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Planning processes

Planning processes

This text offers guidance on three main areas.

This, the initial section, sets out some helpful ways to think about the overall planning systems. It sets some guidelines for a minimal planning systems and notes the issues of legitimacy and power associated with setting this up. When you have read this section, your should have had the opportunity to rethink your view of what constitutes 'a strategy'. You will see where very general oversight on the business environment - such as is involved in scenario planning - fits in with these notions.

The second chapter is given over to the practical issues of how to apply these general notions. There are, of course, many methods which can be applied. This Chapter offers detailed insight into one particular route which has been proven to work.

The third and concluding chapter has two parts to it. The first of these is concerned with scenario generation. The second considers the Forum process, both in respect of what it has achieved and what it may well do next. The section concludes with a range of issues that emerged from the scenarios, items which, when you come to apply this work, may serve as 'hooks' for business issues in any strategy processes in which you may become engaged.

Planning for planning.

Planning for planning.

Successful planning consists of doing the right things in the right order. No one of these things appears particularly revolutionary when seen on its own, but taken together, they create a momentum by which great things can be achieved. There is, therefore, a design task through which these steps are identified and put in place. We are going to begin by assessing the scope of 'planning' so that we can identify the field in which this task is to be carried out. We are then going to look at the specific issues which are solved during the more strategic, general aspects of this range of activities. We shall see that this is a field in which a range of different kids of question collide and require simultaneous solutions; and in which issues of power and legitimacy can create additional tensions. We will then resolve this set of issues.

The word 'planning' means different things to different people. There tend to be four classes into which these things can be sorted.

The planner on whom the responsibility for action may descend has, therefore, a great deal of ground work which it is often necessary to undertake before it is possible to design a process. This may be no more than a beginning, a middle and an end of a straightforward project, something which can be specified completely from the outset. It may, by contrast, consist of a gradual system of iteration, in which the planner learns the full extent of what the organisation needs and the organisation comes to recognise the legitimacy of the points which the planner is trying to raise.

The overall aim of a planning process is to understand the activity and its operating environment and, through this understanding, to be able to see threats and opportunities more clearly than had previously been the case. Where the system has deviated from what was expected, corrective action can be taken. Where areas of ignorance are identified as, perhaps, concealing areas of importance, then exploratory work can be undertaken. When people talk about "strategy", they mean the adaptive steps which they propose to take in order to reach a good match between the organisation and the circumstances in which it finds itself. Naturally, this begs a number of questions. One of the chief difficulties is that a number of issues have to be solved in parallel, none of which are entirely independent of the other.

Issues such as these all appear obvious when set out in cold text. Busy people, when confronted with complex issues that are always embedded in equally complex systems, themselves poorly understood, may either tend to cut the Gordian knot or delegate the issue to a planner or study group.

This brings forward two further difficulties. The planning group may have been delegated a part of the issue and may find that it is necessary to redefine matters or to extend their scope. The first problem is that this can be regarded with some suspicion. Bringing the management group along with the analysts can become a significant task. The second difficulty is that of coping with the new balance of power which this delegation creates. If the CEO or main board decide to think about 'strategy', then that is their right. If a new unit starts to undertake the same task, then it can be viewed in a negative light, particularly by subsidiary organisations. If the planning group comes its conclusions without the participation of the business units, then it is acting in some ignorance and is vulnerable to criticism. It can, however, find it hard to develop the trust and confidence of semi-independent unit managers, who can see it as the agent of senior management, grinding all manner of axes just out of sight.

Strategic planning is, therefore, both a complex analytical and social process. It is foolish to try to deliver a single answer in a single step. What is needed is an endorsed, gradualist process, in which the various layers and flows of assessment are well understood by all. The intention should be to generate a smooth improvement in the general understanding which managers and others have of their operating environment, of the organisation and of the changes which may be occurring to both of these.

There are always tough decisions to be made. Experienced managers know, however, that issues which have been talked through and thoroughly assessed before they reach a crisis tend to have developed a momentum in which they almost solve themselves. Many small decisions, many options developed in advance, deploy themselves at times of stress such that the issues soft lands. It is the unconsidered, unexpected or enforced issue which creates the difficult choices.

The importance of process.

Strategic planning can be seen as an investigatory, research-like process. It operates through an established process, feeding off the products of a previous cycles and feeding into the next. It acts as the means of identifying the broad, general issues which need to be taken through to specific, tactical solutions, expressed in the business plan and in the operating criteria against which tactical matters take place. Its key feature is that it generates understanding.

Figure 1: Extending corporate understanding.

At the heart of what is going on is the development of what has been called the management model. This is the view that people have of, as Figure 1 suggests, 'how it all works and what we are going to do about it'. This model, which is always there to some degree, more or less shared, in a more or less analytical form, creates three outcomes:

This approach has the huge advantage of being easy to understand and open to objective management. It can be 'miniaturised' so as to serve as the template for a workshop. By contrast, it can be the abstract background against which a complex planning process is designed and carried out. Issues which have been delegated for study from such a process, however, carry with them the authority of the group which set them up. People know when and how they are to be used. The people to who the work has been delegated have a clear remit against which to work. Managers understand why a group is offering them a presentation on something which they would otherwise find obscure and out of context.

