management

Scenario Planning 1 Scenario Planning “Thinking the Unthinkable” © 2009 ~ Mark Polczynski All rights reserved Scenario Planning 2 In preparing for battle, I have always found that plans are useless but planning is indispensable. Dwight D. Eisenhower I love it when a plan comes together! Hannibal Scenario Planning 3 Scenario Planning Intellectual Property Generation Technology Roadmapping Voice of the Customer New Concept Ideation Scenario Planning:

Scenario planning provides a contextual basis for the four primary elements of strategic technology management. To do scenario planning, we need to understand the art of “scenario thinking ” Scenario Planning 4 Scenarios are imaginative pictures of potential futures , but the future they picture is just a means to an end . These conversations … are designed to help a group of people see past their own blind spots . From: Doing Scenarios , by Art Kleiner (1999) - http://wholeearthmag.com/ Scenario Planning 5 Herman Kahn developed scenarios to see past the cultural blind spot that thermonuclear war must never happen. What if it did happen? asked Kahn. What sort of world might the survivors face?

From: Doing Scenarios , by Art Kleiner (1999) One critic coined the phrase " thinking the unthinkable ". But Kahn embraced the phrase.

Thinking the unthinkable, he argued, is the only way to keep one's strategic vision from getting stale. Scenario Planning 6 From: My Life Sucks , by Mark Polczynski (2009) • Two biggest contributors to technology development failure:

• Under -resourcing (no project left behind). • Self -delusion (build it and they will come). • Scenario building can reduce both problems:

• Alerts you to the magnitude of problems and uncertainty of the environment you are working into. • Enables you to develop a strategy that optimizes chances of success under all possible scenarios. Scenario Planning 7 Goal of scenario thinking: 1. Envision “ alternate extreme futures ” (worst/best case), 2. Create a strategy that works for all extreme futures. These are the scenarios Don’t pick one and limit to this! Scenario Planning 8 Back to Art Kleiner – • The practice of constructing stories of the future has no single method and dozens of techniques. • Science fiction writers have been very effective in exploring future utopias and dystopias. Scenario Planning 9 Kees van der Heijden has identified several general types: • Project -specific scenarios - What's the best way to beat a rival, or clean a polluted river? • Crisis scenarios - How can local, independent bookstores survive in the face of Amazon.com? • Exploration/consensus -building scenarios - What are the possible futures for Colombia as a nation? How can we build democratic institutions in South Africa? How can American elections become free of financial influence? Scenario Planning 10 Back to Mark Polczynski Scenario planning is especially important for innovators and entrepreneurs . • These people enter, and, in fact, create highly -uncertain environments. • They have a strong tendency toward under -resourcing and self -delusion . • Scenario thinking can help innovators and entrepreneurs “exploit the unthinkable ”.

So, with no further ado, let’s see how this is done… Scenario Planning 11 Scenario Planning Steps:

Here is one that we will examine. Scenario Planning 12 Scenario Building – Step 1: What problem are you trying to solve? Returning to Kleiner … • Scenarios only provoke genuine learning and strategies when they answer genuine concerns . • If you are not responding to a specific crisis, then figure out the key question you need to answer. • If you don't care about the question you are trying to answer, this is all a big a waste of time! Scenario Planning 13 Scenario Building – Step 1: What problem are you trying to solve? Returning to Kleiner… Note: Sometimes you can "jump -start" the process of problem identification by interviewing people before you start the process” “If you could answer one question about the future , what would it be? “ Scenario Planning 14 Scenario Building – Step 1: What problem are you trying to solve? When describing your problem, you need to specify a time scale . - You say: “In X years, event Y will happen”. - The key is choosing X as the minimum amount of time in which your strategic actions may produce results. - If it takes at least 5 years for your actions to produce results, then your timescale must be at least 5 years. - The point is that for this process, there’s no sense in addressing problems that need to be solved before your strategy can make a difference. Scenario Planning 15 Scenario Building – Step 1: What problem are you trying to solve? Second, it can be very beneficial for you to specify the “ stakeholders ” in the problem and solution . In general, we can categorize stakeholders as: 1. Who experiences the problem?

