Prepared by Scenarios - Definitions Scenarios are structurally different stories about how the future might develop TodayThe futureSingle-point forecast Scenario 1 Scenario 3 Scenario 4 Scenario 2
Prepared by Scenarios - Benefits (I) New ways of thinking about and planning for the future Removal of blinders Exploration of new ideas and business opportunities A testbed for evaluation of business goals and strategies Identification of optimal and robust goals and strategies “A map of the future” A common mental framework for discussing future issues Faster response to a changing business environment
Prepared by Scenarios - Benefits (II) ”Scenarios aim to strech thinking about the future and widen the range of alternatives considered” Michael Porter: Competitive Advantage, 1985 ”To create the future, a company must first be capable of imagining it” Gary Hamel and C.K. Prahalad: Competing for the Future, 1994 ”Scenarios are the most powerful vehicles I know for challenging our ”mental models” about the world, and lifting the blinders that limit our creativity and resourcefulness” Peter Schwartz: The Art of the Long View, 1991
Prepared by Scenarios - History 2 WW: Scenarios used in military planning by the U.S. Air force 60’s: Herman Kahn develops comprehensive scenarios concerning governmental and military issues 70’s: SHELL implements scenario planning in their organisation just in time to prepare for the emerging oil crisis (73) 80’s: Scenarios gain acceptance in Norway - Statoil (E&D), Scenarier 2000 (Hydro, Aker, DnV, IBM) 90’s: Increasing interest in scenario learning/planning. Several comprehensive books on the topic are relased
Prepared by Companies using Scenarios today Widely used in the strategy process Also national scenario programmes - UK Foresight, Destino Colombia etc.
Prepared by Companies using Scenarios: Royal Dutch Shell Have a look at shell.com Used scenarios since early 70s ”Building scenarios is about widening perspectives. Using scenarios is about widening options ” Ged Davis, Shell
Prepared by Scenarios - Techniques Source: SRI Consulting A broad spectrum of various techniques for developing scenarios exists The SRI approach: representative/recognised Scenari o 3 Scenario 1 Scenario 4 Scenario 2 Scenario 3 ”Future forward”
Prepared by Introduction to Step 1: The strategic decision Internal logistics provider in Statoil: Business development The role of our company in integrated supply chains: Strategies for controlling the chains Destino Colombia: National scenario project 1997-1999 Imagine which courses Colombia might follow over the next 16 years, and the consequences of each Elforsk, Sweden: Research programme Provide basis for an R&D programme in the Swedish power industry
Prepared by Introduction to Step 2: Key Decision Factors Which factors would you rely on when choosing strategy? Which factors are important when making the hard decision? How can the strategic decision be de-composed into sub factors?
Prepared by Introduction to Step 3: Environmental forces Competitors Substitutes Customers Suppliers Social Economics Politics Technology Ecology Media Demography Rules& regulations MICRO COMPANY MACRO
Prepared by Introduction to step 4: Scenario logic The scenario logic is defined as the organising principle of the key drivers of change (i.e. in what way will the key drivers of change develop and change the business environment) 2x2 Matrix: Well structured Easy to communicate But can sometimes be too rigid? + + - -
Prepared by Introduction to step 4: Scenario logic Intensity of operations in the North Sea: Oil price Field developments GLOBALISATION: Globalisation offshore logistics Industry structure IT Governmental initiatives: Deregulation Privatisation of Statoil Degree of uncertainty HighLow Impact on the strategic focus / KDFs Significant Insignificant Think strategic focus! -?
Prepared by Introduction to step 5: Description of scenarios A story line incorporating developments and interactions in important external forces and key decision factors. It is important that the story lines are characterised by causal relations and internal consistency with respect to the underlying logic (refer step 4), A table showing how the key parameters vary across the scenarios, Specific events, and A creative name or heading
Prepared by Introduction to Step 6: Develop strategy alternatives Scenario A What would be the threats and opportunities? What strategy and actions would we implement? What do we monitor for this scenario? What if we knew this scenario would occur? Scenario D Scenario C Scenario B SOURCE: SRIC
Prepared by The facilitator A facilitator needs to be neutral, i.e. no opportunistic self-interest with respect to the final outcome of the scenario process. A facilitator needs to be a good listener. The facilitator should primarily structure inputs from the scenario team rather than running the show him/herself. A facilitator needs to be analytic in order to structure the discussions in an efficient manner. A facilitator needs to understand the basics of scenario planning. It is important to have an understanding of the concept of scenarios in order to set the proper goals for the scenario process. A facilitator needs to be able to motivate the participants.