One should recall that there are two very distinct ways in which people know things. One form - such as repairing a car or writing a computer program - can be written down, taught and directly transferred. We like to pretend that much of our management tasks are open to this sort of analysis. In practice, however, judgement and broad understanding are much more like the other sort of knowledge, which is tacit and difficult to transmit. You cannot tell someone how to swim, paint a picture or take business decisions and expect them to pick this up: rather, they learn from experience and from working in a team. Such knowledge bases gain more from helpful directions which make sense of and pull together disparate and unconnected aspects of their experience than from explicit teaching. The management model is brought into being by analogy, analysis, information and discussion, all of it calling upon the tacit, hard-to-express knowledge on which complex judgement is based. It follows that activities which are intended to help people improve their management model must take account of this fact. The answers cannot be written down, taught or derive through feats of logic and analysis, for whether true or not, this material will only become a part of the management model when it has been tested and digested, linked into other knowledge and used under safe conditions.

The operational planning cycle.

The operational planning cycle.

We see, therefore, that it is necessary to iterate and to take time to develop and propagate ideas. Planning has much in common with gardening. There is a time to plant and a time to harvest. Many seeds do not grow and many crops yield unexpected fruit. The soil improves with care. There are problem plants, weeds, pests and diseases with which to cope.

One can over-extend this analogy. Nevertheless, a predictable cycle of sowing, growth and harvest helps all who are involved. Everyone can see what is going on. They can see what will be required from them, when it will be needed and for what it will be used. The linkage between the various layers of planning - with which we began - can be made explicit. People make space in their diaries for this. Ideas are given a conduit through which they can flow into the system.

A typical cycle has an annual element to it (and beneath this, quarterly or more finely divided systems of scrutiny). It also has a rather longer, perhaps biennial system. The annual cycle revolves around the review processes in the organisation, business plan and whatever stands in the stead of an annual report to shareholders, supervisory agencies or the public. Some industries, which have to report to a regulator, will have an additional way station in this loop. There are, of course, many ways in which the various way stations can be arranged around this annual loop, but the following is something of a natural flow, which begins when senior management issue the business plan to the organisation.

This four step annual process is replicated, in greater or lesser complexity, in virtually all established organisations of any scale. It is well understood. It is also managed by people who have formal responsibility for doing so. Their role is regarded as entirely legitimate by the rest of their organisation.

The broader process.

We suggested that there might be a broader, perhaps biennial system which supplemented this flow. This is not, however, nearly so commonly implemented or so closely managed. Where it is undertaken, with more or less formality, those given charge over it may feel less sure in their task. They may have less legitimacy. We have already discussed why this may be the case.

The biennial cycle has two elements to it. Both run in parallel and are, in mature organisations, continuous activities which have alternate, biennial reporting points. One of these is a open-ended investigation of the nature of the operating environment. The chief 'probes' of this are those who are most involved with it, but their tacit knowledge may need to be codified and it may need to be supplemented by detailed or integrating analysis. Their management model, in the terms of the preceding section, may need to be articulated.

The second of these activities, which entwines heavily with the first, is concerned with choice. That is to say, if the analysis of the operating environment creates a view of "how it all works" then it is important to be able to say "what we are going to do about it". The first set of analysis leads to the use of tools, such as scenarios and the second, to strategic choice. Neither, on the whole, lead to action. This tends to follow further analysis - as set out in Figure 1 - and tends to be embodied within the activities which the operational units themselves undertake. A few big, dramatic activities may be triggered by and managed from the centre, but these are exceptional. It is far more common to see the business gradually swing around to take account of new realities through many small accommodations.

Figure 2: Three layers in an idealised planning process.

The three layers of an 'ideal' planning process are reflected in Figure 2. The outer loop has the two way stations which we have discussed on either horizontal extreme. On the right, we find the analysis procedures that create integration and insight. The definition of the issues and the choices open to the organisation are located on the extreme left. In between these, general thoughts are - at the bottom - turned into strategic issues through discussion with informed people. At the top of the outer loop, strategic ideas give rise to instructions, criteria and the setting of balances; and trigger further areas of exploration.

The middle loop represents the operational planning process. On receipt of the messages, criteria and targets, the operational units go about the four stage process which was discussed early. (In the interests of clarity we have omitted two elements of this: building a draft business plan - which would go at 2 o'clock on the inner loop - and creating a report to the stakeholders, which would probably best be placed at about 11 o'clock on the same loop.) Inside of this loop lie the procedures of tracking and consolidation, without which no complex activity can function.

The remainder of this text will focus on the outer loop and its interactions with the operational aspects of the organisation. The operational planning procedures will be taken as read. At issue is, therefore, how to carry out four primary activities:

It is worth noting, once again, that each of these issues depends strongly on what has gone before. In the analogy with which we began, if the planning garden is well tended, then the gardener can focus on high level and subtle goals. If, by contrast, it is a weed-smothered wilderness, then this limits development to some rather basic tasks. Equally, if the garden is laid out - if the planning process is installed and well understood - then cultivation becomes all-important. If the paths have yet to be laid, however, then the design task must be completed and agreed before much more can be achieved.

The advantages to be won from a full planing system.

The advantages to be won from a full planing system.

It is worth noting the advantages which flow from this outer loop. The management model is subject to a continuous upgrade. Tacit knowledge - about different areas of specialisation, about the challenges to be overcome - are shared and put in a common framework. Crisis is easier to anticipate from a broad perspective and much easier to handle amongst people used to sharing such insight. Judgement on complex issues is much improved when it is set against objective analysis, not least as areas of uncertainty are defined and limited. Indeed, the organisation automatically builds resilience into itself as it begins to understand these uncertainties better.