2. Who causes the problem?

3. Who pays for the problems?

4. Who supplies the solutions?

5. Who pays for the solutions? One person can be in different categories. Scenario Planning 16 Scenario Building – Step 1: What problem are you trying to solve? Here, we demonstrate Step 1 on a real -world problem. • The Marquette University Master of Science in Engineering Management (ENMA) program addresses issues that are critically important to engineers and their employers: (program relevance = high  good ). • What happens if the ENMA program is not financially self -sufficient : (program costs > tuition income  bad ). Talk about thinking the unthinkable! Scenario Planning 17 Scenario Building – Step 1: What problem are you trying to solve? Our ENMA stakeholder list and key problems might look like this:

• Students : How can I keep my current job and advance in my profession? • Employers of students : Where will my future leaders come from? • Marquette University : How do I maintain/improve my image and balance my budget? • College of Engineering : How do I enhance my “product portfolio” and balance my budget? • ENMA staff : How do we maintain a program that attracts students? Scenario Planning 18 Scenario Building – Step 1: What problem are you trying to solve? The high -level problem that we are trying to solve is that ENMA program is not financially self -sufficient (loosing $). We want to solve this problem so that all of our stakeholders are happy. This could be solved by (and/or): 1. Increasing number of students in the program (tuition income), 2. Reducing program expenses, 3. Obtaining outside funding to support the program. Scenario Planning 19 Scenario Building – Step 1: What problem are you trying to solve? Here are three specific problem statements that we can consider: Over the next five years : 1. How can we increase enrollment in the program? 2. How can we reduce program expenses? 3. How can we obtain outside funding to support the program? For this example, we will focus on the first question. Note that scenario thinking is really an ongoing process.

So maybe we do question 1 this year, and do the other questions over the following 2 years. It’s all about the conversation! Scenario Planning 20 Scenario Planning Steps:

1. What problem are you trying to solve? 2. Gather information 3. Identify driving forces 4. Identify critical uncertainties 5. Create scenarios 6. Compose the stories 7. Scenario application 8. Identify key indicators 9. Monitor key indicators 10. Update scenarios and strategies Increase enrollment in ENMA program Scenario Planning 21 Scenario Building – Step 2: Information Gathering • After defining the problem to be solved, you need to gather information relevant to the topic. • This can be time -consuming, tedious, and frustrating, since you don’t really know all the types of information that you need (you are going to think the unthinkable ). • This is why scenario planning should be an ongoing process – your databases will continue to improve over time. For our example, here are some things we know about ENMA... ENMA program enrollment Virtually all tuition -paying students 22 Scenario Planning0 5 10 15 20 25 30 Fall 2004 Spring 2005 Fall 2005 Spring 2006 Fall 2006 Spring 2007 Fall 2007 Spring 2008 Fall 2008 Spring 2009 Fall 2009 Regular Non -Degree Temporary COE ENMA course credits by all MU students Predict 63 students in 3 ENMA courses for Spring 2010 23 Scenario Planning0 50 100 150 200 250 300 350 2004 2005 2006 2007 2008 2009 Fall Spring Total Tuition on MU credits taken my ENMA students ($800/credit) Predict $255K 24 Scenario Planning$- $50,000 $100,000 $150,000 $200,000 $250,000 2005 2006 2007 2008 2009 Scenario Planning 25 Scenario Building – Step 2: Gather Information • Now, given this information, do we want to stick with the same problem statement? • Do we want to revise our crystal ball questions? • If we want to balance the budget by increasing enrollment (increasing tuition), which problem are we trying to solve:

• Increasing enrollment in ENMA program ? • Increasing enrollment in ENMA courses ? Well, of course, this depends on the University’s accounting practices! Scenario Planning 26 Scenario Building – Step 2: Gather Information Important Note!!

• Even though information gathering is a critical step in creating scenarios… • Scenarios are NOT straight -line extrapolations from historical/statistical data – this is just thinking the thinkable. • Again, the goal is to think the unthinkable – what are the alternate extreme futures? • So, this is more like Chaos Theory (Catastrophe Theory). What small changes could have drastic impact? Scenario Planning 27 What Next?

