, etc. However, there are some book themes that do make me chuckle.

1. The “revolutionary” marketer. There must be a big market for advice on how to market your product because I see no shortage of books revealing a “revolutionary” approach to marketing. These books seem to have a few things in common.

A. They tend to give marketing tips that everyone learns in their first marketing class in an MBA program
B. Somewhere, often on the cover, they state that the book will give you the marketing knowledge you won’t learn in an MBA class.
C. Each author seems to honestly believe, or at least they want the reader to honestly believe, they discovered these “revolutionary” marketing techniques.

2. Save yourself! Quit your job. These books present entrepreneurship as the salvation for people who hate their life. First, let me say that these books can be great motivators for people struggling to finally take the plunge. However, while switching jobs can be a great way to infuse some needed change in your life, setting out on your own as an entrepreneur is a highly stressful thing to do. I’ve done it, trust me on this.  It seems to me, it is better to do it when the rest of your life in order, not when the rest of your life is a mess.

3. The leadership wisdom of the wizened CEO/coach/entertainer/person whose 15 minutes of fame are just about over. Apparently, there is some law that says that once you become CEO or famous for some other reason, you are required to write a book so that everyone else can bask in your reflected glory and you can explain why you are so smart. In this book, you need to state the obvious lessons you learned (such as be nice to your executive team but hold them accountable). You should report these lessons as if they are secrets passed to you by some ancient society and now you are releasing them to the masses. Make it clear, in humble terms, that your successes are the result of your brilliance and not at all about luck (knowing the right people, being at the right place at the right time, going to the right college, etc.)

I am just having some fun here. I DO know there are some great books out there (even some written by former CEO’s).

Scott Snyder’s recently released book, The New World of Wireless: How to Compete in the 4G Revolution
, offers some provocative and valuable insights into the future of wireless.

He considers how emerging technologies can combine with political and social forces to transform communication dynamics in the future.

I hope to offer a more detailed review of the book in the near future. For now I’ll just mention how intrigued I am by Snyder’s discussion of digital swarms. Here is a short description of the concept in Dr. Snyder’s own words:

If you think of wireless networks as connecting a virtual mass of
users and networked objects, allowing them to converge around specific
places, ideas, or activities in a semi-coordinated fashion, this is, in
fact, a swarm. This is a concept beyond the “convergence,” “interconnectedness,”
and “pervasiveness” we have seen in information networks.
Not only are swarms interconnected and pervasive, they also
include a collective behavior and purpose that is not captured in
these other concepts. It is this underlying characteristic that also
makes it so difficult for organizations to see the early signals of this
new paradigm.

…

Wirelessly enabled swarms have occurred in recent years, such as
the throngs of disgruntled citizens in the Philippines who tried to take
over government buildings using text messaging to coordinate their
movements. However, the current wireless networks do not support
“swarming” as a natural occurrence due to limitations in interoperability,
location awareness, device intelligence, and capacity. The
newest fourth generation of wireless technology, or 4G, overcomes
these limitations, opening the possibility of swarming as a routine
occurrence in both professional and social situations.

Dr. Snyder’s scenarios for how these swarms, and other technological shifts play out through different future scenarios is an excellent resource for anyone who is invested in the future arch of technology.

When I give short workshops on managing change, I focus on five key aspects of change planning.

1. Identify stakeholders
2. Align arguments to generate stakeholder momentum
3. Create an engagement strategy
4. Identify trigger events
5. Plan to be wrong

Prefacing all of this is the step of clearly defining your change.

Here is a a video where I explain trigger events and illustrate it with an example from the story of Branch Rickey’s efforts to desgregate Major League Baseball in the 1940s.

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.

Webinar on Managing Uncertainty.

February 24, 2009
11:00 a.m. to 12:00 p.m. (EST)
FREE – RSVP at https://www2.gotomeeting.com/register/367870545

Sponsored by Decision Strategies International

As Darwin observed, it is not the strongest or smartest who survive but those who are most adaptive to change. What has your company done to increase its adaptiveness? Have recent world events caused you to accelerate your efforts?