The operating units, too, are addressed in a common language and come to see the necessary central adjustments that are made to their plans as more structured and less arbitrary. Functional areas of responsibility - in finance and treasury, in human resource, information management, safety management and stakeholder relations - are all seen to have a proper place in the broader scheme of things. This place can be hard to identify in a highly focused, very segmented and operationally focused organisation unless there is some mechanism which generates this oversight.

Indeed, this is the core and most important point to be made. Organisations have probably never been so specialised and task-centred. Issues and concerns which do not answer the imperatives of the coal face can seem irrelevant and impertinent. Systems of this nature will not, of themselves, generate the oversight from which innovation, managed change and external relations develop. The centre of an organisation can be thought of as the parent of many child agencies and processes. It justifies itself to the degree that its actions add value. The chief value that it can add lies in two areas: in disciplining the children to a common set of values, and in carrying out those useful initiatives which will never, of themselves, arise from the actions of the agencies, each acting in its own sphere.

Scenarios to strategy.

It is important to hold this 'architectural' model of the strategy process in the back of the mind. It brings forward one obvious and major implication, which is that the would-be architect needs to have the legitimacy to act. Planning in complex organisations is a major task. It diverts people from core tasks. It is seen to interfere with natural patterns of delegated authority. It causes senior managers to re-assess the fundamentals of the organisation, with sometimes unpredictable consequences. People can fear it, senior managers can wonder where it may lead: those who take up this task are, therefore, treading upon something of a mine field. They need to make it clear to all concerned the exact scope and limits of what they intend. The disciplines of project management - with regular way stations, at which the process can be aborted if managers feel out of control - can serve as a potent reassurance in the early stages of design.

Legitimacy flows from the personal involvement of the CEO and the management team. All planners have their tales of disaster. Most of these stem from trying, for all of the best reasons, to get a project 'round the system' by stealth, or to stimulate action through the medium of a myriad of pinprick initiatives. If, therefore, the CEO cannot see the point of such activities, even in the light of a structure such as that set out in Figure 2, then there is little point in embarking on more than very generic analysis.

This Chapter is concerned with the bottom loop of Figure 2. It takes it as read that there is a operational planning cycle - the inner loop - and that some form of environmental scanning, including the generation of scenarios, has been done. It is concerned, therefore, to work with the operational units and with senior managers in order to define the issues on which choice has to be made, instruments created to bring about that change and, where uncertainty remains, further work can be triggered.

Thinking about business choices.

One can be unsure of the answer to a question, or unsure of what question to ask. Figure 1 suggested that the improving management model first identified the questions and then found answers to these. Excellent and relevant reviews of the operating environment, either current or in prospect, may not lead directly to problem identification. In part, this is why management fashions are so prevalent. They offer ways to think about hitherto diffuse issues such as the shareholders, the implications of information technology, the living environment or the competition. They set an accessible agenda.

Firms need to undertake much the same task for themselves. Management fashion is much set by events: by, for example, its ability to interpret crisis. If firms trail behind fashion, then they will also trail behind events. Clearly, there are many ways by which issue identification can be undertaken. This Chapter discusses one process which delivers results. We make no claim to completeness, however, and there may be better approaches and styles which better suit individual organisations. These techniques can, for example, be used to focus upon innovation and the generation of new ideas, something which requires a re-balancing of some of the elements which follow.

The products of analysis - such as scenarios - describe the operating environment of the organisation in ways which are designed to spark insight. There are, therefore, two stages have to be designed into the process. One of these exposes these ideas to as many people, from as many operational backgrounds, as it is feasible to achieve, asking them to say what implications they see as flowing from this. The second stage takes up what each of these events has produced and consolidates this. We are going to treat these two phases under distinct headings.

Drawing in the operational units.

This creates a range of benefits. The interactions with the operational staff will have created new insights. These will be applied to their various areas of responsibility, something which will appear in their respective operational plans. Secondly, they will be thoroughly briefed in the preoccupations and oversight of the organisation as a whole, something which serves as an antidote to the tendency to over-focus which can develop in hard-pressed activities. The third advantage is that of ownership. The analysis that emerges from the phase of consolidation will be seen to have drawn on the knowledge base of the operational units. The managers of these units will know that they have been consulted and will be inclined to accept the outcome. In addition, the assessment will be better informed for the process of consultation. It will be more expert, more able to avoid dangerous generalisations. Finally, a degree of network building and cross-fertilisation will develop in the organisation. This can help to offset intense divisional focus and can bring people with the capability to develop multi-sectoral innovation into contact, under conditions in which they are predisposed to think about new things.

Issues such as legitimacy are effectively settled when a cycle of consultation is complete. The process managers come to carry out a defined and rather enjoyable task, management teams find themselves enriched by the process and gain, rather than lose, authority as a result of their involvement. The chief way in which this consultation is advanced is through the medium of workshops.

Almost everyone has been to something called a workshop. Some of these have been professionally facilitated, others have been little more than a formless round table. It is a general rule that structured workshops succeed more often than structureless events; and this rule grows in strength as the issues become more complex and the numbers of people who are involved increase. There are few ways of losing legitimacy more surely than appearing before an unbriefed management team, with no agenda and a few generalisations to hide one's conceptual nakedness. There are three rules of workshops:

A workshop begins with a statement of intent. It calls forward one or more scene-setting presentations. It then begins an interactive process of enquiry, through which the participants are led to explore their individual management models, tabling and consolidating these. A central set of issues emerge and are prioritised in various ways. Those with high priority are actioned and delegated. The workshop closes with an agreed timetable through which the actions will be reviewed by the participants. Let us look at each of these steps in more detail.