• At this point, you might be tempted to seize on one strategy for increasing enrollment in the program. • A more experienced person might come up with several strategies (see next slide), and then pick the “best” one. • But which IS the best one? Why? • According to scenario thinking.. The ideal strategy is the one that leads to success under all possible future conditions . The key to scenario thinking is to not select or eliminate any scenarios, but to optimize across all scenarios. Scenario Planning 28 Four Possible ENMA Strategies • Strategy 1: The same, but more No major program structural changes, heavy emphasis on local recruiting, initiate pro -active international recruitment. • Strategy 2: Go it alone Sever bond with GSB, expand required ENMA courses to 9 (27 credits) plus 2 elective courses (6 credits) from any MU program. • Strategy 3: Take it outside Terminate ENMA program, but maintain ENMA courses. Offer 12 credit ENMA certificates based on ENMA courses. Market primarily to local industry and COE grad students from other programs. • Strategy 4: Shut it down Terminate ENMA program, eliminate ENMA courses/faculty. Which one?! Why?!

Think the unthinkable! Scenario Planning 29 Scenario Planning Steps:

1. What problem are you trying to solve? 2. Gather information 3. Identify driving forces 4. Identify critical uncertainties 5. Create scenarios 6. Compose the stories 7. Scenario application 8. Identify key indicators 9. Monitor key indicators 10. Update scenarios and strategies This is where the unique elements of scenario thinking come in Scenario Planning 30 Scenario Building – Step 3: Identify Driving Forces • OK, we’ve identified the primary problem to be addressed by our scenario planning process, • And we have collected whatever data we could given the uncertainty of the situation. • Now, we could just dream up some strategies off the top of our heads and randomly pick one. • But no, we’ll try a more systematic route to developing strategies. • Our approach will start by identifying “ driving forces ”. Scenario Planning 31 Scenario Building – Step 3: Identify Driving Forces • We will start by identifying “ driving forces ”. • Different scenario planning approaches use different terms and describe driving forces in different ways. • But by -and -large, these are “megatrend ” forces, many of which are almost certain to occur. • A good example is demographics. Scenario Planning 32 Demographic Megatrends Scenario Planning 33 Scenario Building – Step 3: Identify Driving Forces Here is a list of categories of “standard” driving forces: • Political • Economic • Societal • Technological • Environmental • The ScenarioThinking.org website has a nice expansion of this standard list:

http://scenariothinking.org/wiki/index.php/Driving_Forces Scenario Planning 34 ScenarioThinking.org has a format for describing driving forces – http://scenariothinking.org/wiki/index.php/How_to_determine_a_driving_force%3F Name: It helps to be specific, e.g. rather than “Demographics”, call it “ The ageing of America” to indicate direction of the force.

What: A short description of the driving force. Enablers: Factors which strengthen this driving force. Inhibitors: Factors which weaken this driving force. Paradigms: Changes in ways of thinking about the world due to driving force. Experts: Sources for additional information about this driving force. Timing: Dates for key milestones in the development of the driving force. Web Resources: Useful resources on the web relating to this force. Scenario Planning 35 Scenario Planning Steps:

It is thinking the unthinkable… Scenario Planning 37 Scenario Building – Step 4: Identify Critical Uncertainties • First, come up with a list of many drivers impacting your problem. • Next, plot your drivers on an uncertainty/importance plot. • Now, choose drivers in the high uncertainty, high importance quadrant of the plot. Uncertainty Importance Driver A Driver B Driver C Driver E Driver D High Uncertainty High Importance Low Scenario Planning 38 Scenario Building – Step 4: Identify Critical Uncertainties • For example, the “ageing of America” has low uncertainty, and high importance. • Thus, for scenario planning, it is “uninteresting”. • The purpose of scenario thinking is to “think the unthinkable”.