Prepared by The scenario Team Source: METIER SCANDINAVIA Pessimist Neutral Facilitator Optimist Male Specialist Female Economist Generalist Technician A cross- functional team
Prepared by External participation Broaden horizon Removal of blinders New perspectives Complementary/in-depth knowledge Experts, generalist, customers, suppliers,...
Prepared by Practical Exercise Develop a scenario for the entertainment industry in 2005 Remember: Scenarios are radically different from the situation today, but at the same time plausible... Describe scenario: Name, bullet points, illustration
Prepared by MARINTEK - experience MARINTEK - SRI Consulting (98): Innovation in the container industry MARINTEK - Norwegian Ministry of Petroleum and Energy (98): Floating production and offshore MARINTEK - Statoil DTJ (99): The role of DTJ in integrated supply chains: Robust strategies MARINTEK - Wallenius Wilhelmsen Lines (00): Logistics management services required by new and existing customers in the next five years”
Prepared by Case: WWL scenario prosess 2000 Background Goals Process Scenarios Feedback/conclusions
Prepared by Background Significant changes in the business environment: - Consolidation and globalisation - Time-based competition - Outsourcing of logistics - Emerging system integrators - Increased systems integration - De-regulatory efforts - Environmental concerns Scenario planning Increased focus on logistics – need to develop logistics strategy
Prepared by The logistics rationale (1) According to Northeastern University and Armstrong & Associates, the outsourcing market is growing nearly 20 % annually Billion USD The outsourcing market Logistics: Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers' requirements
Prepared by The logistics rationale (2) ”Would like the carriers to provide more value-added services, especially in booking and control of various supply chain activities like point to point services and contracts where land side processes at both origin and destination are managed by the ocean carrier” Bob Frinier, Vice President, Logistics, Nissan ”Movement towards more and more outsourcing to systems integrators” Lou Sorchevich, Director of international transportation, GM ”Our company intends to co-develop global process systems with our partners and integrate operations with a few of the best providers in the logistics area” Bill Carrigan, Manager Global Marine Transport, Ford ”Do not know whether VWT is profitable and feel it is probably irrelevant, since it is viewed as a ”strategic” investment by senior management” Joe Manschke, Ken Fletcher, Chuck Domke, Logistics, transport processes, VWT/VW Different customer philosophies with respect to outsourcing of logistics
Prepared by Background Input from GLM project: Step 2 and 3 The project will develop a global logistics management strategy in accordance with the vision and goals of WWL WWL vision: “Help our customers succeed through innovative transportation and logistics solutions”
Prepared by Goals Explore the need for future logistics management services Contribute in the strategy formulation process and in establishing divisional and regional measures and targets with respect to logistics management services Develop a map of the future with respect to new logistics management services Input to Global Logistics Management project Evaluate whether scenario planning should be used on a regular basis by WWL in their strategic planning process
Prepared by Process Core team: –Bengt Eurén, Senior Vice President, Operation, WWL –Steve Cadden, Senior Vice President, Global Logistics, WWL –Jan Walle, Senior Vice President, Business Services and Finance, WWL –Reidar Hauge, Senior Vice President, Information Systems, WWL –Anders Boman, Senior Vice President, Commercial, WWL –Bengt Ramberg, Vice President, Global Logistics, WWL –Fridtjof Næss, Vice President, Business Performance & Pricing, WWL –Jesper Olsson, Research and Development, WWL –Gudbrand Fløtaker, Information Systems, WWL –Reidar Nilsen, Vice President, Research and Development, WWL –André Kroneberg, Torbjørn Landmark and Eivind Dale, MARINTEK Four regional workshops in order to complement the findings of the core team Time horizon: December 1999 - May 2000
Prepared by Final scenarios - Limited number of carriers - Specialised tonnage - Long term client relations - Stable production patterns - Postponement of production - Reduction in ODT - Customisation - Time-based competition - Limited number of carriers - Long term client relations - Erosion of conferences - System integrators (UPS) - Containerisation of cars - Stable production patterns - Combination of: - The coca-cola race - New days same way
Prepared by Feedback/conclusion Managers at different levels, in different regions and with different professional backgrounds developed a common understanding of the forces driving the business environment and the need for logistics management services The need for future logistics management services was explored by using the scenarios
Prepared by Conclusions WWL decided to use scenario planning on a regular basis and make the scenarios a part of the regular strategy process in the company