The statement of intent has already been discussed. It is, however, as important to say what the workshop is not as what it is. It is not, for example, a review of performance or a forum for decision-taking. It is a means by which managers can feed into corporate processes and from which they can gain oversight on corporate preoccupations. They can take a part in setting the criteria against which they are going to be judged.

Meetings can be conducted at many levels of abstraction, from the vaguely aspirational to the detailed, tactical and adversarial. At least one role played by scene-setting presentations is that they define the level of abstraction at which it is useful to talk. Scenario presentations can pitch people too high up the abstraction scale, trying to better the scenario process; and a helpful offset to this are specific items of analysis. These can be pitched at the corporate level. It is always instructive to see how the organisation has performed against plan, year after year. Its use of assets can be compared to equivalent organisations. Customer and other stakeholder attitudes can be tracked over time or in cross section.

If the material has been made available (something to be agreed with the CEO) the detailed performance of the operational unit can be assessed in much the same way: how well is it using its people, its capital assets; how is it positioned with respect to stakeholders, its cost structure, its use of IT or technology? Objective attempts to map the operating unit on key dimensions (size, growth, stakeholder satisfaction, environmental impact, regulatory burden.....) create the two dimensional maps so beloved of consultants, which permit the unit to be located in respect of other activities to which it can be compared. A key dimension for commerce is that of shareholder value: does the organisation meet its cost of capital when weighted of the risks which it faces; and if it does not, then how is return to be increased or risk reduced. Does the unit, indeed, fit with the overall organisation or should the link be cut?

Opening presentations of this sort should never aim to answer the question, merely to pose it. Further, managers should be allowed to develop their own conclusions, not have negative messages served up to them. Stylistically, therefore, the nature of this material and its presentation need to be carefully managed. The facilitator must never, under any circumstances, present material which will give rise to a defensive response. It is ideal if the CEO can take on this role. The facilitator - or a member of the team - can present challenging scenarios and corporate material which has a negative slant to it, but only those who have needlessly enraged a management team will know the joys of being the quarry in a game of 'hunt the facilitator'.

The presentations lead, through a coffee break, to the process of enquiry. The break is important: it gives people an opportunity for one-on-one discussion about issues that remain unresolved and allows complex ideas to consolidate. The enquiry consists of a structured mechanism, by which the various management models around the room are given expression. It is intended to open things up, not bring them to synthesis, which occurs in a subsequent phase.

The most useful tool that has been developed around this step is the yellow Post-It. Sophisticated facilitators use adhesive-treated plastic hexagons for the same purpose, which have the advantage of size, if not of cost. Each member of the workshop is equipped with a block of these and a wall board pen.

The facilitator will have prepared a range - three to five - sweeping questions that cut through the problem area from a number of directions. He or she should begin the session by outlining the remainder of the day: expansion, consolidation, prioritisation, agreed action. The expansionary phase is about to start. "The presentations have raised a number of issues. One that all will agree is of great power is the following. Please will you use your Post-Its to capture a number of points that you would wish to make on this. The results are going to be stuck to - and then arranged in clusters on - the wall. Could you please use few words and big letters, so that everyone can read your products?"

Five minutes of squeaking pens and crumpling paper follow. Working up to the CEO around the table, the facilitator asks each person for their best comment. Unless the comment is one of clear fact, it is helpful to ask what is intended by the comment, as this is often where the useful remarks emerge and where others intervene to generate debate. The Post-It is stuck on the wall, with the facilitator trying to keep some vague clustering in mind whilst doing this. "Let's see: that's about people, isn't it? Do you want this with internal human resource issues or with the stakeholder group?" Repetitive Post-Its are to be discarded by their owners, which avoids duplication and allows a wide range of thoughts to be tabled in a brief period. Once a tranche of Post-Its is exhausted, the facilitator poses another question, with the same result.

Some facilitators prefer to have an assistant, whose job is to record remarks from discussion on Post-Its in much the same way, but where the style relies heavily upon debate within the group. This is, without doubt, the most fruitful approach. It can be hard to carry of with a group who are inexperienced in the technique, however, or who are not expert in the issue under discussion. It is ideal for, for example, in technical discussions.

After two or so questions, the facilitator may choose to ask the group if there is something on which they would like to focus, or suggest something that has proven to be the core of debate. After a while, however, the group begin to repeat themselves or to embroider small areas of the issue. It is time to move to he next phase.

Issues emerge as the Post-Its fall into clusters. Many facilitators now take a fifteen minute break, during which the participants are encouraged to re-arrange the Post-Its in ways which seem better to capture the structure which is emerging from debate. There are usually five to ten clusters, often with no evident connection between them, and some orphan issues. There then follows a phase of negotiating a form of words which captures what people mean by the clusters which they have created. This is invariably a highly fruitful step and one for which the recording assistant has a major role to play. The lead facilitator should withdraw and allow the debate to proceed, or should become the recorder if he or she is alone. As the debate winds down, there may be gaps which are evident to an outside eye. It is helpful to have prepared a check list of the issues evoked by the presentations with which the day began. "So. Have we said enough about the managing the interface with suppliers?"

The end of this stage marks a natural break and is best celebrated with lunch. The tasks which follow are convergent, aimed to bring matters to a clean conclusion.