Uncertainty Importance Driver A Driver B Driver C Driver E Driver D Low Ageing of America Germs rule! Scenario Planning 39 Step 4: Identify Critical Uncertainties • You can use other axes on the plot, as shown below. • Whatever the axes, the point is to come up with drivers that will ultimately produce “interesting” scenarios. Uncertainty Uncontrollability Driver A Driver B Driver C Driver E Driver D High Uncertainty Highly Uncontrollable Low Scenario Planning 40 Step 4: Identify Critical Uncertainties Urgency (Time) Importance (Impact) Task A Task B Task C Task E Task D High Urgency High Importance Scenario Planning 41 Scenario Building – Step 4: Identify Critical Uncertainties Let us return to our example of the Marquette ENMA program, One key factor for the program, obviously, is the need for engineering managers ! • It seems to be a given that the world needs more technology . • Therefore, the world needs more engineers . • Therefore, more engineering managers . But these are obvious and “ uninteresting ” drivers for ENMA program. Scenario Planning 42 Scenario Building – Step 4: Identify Critical Uncertainties But this need for more engineering managers has some interesting dimensions, such as:

• Where will these engineering managers be working? • What will be the primary functions of these managers? Scenario Planning 43 Recall our ENMA stakeholder list:

• Students (current and future): How can I keep my current job and advance in my profession? • Employers of students : Where will my future leaders come from? • Marquette University : How do I maintain/improve my image and balance my budget? • College of Engineering : How do I enhance my “product portfolio” and balance my budget? • ENMA staff : How do we maintain an attractive program and keep our jobs?

Are the questions on the previous slide interesting to these stakeholders? Scenario Planning 44 Scenario Building – Step 4: Identify Critical Uncertainties • Are these questions important : - Where will engineering managers be working ? - What will these engineering managers be doing ? • These questions are important to our stakeholders: • Students (current and future): How can I keep my current job and advance in my profession? • Employers of students : Where will my future leaders come from? • Marquette University : Where will my future students come from? • College of Engineering : What will my future student do? • ENMA staff: What should I teach??!! Scenario Planning 45 Scenario Building – Step 4: Identify Critical Uncertainties • Are these questions uncertain : - Where will engineering managers be working? - What will these managers be doing ? • Recall my observation:

• Two biggest contributors to technology development failure:

• Self -delusion (build it and they will come), • Under -resourcing (no project left behind). • If you think you know the answers to these two questions, I suggest to you that you are:

• Experiencing the first contributor, and • Will be experiencing the second, or • Fast -tracked to be the CEO of your company. Scenario Planning 46 Scenario Building – Step 4: Identify Critical Uncertainties Here are two interesting drivers for our example. Uncertainty Importance Driver A Driver B Driver C Driver E Driver D Where engineering managers will be working. Low What engineering managers will be doing. Scenario Planning 47 For this example, we will refine our scenario planning even further.

We said there were two interesting issues: - Where will engineering managers be working? - What will be the primary functions of these managers? For this example, we will focus on only the second issue: What will be the primary functions of engineering managers? We can always address the first issue in a future scenario planning session. Our primary question:

- What will be the primary functions of these managers? Engineering managers have many functions, but most are “uninteresting”: • Project management • Balancing the engineering budget • Hiring people • etc… In our example, we will focus specifically on two critical functions of engineering managers: - Innovation – Devising new solutions to problems. - Entrepreneurship – Bringing solutions to customers in new ways. Scenario Planning 48 Scenario Planning 49 Scenario Planning Steps:

Innovation – Devising new solutions to problems.

Entrepreneurship – Bringing solutions to customers in new ways. Example:

In Scenario 4 , engineering managers are highly involved in devising new solutions to problems and bringing them to customers in new ways. Scenario Planning 52 Note:

• This is just one way to come up with scenarios. • It’s systematic, and generates a manageable number (four) of highly - differentiated scenarios. • It’s good way to start. • But if you get into this way of thinking, you don’t need to be tied to this approach. • You can even just come up with them off the top of your head, as long as they are interesting and highly -differentiated. Scenario Planning 53 Scenario Planning Steps:

Entrepreneurship – Bringing solutions to customers in new ways. Example:

In Scenario 4, engineering managers are highly involved in devising new solutions to problems and bringing them to customers in new ways. Scenario Planning 55 Scenario Building – Step 6: Compose the Stories • For each of your (4) scenarios, you must now write a short story . • Each story should capture a vision of how the world will be under this scenario. • It can be quite beneficial to come up with a catchy name for the scenario. • Names stick in the mind and capture the essence of the scenario. • You might attempt to describe the state of the world that characterizes your scenario. • Or you might choose an archetypical person that would characterize your scenario. For example… Scenario Planning for Nuclear - Powered Generation of Electricity Tony Roder, Sharath Tadepalli, Keith Sherer, Matt Osburn Dr. Mark Polczynski 56 Scenario Planning Problem Statement Economic, political and environmental issues are expanding the demand for alternative energy sources.

