SCENARIO-BASED PLANNING

© 2015 MERIDIAN ASSOCIATES INC. All Rights Reserved

Consultants in Corporate Direction

One East Erie Street

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SCENARIO-BASED PLANNING: AN ESSENTIAL STRATEGIC APPROACH IN TODAY’S ENVIRONMENT

DIANE M. MEISTER FOUNDER AND MANAGING DIRECTOR

MERIDIAN ASSOCIATES INC.

HERB RUBENSTEIN PRINCIPAL, MERIDIAN ASSOCIATES INC.

LECTURER, UNIVERSITY OF COLORADO DENVER

Association for Strategic Planning 2015 National Conference

Washington, D.C.

May 7, 2015

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Agenda

5 Discussion / Q & A

2 Case Examples

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4

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Where It Can Go Wrong

Scenario-Based Strategic Planning AN INTRODUCTION

Incorporating into Your Existing Strategic Plan

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AN ERA OF RADICAL CHANGE!

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Every Organization Faces Future Threats: Which Might be Yours?

Self-Driving Car

“70 Billion Connected

Devices by 2020”

Smart Fabrics

The ACA: A potential unraveling?

3D + 4D Printing

High-Speed Rail

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A Range of Those Likely to be Disrupted

Cable TV

Health Insurers

Auto Insurers

Auto Parts Makers ++

Apparel Designers / Retailers

Manufacturing / Construction / Education / Health Care / ++

Industries Likely Disrupted:

Self-Driving Car

“70 Billion Connected

Devices by 2020”

Smart Fabrics

The ACA: A potential unraveling?

3D + 4D Printing

Aviation

High-Speed Rail

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Problems with Traditional Strategic Planning

o

Future forecasts are too

often merely extrapolations

from the past

(“A remnant of the Industrial era”)

Insufficient attention to early signs of industry

disruption (“It won’t happen to us!”)

No adequate

accounting for

“Strategic Risk”

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“We’ve looked at global companies that have destroyed the most

value, the world’s biggest losers – and discovered that 80% of value destruction has come from bad strategy decisions – not from environmental shocks or poor operational

performance – from bad strategy decisions. When we interview top executives in their ‘truth rooms,’ i.e., away from the analysts, we hear that the majority have no confidence in their

strategy. 60% of 4000 top executives have no

confidence in their strategy. That’s an indictment of the way strategy has been done for a long, long time!”

Cesare Mainardi, CEO Strategy&

March 2015

An Indictment!

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A Better Approach:

Scenario-Based Strategy

o

Creates active awareness of “possible” futures

Permits deeper assessment of – and the

ability to manage – strategic risk

― Economic

― Political

― Customer Demand

― Competitive

Drives response preparation

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Value of Scenario-Based Strategy (Cont’d)

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Alternative to Unreliable Forecasts: Recognizes

the future cannot be predicted with any accuracy

Embraces Future Uncertainty:

— Seeks out, rather than stifling, diverse views

— Encourages engagement and discussion,

allowing new choices to emerge

Allows Organizational Adaptability – a valuable sense of calm when pressure is on to react

“It’s not the strongest … who survive.

It’s those who best adapt to change.”

Charles Darwin

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Our Goal Today: Promote Scenario-Based Strategic Planning

Encourage Newcomers

to consider its use

Provide Reasons for

Reconsideration Among

Triers Who Abandoned

Help Successful Scenario

Users Up Their Game:

Provide ways to further

enhance the value Scenarios

provide to your organizations

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Meridian Goal: Part II

CREATE A COMMUNITY DEDICATED TO THE WILDLY SUCCESSFUL USE OF A

SCENARIO-BASED, “PORTFOLIO OF OPTIONS” APPROACH

TO PURSUING ORGANIZATIONAL GROWTH IN MID-SIZED ORGANIZATIONS

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Scenario-Based Planning for Mid-Sized Organizations

The Meridian Approach

Mid-Market Scenario Planning should focus on:

A 3 - 10 year time frame (not 40!)

High-impact “STRATEGIC” RISKS –

even if currently LOW likelihood

TWO Scenarios per high-impact risk

Clear scenario names

Less effort on detailed scenario “stories”

More on:

— Identifying real “drivers” of change

— Your response Plans

— Defining and making the SMALL BETS

— Tracking PREDICTIVE INDICATORS

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Meridian Process:

Four Critical Components

#3: Make EARLY BETS that… a) Anticipate opportunities b) Mitigate risk

#1: The Starting Point:

Strategic Risk Assessment

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#2: Define Alternative Scenarios

#4: Define / Track Predictive Indicators

“Mountains”

“Oceans”

Indicator 1

Indicator 1

Indicator 2

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Case #1

• 2014 Oil Price Collapse

• “EARLY BETS” by two oilfield service companies

Case #2

• 2015 Supreme Court challenge to

Affordable Care Act

• SCENARIOS & PREDICTIVE INDICATORS for health care service providers

Case #3

• #1 Global Metallurgical Engineering Firm facing revitalized competitor

• Strategic RISKS, SCENARIOS, PREDICTIVE INDICATORS, EARLY BETS

CASE EXAMPLES

Documents

SCENARIO-BASED PLANNING