The chief aim of the afternoon is to prioritise the issues that have been surfaced. There are a number of schemes by which to do this. We will discuss two of them.

One approach is to sort issues into components which are primarily out of the organisation's control - and are therefore risks - and those over which some element of choice can be exercised. The aim is to move as many risks as possible into the 'choice' category by finding out the levers which can be exerted upon them. This is a good approach when one is looking at well understood and operational issues, and considerably less helpful when one is looking at unknown territory for the first time. We turn to this issue in the next section.

One helpful device which emerges from the scheme that identifies choice is that it allows one to map the key dimensions of choice and thus to create a species of road map for the organisation.

Figure 3: An example of a 'choice' matrix.

A company might be able to suggest that the key choices that faced it were between consolidation or growth, on the one hand, and between becoming a low cost commodity supplier of intermediates, as opposed to a innovation-focused, consumer product manufacturer, on the other. These independent choices create a space on which the company and its competition can be located. Possible future options might become apparent and impossible combinations blocked out. Figure 3 suggests such a matrix for a toy manufacturer. The grey area is non-viable and two options suggest themselves: to pre-empt or capture the flow of growing Asian imports and to reposition the firm as a fast growth, low cost intermediate supplier to the industry.

This approach has the advantage of being clear and easy to communicate. It can be simplistic, however, and can ignore a wide range of important issues. It must lead into a phase of prioritisation.

A number of issues - perhaps between five and fifteen - have been tabled. These have been discussed in depth and people know what they mean by the forms of words that have been chosen, something not always clear in issues which have not emerged from joint debate. If the "choice" schema has been followed, then there may be a pair of options also on the table. Each of these, excluding the options, should be transcribed onto a Post-It. These should be stuck, vertically, on the wall. People are asked to arrange them in rank order. Is this more or less important than that? Debate ensues and words are changed. "Importance" is, of course, a weasel word. The facilitator should make it clear that the criterion is whether understanding the implementation of the solution to a given issue, irrespective of the time frame involved, is more or less important than the Post-Its that frame it.

This phase can take a while to complete. The second stage is to ask the team to rank the Post-Its for the urgency of their solution. Keeping the vertical rank order constant, therefore, a new horizontal movement occurs. Figure 4 gives some idea of what the resulting structure should resemble.

Figure 4: Creating the action agenda.

This figure is, of course, the priority order of the matters which the management team have decided most need to be addressed as a result of a detailed discussion of the challenges which they face. It is, therefore, a powerful symbol. Those issues which occupy the top right hand corner of the figure are the most important and most urgent issues upon which attention should be turned. The lower left are the converse.

These issues need to be actioned and delegated. This is where the CEO becomes central to events. The facilitator should withdraw and allow the team to decide who does what, when it will be done and to whom it will be reported. It is often the case that the key individuals wish to consult with their own teams before defining the next steps and it is up to the CEO as to how this is to be handled. The minuting of the meeting, for example, is a matter for the CEO to delegate. Many choose to do it themselves.

This ends the workshop. The facilitator has a record of events, which may include a Polaroid photograph of the Post-It array. Experienced facilitators lines the walls with paper - it is possible to buy A1-sized blocks with adhesive edges, rather like Post-Its - and these can be detached and taken away for transcription. This is not, however, possible with hexagons. The chief thing which the facilitator carries away, however - and which is retained by his or her colleagues - is better insight into the operational aspects of the organisation. It is important to codify these and bring them together, so as to be in a position to take forward the overall processes of synthesis. It is this, the corporate-level strategic synthesis, which is the subject of the next section.

Corporate consolidation.

Figure 2 set out four way stations on the outer loop of the planning process. The last section of the preceding Chapter described a proven approach to one of these blocks. It creates two outcomes: better informed and more 'strategic' choice at the level of the operational units and technically-better informed oversight on the part of the corporate team.

This team has access to broad tools of analysis. Shareholder relations knows how shareholders look at a company, for example, and all organisations have a good feel for their general reputation. Specific instances of this, such as recruitment, staff attitudes and press comment serve to reinforce these views. There may be formal surveys which are conducted. There may be elaborate exercises with consultants and with in house expertise, aimed to unlock a theoretical understanding of these issues. In addition, work on the business environment - such as scenario development - will have generated a deep pool of understanding amongst those who wee engaged in it: far deeper than can be offered to those who hear a presentation of read a publication. All of these factors compound and grow as the iterations around the planning process develop and the knowledge pool begins to fill.

These sources are, of course, supplemented by the parallel insight and concern of senior managers. Central management have a distinct set of concerns from operational staff. They must co-ordinate, reconcile, foresee and steer with a far greater reach and with far more tenuous tools than people who operate in the immediate feedback of market forces. The core of a company does not stand still: it migrates, changing in all its parts as time passes. Migration which is not managed has all of the coherence of a bucket of fish poured into a stream. The businesses dart off in all directions and the cohesion is lost. Task such as these can only be overseen from the centre and is the chief value which it adds to the business portfolio. Planners need to understand and incorporate these issues.