As oil prices rise and reserves are depleted pressures to develop alternatives to petro -energy increase. Reducing the dependence of the country on foreign oil is in the interest of National Security.

As awareness of global climate change rises there is a greater call for alternative energy sources.

The obstacle at hand is how to make the nuclear power industry a viable and desirable energy source for the future. 57 Scenario Planning Critical Uncertainties:

Social/Political Climate : Political and social climates are historically very unpredictable in the realm of nuclear power.

Technology : Technology can play a very important role in giving nuclear power a new way to reuse or dispose of spent fuel. 58 Scenario Planning Scenarios 59 Scenario PlanningSocial/Political Embracement + Spent Fuel Technology + Happy Homer Who Needs It? Not Only No … ! Yucca World Scenarios: Happy Homer : Nuclear power is seen as environmentally friendly, safe and low -cost. New technologies have been developed to allow full reprocessing of spent fuel into more usable fuel to be placed back into a reactor.

Yucca World : Demand for nuclear power outweighs any opposition to the storage of nuclear waste. Not only No…! : Worst case scenario for the nuclear power industry. No new technologies emerge to help solve the problem of spent fuel and the general public and politicians do not want nuclear power.

Who Needs It? : Technology exists to cleanly and safely reprocess spent nuclear fuel, but a different alternative energy source has shown itself to be more efficient and more easily implemented. 60 Scenario Planning Scenario Planning 61 Scenario Building – Step 6: Compose the Stories For our ENMA example, two classic archetypes are: - Engineer as Entrepreneurial Innovator  Westinghouse - Engineer as Innovator  Edison Or you might call the entrepreneurial innovator scenario “ The Messiah”. And you might call the engineer as innovator “ The Geek.” Scenario Planning 62 Scenario 2: Edison Engineer as innovator Scenario 4: Westinghouse Engineer as entrepreneurial innovator Scenario 1: (TBD) Engineer as resource manager Scenario 3: (TBD) Engineer as entrepreneur Entrepreneurship Innovation + - - + Innovation – Devising new solutions to problems.

Entrepreneurship – Bringing solutions to customers in new ways. Scenario Planning 63 Example - Scenario 4: Westinghouse In this world, the engineering manager is looked to as a leader in the global virtual village. The engineering manager is capable of:

• Identifying and clearly defining current, emerging, and future economic, social, cultural, political, environmental, and technological problems, • Conceptualizing technically and commercially viable new solutions, • Packaging and delivering the solutions in a manner that delights the customer. Scenarios can be more “lyrical”. You could write a short story on a “Day in the Life of G. Westinghouse”. Scenario Planning 64 Scenario Planning Steps:

• This set of 3 lectures on scenario planning is about creating the context for strategic technology planning and development. • The scenarios that we develop are not the strategy, they are only stories about the future. • The rest of this course is what we must do to develop the strategies. • The point here is that the strategies we develop must work in all the scenarios that we create using the scenario planning tools we just reviewed. Scenario Planning 68 OK, what is the strategy for increasing enrollment in the ENMA program? www.mu.edu/enmacerts Scenario Planning 69 Certificates and courses intended for:

Innovators, entrepreneurs, and engineering resource managers. Scenario Planning 70 Are we done yet? Heck no!

Recall that your scenario planning should have a specified target date, for example, 5 years. As your 5 year scenario target approaches, you need to know which (if any!) of your scenarios is closest to reality. To do this, you need to identify a few key indicators relative to your scenarios that give some clues as to which way the world is evolving. So, the last steps in the process are:

• Step 8: Identify Key Indicators • Step 9: Monitor Key Indicators • Step 10: Update Scenarios and Strategies Here are examples of key indicators for the ENMA example… Scenario Planning 71 Key Indicators for ENMA Program Strategy to Increase Enrollment:

Internal indicators: • Enrolment in program and courses (OK). • Completion of MS and Certificates (OK). External indicators (TBD): • Where are graduates working? • What are they doing? Original important and uncertain drivers! Benchmark other programs, too. Scenario Planning 72 Scenario Planning Steps: