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SAMI Robust decisions in uncertain times Using Scenarios Gill Ringland CEO & Fellow, SAMI Consulting 7/21/2015 www.samiconsulting.co.uk 1 Agenda Robust decisions in uncertain times • • • • Why use scenarios - scenarios & forecasts Applications of scenarios Presenting scenarios Outcomes of using scenarios 7/21/2015 www.samiconsulting.co.uk 2 Experts in oil prices Robust decisions in uncertain times Actual peak $145 in 2008 21/07/2015 www.samiconsulting.co.uk 3 London population Robust decisions in uncertain times 9 8 1991 forecast 7 6 5 Actual Forecast now 4 3 2 1 0 1951 1971 1991 2006 2016 “A trend is a trend until it bends” 21/07/2015 www.samiconsulting.co.uk 4 Forecasts Robust decisions in uncertain times Forecasts are over-precise Today Range Of Uncertainties Trends Timing ? 21/07/2015 www.samiconsulting.co.uk 5 Changes from outside ---Robust decisions in uncertain times Other industries New technologies Competitors Customers Politics, economics GEPlanning Oil & Gas Horizon Planning Horizon Regulators 3 years 5 years 10 years Societal change Timescale 21/07/2015 www.samiconsulting.co.uk 6 Scenarios Robust decisions in uncertain times • Forecasts focus on “the right” answer and a partial “right” is often viewed as wrong • Scenarios are – “an internally consistent view of what the future might be”, – “not a forecast but one possible future outcome” • Scenarios explore different possible futures Forecasts Scenarios Source: Professor Michael Porter, “Competitive Advantage:”, (Free Press, 1985) 21/07/2015 www.samiconsulting.co.uk 7 How scenario thinking works Robust decisions in uncertain times • Ingvar, a neurobiologist, found that the human brain is constantly attempting to explore options for the future even while we are asleep – “memories of the future” • Models of the world provide a context for these explorations – “memories of the future” act as a filter to signals. • Scenarios provide several alternative mental models of future worlds for the brain to explore – increases the range of “what we have experienced” and “what is relevant to our future” – increases the ability of the brain to perceive. . Source: D. Ingvar, “Memory of the Future”, Human Neurobiology, 4(3), p127-136, 1985 21/07/2015 www.samiconsulting.co.uk 8 Thinking styles Robust decisions in uncertain times Line manager, Engineer Corporate manager Early indicators Decisions, Timelines Portfolio management Options Decisions 21/07/2015 Strategist Scenarios Ideas & systems Planning Alternate worlds www.samiconsulting.co.uk Future thinker “843” trends interconnected 9 Applications of sccenarios Robust decisions in uncertain times • Public policy – Creating a stakeholder dialogue • eg future of Arnhem in Scenarios for Public Policy – Exploring policy options • eg scenarios at the dti in Scenario in Public Policy • Inside organisations – Common language for new teams • eg EC HLEG Converging Technologies on SAMI web site – Part of strategic planning • eg ICL in Strategic Planning – Briefing on “new worlds” and strategy • eg FutureParts in Here be Dragons 7/21/2015 www.samiconsulting.co.uk 10 Presenting scenarios Robust decisions in uncertain times • Three audience types – Managers – Public (and Social scientists, marketing) – Scientists and engineers • See paper “Presenting scenarios” 7/21/2015 www.samiconsulting.co.uk 11 Early indicators Robust decisions in uncertain times • Early indicators are a powerful way of engaging the organisation • Are clear “events” which would be a sign that a scenario is evolving • Shell & gas fields – Gorbachev promotion as early indicator of changes in Russia – Decided not to buy gas fields as Russian ones would change pricing • ICL and the ICT industry – – – – In Coral Reef scenario, AT&T would sell NCR In Deep Sea scenario, IBM would regroup as an integrated supplier Both happened in the same month Insight for ICL – the computer and communications industry were on different cycles • Often ask a group to think up newspaper headlines that would signal a scenario, as a way of “thinking in” to a scenario. 7/21/2015 www.samiconsulting.co.uk 12