In other respects, however, consolidation at the corporate level has much in common with consolidation after a work shop. Complex issues are seldom addressed in a single sweep and there is seldom a single workshop. Through discussion and through interview, perhaps as a result of one or more workshops, the central planners are set an agenda of issues to be developed. These are, increasingly, focused upon straightforward issues. In commerce, the key issues tend to be the scope of the portfolio - "is the organisation doing the right things in the right places in the right way with the right people?" as one consultancy puts it - the relative cost structure, the nature of the competition and the changing character of markets and regulation. Organisational style is often of importance to established organisations and to those going through a phase change. Management and staffing in changing times is also a generic issue. Finally, and perhaps most significantly, there are the issues of resource needs, of income, of borrowing and of the justification of these.

Most organisations find that it is unwise and impossible to try to find solutions to all of these issues in a single pass. Particular matters - such as the portfolio, cost effectiveness, human development - are regarded as being of particular importance and are given prominence for a turn of the planning cycle. Other issues are seen as being important but in too immature a state to take to the organisation for action: they are set aside for further development, just as they were in the focused workshop.

Making change happen: levers and options.

Some issues are, therefore, given priority. It is not enough to say that an issue matters, however: one has to have a clear notion of how it is to be brought about. As we discussed earlier, some issues can be addressed from the centre: in respect of borrowing, for example. The great majority of the key issues are, however, in the hands of the operational units. There are a limited number of tools by which these can be induced to do what the central organisation deems to be appropriate. These tools include:

Power without accountability is dangerous, but accountability without power is paralysing. Criteria to which managers cannot respond are worse than no criteria at all. A great danger from management which relies entirely upon criteria - as opposed to collegiate understanding of goals, imperatives and mutual interest - is that the organisation descends into a species of gamesmanship, playing the system rather than seeking real advantage. In particular, such systems can make migration, managed adaptive change in the core activity, something of a wistful dream.

The creation of scenarios.

Scenario generation is a technical business. Before we get too close to the details, therefore, it may be worth considering what role it plays in the planning process. Figure 2 had, as readers will recall, three layers to it. The outer shell, concerned with broad issues, had four way stations. We have now visited three of these: bringing issues to the operational units, fusing this and other thoughts into a set of priorities for the organisation and building these priorities into directions which will take the organisation in the desired direction. The fourth block was concerned with the development of analysis that informed and extended the range of these processes. Scenarios are a tool by which such analysis is co-ordinated and communicated to the organisation at large.

Tacit knowledge, it will be recalled, is difficult to communicate. We explain complicated things with analogies, though diagrams and by them acting out. Scenarios, telling tales of alternative futures latent with a better understanding of the present, encapsulate huge amounts of impenetrable analysis in accessible stories. People remember them and use this memory as an acid test for the equally complex proposals that come to them. Scenarios have to do rather more than this, however, for well-developed ones give people confidence about reasonable ranges and the nature of the key variables which they must watch. They are educational, giving a sense of the invisible clockwork against which the affairs of the world may tick. Scenarios integrate the complexity of the present and of prospective change into manageable 'memories of the future'.

Scenarios are, therefore, communication tools as much as they are the machinery which gives structure to analysis. They are developed with the intention as much to understand the present to as to be able to foresee elements which may govern the future. In order to do this, the team has to focus upon on one or two central issues that it is appropriate to highlight. These issues are chosen for their relevance, through interview, work shop and through the routes which have been described in the preceding chapter.

The issues tend to come in a number of distinct 'flavours', however, which can cause confusion.

The approach which is most commonly used is to create a mental picture, a 'model', of what it is that matters and how these various things may impinge on each other. It can be that such a model shows one that almost any future is going to be starkly different from the present. If so, then this is the main message that one needs to communicate.

It is more commonly the case, however, that certain factors in the model stand out as being both highly important and rather uncertain in the way in which they will work themselves out. Scenarios are used to explore the range of possibility which these factors represent. They are often called the critical dimensions of the scenarios, with each scenario defining a situation in which various combinations of these dimensions are expressed. This is why the matrix is so popular, for if one has identified the two or more critical dimensions that one wants to explore, then the square (or, as may be unavoidable, the cube) that has these measured out along its sides serves as a sort of map of the territory which the scenarios are going to explore. We have already met something of the sort with the 'choice matrix', shown in Figure 3.

Figure 5: The passage through time of alternative scenario 'logic'.

Figure 5 shows something of the factors which have to be balanced. Time flows from left to right. Two or more lines of development emerge. Each is effected by a number of factors, such as social conditions. The courses pass through a number of time windows, which are shown as planes, each made up of the key dimensions which the scenario writers want to high light. Scenario A is, therefore, the outcome of the forces which are driving change, to be sure, but also of the time frame and the dimensions which have been chosen.

Readers will note that the scenarios which are shown as A and B straddle the 'present' in the figure. This is often the case where the current way in which things are organised is maintained, but where this structure is subject to many different forces. The best approach to such a case is to spell out these forces and the subsystems which they tend to emphasise. The scenarios are used to highlight two or more distinctive outcomes, dwelling on issues which matter a great deal to the participants. It is seldom possible to offer a definitive analysis as to why these are the right or indeed the only outcome. Indeed, the scenarios are there explicitly to challenge thought about what seems to be a smoothly developing status quo.

By distinction, it is often the case that two or more interesting outcomes (that is to say, two or more interesting dimensions, drivers and time frames) produce results which are more or less different from each other - but which are starkly different from the present. One might have presented such cases to Gorbachev in Spring of 1989, for example: nothing which is foreseeable is remotely like the old USSR. Is such circumstances, it is a mistake to present a single future, but also a mistake to strain after wildly differing futures. Presentations of this sort tend to emphasise the systematic nature of change, of how - for example - abstract forces have rendered obsolete the former status quo. They may well be led by economic or numerical analysis and one can make a good attempt to prove the validity of what is being said. The presentation is more predictive and offered less in the spirit of integration than is the case in the previous paragraph.