This webcast will provide practical ways to manage uncertainty by showing you how to:

• Use scenario planning to improve your organization’s insight and foresight
• Devise adaptive strategies with sufficient flexibility to deal with the unexpected
• Implement a dynamic monitoring system to track the external world in real time
• Improve your organization’s agility in terms of structure, processes, and rewards
• Enhance your information and decision making procedures to remain vigilant
• Foster strong leadership at multiple levels

Dr. Paul Schoemaker, Founder and Chairman of Decision Strategies International, Research Director of the Mack Center for Technological Innovation and Adjunct Professor of Marketing, The Wharton School, University of Pennsylvania, will review key points of the attached article “Are You Ready For Global Turmoil?” and best practices for managing uncertainty.

Bernardo Sichel, Managing Director of Consulting at Decision Strategies International will give practical tips and advice for applying scenarios to near term decisions and risk management.

Commander Steve Kelly, United States Navy OPNAV Planning Group, and Sandra Thompson, Global Director, Strategic Growth, Johnson & Johnson Diabetes Care Franchise, will share their experiences incorporating scenario planning and adaptive strategies to manage uncertainty.

Dr. Scott Snyder, CEO and President of Decision Strategies International, will moderate this interactive discussion and summarize key take- aways and best practices for participants to take back to their own business today.

RSVP:
Space is limited. Reserve your Webinar seat now at: https://www2.gotomeeting.com/register/367870545

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

The layoff announcements keep coming and are unlikely to stop anytime soon.  This week,among other news, we learn Alcoa will layoff over 13,000 employees and Macy’s is closing stores.  Most of the media attention focuses on the plight of those who lose their jobs.  This is appropriate since those laidoff due to industry-wide economic forces have a difficult time finding new jobs, as those in the financial services industry can attest.

Another group of people with a challenge after layoffs are the managers left with the task of motivating and focusing the nervous and possibly demoralized remaining employees.  Managers can act to can make the post-layoff period a time of momentum building and innovation.

1. Vision and Mission work.  Every employee knows times are difficult and everyone is asking themselves the question ‘Will our organization survive?’  Don’t pretend this private questioning isn’t happening.  Confront it head on with a conversation about the mission of the organization.  What makes the company special?  How do the economic difficulties create opportunities to re-ignite the vision?  How can each employee contribute to the mission? A vision is not a luxury during a time like this.  Employees are looking for a reason to believe in the future of the organization.  Give them one or, even better, create one with them.

2. Invite Innovation through Flexibility.  Your employees know the business as well as anyone.  Give them the autonomy to help solve the organization’s challenges.  Share what you know about industry headwinds and future trends.  Invite your employees to find solutions or new market niches to exploit the changes in the industry.

3. Initiate new Communication Channels. Find a way to institutionalize new internal communication modes.  Make it clear that employee ideas are welcome and create a new forum to report out to your employees and hear back from them.  This could be a weekly video conference, a monthly meeting, a company wiki.  The structure the works depends on the culture of your organization.

4. Start a new strategic planning exercise. A good strategic planning process trains participants to think strategically and think differently about their industry.  If your goal is to get employees throughout the organization to innovate, then you want them to be able to innovate in a strategic manner.  Initiate a strategic planning exercise as a training and employee development task.  The main goal is not to create a new strategy but to get your employees to better understand the current strategy, help modify the strategy to match the new environmental constraints, or  help guide their innovative thinking.

5. Build an internal expertise and knowledge development network. The destruction of informal knowledge networks is a hidden cost of any layoff.  Often the informal knwoledge is not even recognized until it disappears after the layoffs.  The post layoff time is ideal for building a snapshot of the expertise network within the organization and using this to identify mentors and opportunities for employee development.

The bottom line is to give employees a sense that they have some control over the future of the organization and that the future of the organization is strong.  Since the recent past of the organization did not go so well, the only way to create some positive momentum is to take real, visible action demonstrating why the future will be different.