Finally, there are instances in which there is genuine uncertainty as to how the world is to be interpreted. There are two rival models: if one is true, then this will happen, whilst if the other is valid, then something distinctive will follow. This has more in common with pay off matrixes and risk analysis than scenarios. One might have asked in 1920: will the democracies or the totalitarian world prove the viable approach to the world of mass markets and technology? One could sketch two alternative worlds, in the manner of science fiction. This may be sometimes be helpful, but it is a primitive approach that does not offer much to decision support.

Phases of development.

As we have already noted, scenario development is something of an art form, in which several layers of judgement collide in useful ways. It is possible to write a 'strategy cookbook' but not, with any hope of success, a similar guide to scenario writing. All that this section can do is set out some of the guidelines.

Setting useful boundaries.

Scenarios are not right or wrong, but useful or distracting. What constitutes 'useful' depends on the preoccupations of the users, their level of sophistication and the time frame within which the operate. The 1996 Forum round drew on a workshop of senior representatives to define the specific issues to be developed, but also had the benefit of having conducted interviews with over a hundred further organisations in 1995. A surprising commonality of interest emerged: about the cohesion of the industrialised societies, about the muddle around the concept of 'globalisation' in respect of information technology, with regard to the pace of competitive change in companies. A further subgroup were interested in security issues and a further group in the issue of economic development. A range of practical questions arose around how business is to be done in poor countries. Regulation, the way in which Government ought to go about its business and the haplessness of politicians in the industrialised world were all recurrent themes.

Scenarios may be seen as a message to the organisation or as a genuine attempt to explore. It may be that senior management choose to dwell on an issue - economic survival, technological change - at the expense of a more balanced approach because they want to focus attention on this single area. This is uncontroversial if done on occasions or for one particular case in a suite of scenarios, but can rather vitiate the point if the exercise is always focused upon a lopsided view of the world.

Developing the issues.

The scenario process begins with a sifting of the issues, of the various declared interests that have come out of the planning and other processes, of senior management concern, of matters delegated from elsewhere in the planning process. It may be that colleagues who work in areas such as human resource, information technology support or public affairs have much to contribute. The end product is, however, a set of themes which are specific enough to be clear and general enough not to be prescriptive. These themes are endorsed by those who grant legitimacy to the whole process, which may include the operational units which we met in the preceding chapter.

The themes are then developed, primarily to 'anatomise' them. This consists of finding out what makes them up. It seeks the areas in which unresolved tensions lie and what new factors have come to bear upon them. Expert help, where this can be found, is always an assistance. The aim is, however, for the team to feel that they understand the structural nature of the problem, the chief uncertainties and the primary drivers of change. Experts may help them to gain this understanding and experts may tell them when they have failed to reach it. Experience suggests, however, that whilst experts know enormous amounts about specific aspects of their field, they are as incapable as lay people of giving an overview of all of it, least of all its connections into other areas of interest. This limitation is most pronounced in the social sciences and least true in the technical disciplines, the exact converse of what is popularly thought to be the case.

There is always frequent interaction between the 'theme teams', not least as the same people tend to serve on several of them. Experienced people offer balance and are able to point, for example, to the right level of abstraction at which to work. A key balancing act is that of offsetting sources of specific technical expertise and enthusiasm. It is not enough to be excited by, for example, nano-technology, one has to see the role which this plays in the overall structure which describes the focus of the theme. Enthusiasts and specialists may miss this balance. This, indeed, is a central issue: how to be sufficiently realistic about a field without being too detailed or too diffuse. The time frame in which key developments are likely to show themselves also becomes clear and a 'future chronology' can be guessed at. It may be possible to put some numbers to some aspects of what is being discussed. At this stage, it is time to put together what has been learned.

Consolidation and synthesis.

The themes will have been triggered by people who have a strong intuition of both what matters and what is seen to matter by their target audience. They will be concerned to build bridges between the two. As the themes begin to come into coherence, therefore, they have to ask themselves whether their intuition is correct.

Most scenario processes aim at a mid-term review, at which the themes are presented and subject to discussion. This review usually surfaces areas of weakness and gaps in the logic. It may point to the need to refocus the process.

These are distinct matters. The focus - upon the industrialised world, multinational companies, the chemicals industry, India - depends upon the preoccupations of the target group. It can be hard to address highly specific issues in the medium term without reference to broad issues, however, and scenarios for - let us say - the aviation industry in Latin America are usually rather tenuous and weak if they do not take account of what drives the Latin business environment. The longer the time frame, the broader must be drawn the framework. The Forum scenarios offer a framework against which more specific or detailed work can be developed, of which more, below.

The areas of weakness are usually self-evident. In addition, however, there are those issues in which matters of great importance are felt to be latent, perhaps as a sculptor sees a rough stone, but which need development for the nature of this importance to be apparent. For example, it might be that the media are seen to have an increasing role in political debate. Very well, say other members of the team, we know that. What are you trying to say which is new? Should we dig into this a bit more? Further work would show this to be the root of an exciting new development or a continuation of something already well understood. A string of meetings are often run between the mid-term meeting and the beginning of the development of the draft scenario logic.

Synthesis is greatly assisted by three key features: a clear remit, experience from the past and the participation of people who have a good feel for the way in which the important systems under scrutiny themselves operate. We have discussed the process which gives rise to the first of these. The second is something which develops as the process itself matures. There are, however, people who have developed such oversight as a part of their profession, perhaps as an economist, or who are simply rather good at such things. They are valuable and should be involved as much as is feasible, but should not allowed to predetermine the outcome in respect of some professional orthodoxy or other. Synthesists should beware of fashion, passion and enthusiasm.

Towards the end of the synthesis period, the 'key dimensionality' should be emerging. (This piece of jargon is explored in the opening section of this Chapter.) The focus of the work should also be clear. "We are talking about the future of the aviation industry in Latin America, taking our focus on what happens over the next ten years. The key dimensionality is concerned with the balance between deregulation and competition. The first of these is dependent on the world stage - and certainly on North American relations with Latin America - whilst the second considers matters such as the technology that will let global companies begin to deliver local and long haul services at low cost into the Latin area. Now....."

This state is a happy one when it is reached. The team need to be behind it. The people who have contributed to defining the issue, and in particular, senior management, need to endorse the basic logic and focus. This is achieved, usually, by one-on-one discussion with the CEO, a presentation or a note to the management team, followed by a flurry of redirection. Many issues need validation. Numbers and facts have to be collected. Many back their work with a quantification: essentially, a simple extrapolation of key variables under the scenario logic, in order to see if the balances which are created are viable. If, for example, the balanced-but-bad outcome which looks commercially challenging brings with it, however, a level of unemployment that would disrupt the innate balance of the case, then has failed the test of consistency.


Quantifications are a minor part of the exercise, but they can grow to disproportionate influence. The can take on the mantle of a forecast and can sweep aside the logic: the answer is 42, after all. Drop that into the spreadsheets. Crank up the business plans: look - the answer! They are to be treated with care and to be published with circumspection.

The central issue of the process of formalisation is to tell a good story. You are creating two - or at the most, three - 'memories of the future'. Like well-drawn characters in a novel, these need to be distinct, coherent and memorable. Coherence is the most demanding of these criteria.

Mid-term scenario papers are often filled with spaghetti charts, in which a maze of influences impinge, one upon another. Final documents have often found better ways to express this, but the underlying truth is that of well-understood connectivity. It is often the case that malfunction predisposes a coupled system to further failure, whilst success sets the grounds for success. It may be, therefore, that the logic leads to a sunlit and a cloudy world. One may have to have a bad case and a good one. It may also be, however, that the sunlit world is dreadful from a business perspective, whilst the sheltered gloom offers sustainable returns. Most surges of growth carry within themselves the mechanisms of correction, whilst most collapses give rise to mechanisms of recovery. It is in these features that the operational messages are carried: the deregulated case for Latin America is commercially alarming - but suggests the following options. If the barriers remain, however, this will be against the background of economic malfunction and we may find ourselves in a difficult position when, as seems inevitable, the barriers finally fall.

It can be helpful to begin the analysis with the predetermined elements. The population is growing. Female participation is doubling the work force. Biotechnology will have opened many doors in a decade. It is then necessary to spell out the key dimensionality: deregulation or not, invasion or not. The next step, based upon detailed analysis, is to set out the structure which underpins these issues, with an aim to exclude some outcomes and to show mutual dependence in others. This analysis may be too much for a single reading and usually serves as something to which people can refer as they wish to develop their understanding. It is also the basic material from which the presentation is drawn.

The synthesist then explores the balances to be struck amongst the key dimensions on the basis of this analysis, arriving at the two or three cases which are fleshed out as the scenarios. These are described so as to touch on a number of common themes in each, showing the implications for employment, sector growth, partnership or whatever seem the key concerns of the stakeholders. The implications of these issues can be further accentuated through a limited exposure of the quantification.

The overall aim of this work is threefold. The first is to arrive at a consistent, rational and broadly expert overview of the operating environment. The second is to offer the immediate audience for this an accessible set of alternative outcomes, such that they gain some insight into the forces which are running and the range of possibilities which exist. The third is to convey these issues (and the implicit messages embedded by senior management) into the strategy process.


Most of us operate in a presentation culture. People read booklets after they have heard the presentation and been convinced by the outline, the numerical case and the prevalent views that are ripening on the grape vine. The presentation is, therefore, important.

There are three points to make about this:

Complex figures are often best handled by build-ups. That is to say, one starts with something simple and builds upon this, offering commentary. The traditional way of doing this was with overheads, often with fold-over layers to them. A more effective tool is the modern PC-linked projector, in which common software packages such as MS PowerPoint allow one to build images up in complex and helpful ways. Other tools which have been used are videos - costly, and with a poor history of acceptance - and audio tapes, for use in the car. There has been talk of interactive hypertext scenarios, world wide web-style; but successful solutions to the problems which this raises are not, shall we say, widespread.

One issue which is always raised in discussion is how scenarios are to cope with disaster or with the unexpected: with wild cards. The short answer is that unless the roots of the disaster are in the scenario logic, then they will not cope. From time to time, people draw up lists of wild cards:

If one is to take note of these, then it is in the "workshop-to-strategy" loop in which one must do it. It is clearly the case that a telecommunications company has to take cognisance of active attempts that private individuals, extortionists and military powers might make to subvert its system. This is hardly scenaric: it is a real systemic risk to which the business must respond. That society may suddenly become phobic about telephones is, however, a wild card that one can hope is not played but about which essentially nothing can be done.

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