Scenario Builder – Building logical future scenarios in uncertain times

Nette Lehtinen, Managing Consultant|czwartek, 22 Marzec 2018

An effective scenario method produces consistent and logical scenarios that are relevant to strategic decision-making. At Capful, we have developed a new solution to improve the efficiency, quality, and functionality of scenario work. Scenario BuilderTM relies on mathematical algorithms – also used in machine learning – and draws on consistency analysis to assess the interconnections and logical inconsistencies between multiple alternative scenarios.

Scenarios help companies to see the big picture above fragmented streams of news and events.

 

The fourth industrial revolution increases uncertainty about the future. The geopolitical scene is changing as, in the current period of protectionist rhetoric, China pursues the leading role in both trade and world politics. Many traditional companies are afraid of losing direct contact with consumers as new players aim to gain control over the customer interface. Businesses are being developed As-a-Service, forcing also the manufacturing industry to develop new service models. Disruptive technologies have the power to break down the operating and business logics of entire industries.

Identifying potential future operating environments in advance makes strategic decision-making stronger and more thorough, for instance when making decisions on specific investments, geographical market areas or new business areas. Scenarios help to visualize the cause-and-effect relationships of major events concerning the industry, competitive field, clients, technologies, legislation and so forth. In effect, scenarios help the company to connect individual news to bigger phenomena.

Scenario BuilderTM enhances the ability to identify and build up consistent scenarios. 

A process utilizing Scenario BuilderTM proceeds as follows:

  1. The influencing factors in the organization’s operation environment are identified.
  2. From these influencing factors, the key uncertainties and trends are identified through impact-uncertainty analysis and cross-impact analysis.
  3. The key uncertainties are turned into a Futures Table, which defines the alternative outcomes for each uncertainty. These outcomes are defined through expert interviews, questionnaires, and industry analyses.
  4. The Scenario BuilderTM generates all plausible scenarios based on the Futures Table. For instance, the Futures Table equipped with ten uncertainties, with four outcomes in each, generates over one million scenarios, all different from one another.
  5. The Scenario BuilderTM assesses and compares the inconsistencies within and between the scenarios and selects, e.g., two hundred most logical and consistent scenarios for further exploration.
  6. The Scenario BuilderTM algorithm identifies the scenarios most similar to each other and visualizes them as clusters on an informative and interactive scenario map [Figure 1]. A multidimensional scenario space is turned into a two-dimensional map, making it possible to identify and choose the most interesting scenarios for further assessment.

 

export_image_final_mukailtu HVK
Figure 1. The scenario map produced by the Scenario BuilderTM visualizes one thousand most logical scenarios in the Finnish National Emergency Supply Agency’s scenarios 2030 project. The yellow circles express distinct scenarios and their consistency and indicate their differences and similarities from one another. In addition, there are other scenarios in the map selected for further exploration.

 

  1. The selected scenarios are described, visualized and quantified in various ways. Further testing, elaborating and refining is done in workshops.
  2. Once the scenarios are complete, the next step is to conduct an impact analysis. This enables identification of the company’s key opportunities, risks, and strategic options. In this phase, the current strategy is also tested in different scenarios.
  3. Through the impact analysis, concrete back-up plans for alternative future developments are created.
  4. Scenarios are used as a framework for monitoring the changes that take place in the organization’s operating environment. If or when a certain scenario appears to be materializing, the organization is able to update their strategic plans accordingly.

The Scenario BuilderTM helps to evaluate the potential developments within a multidimensional business environment. Moreover, it enables a comprehensive assessment of individual events and their relationships with one another. The Scenario BuilderTM aids in identifying the building blocks of each scenario and speeds up the process of comparing different scenarios with each other. The probability of ignoring plausible scenarios decreases and the efficiency and quality of the scenario process improves.

Would you like to hear more about Scenario BuilderTM and how it can be used in your scenario and strategy work?

Please contact us here!

nette2

Nette Lehtinen

Managing Consultant

Top

Master’s Thesis: Generation of strategic growth alternatives – Empirical evidence from large companies listed on NASDAQ OMX Helsinki

Tuomas Paananen, Aalto University School of Business|czwartek, 19 Październik 2017

“The investor of today does not profit from yesterday’s growth.” – Warren Buffett

In order to serve the underlying purpose of any business, to make a profit for its shareholders, companies regardless of size, industry or geographical location need to consider and seek growth. However, creating growth is not a simple task but requires thorough thinking and decision making from top executives steering their businesses.

Objective of the study

The objective of this study is to find out the factors or approaches that companies take into consideration when generating strategic growth alternatives. Also the sources of these inputs are examined. In addition, the study aims to address the ways in which the growth alternatives are communicated to the decision makers.

Methodology

The theoretical foundation of this thesis lies on rational strategic decision making and strategic growth alternatives. The empirical data for the study was gathered from 13 semi-structured thematic interviews with top level executives responsible for strategy in their organizations. At the time of the research, all the companies were listed on NASDAQ OMX Helsinki and had a market capitalization in excess of 250 million euros. The interviewed strategy executives represented the following companies: TeliaSonera, Neste Oil, Elisa, Cargotec, Valmet, Tieto, Sanoma, Aktia, Oriola-KD, Basware, F-Secure, Finnair and Lemminkäinen. The interviews were interpreted through thematic analysis using a systematic coding process. Data collection and data analysis were conducted as an iterative process building on the theoretical framework constructed based on earlier research on the topic.

Findings

Generation of strategic growth alternatives is a multi-dimensional process including various inputs. Based on the findings, the outside-in approach, in which external operating environment is essential, is emphasized when creating strategic growth alternatives. Especially customers are seen as an invaluable source for growth opportunities. High priority factors from the external environment are also market growth and the competitive field. In addition, the relevance of widely discussed static positioning strategies seems to be eroding. Core competencies, capabilities and even organizational culture are replacing the older underpinnings when it comes to new business development. Growth generation needs to be continuous – not tied to the calendar year.

 

Keywords: strategic management, strategic decision making, new business development, strategic
growth alternatives, growth, NASDAQ OMX Helsinki

Download the full article.

Top

Imię*

Organizacja*

Email*

Numer telefonu

Wiadomość

Pola wymagane są oznaczone gwiazdką (*)

Sulje

Pysy kartalla

Tilaa uutiskirjeemme ja saat tietoa tulevaisuuden nousevista ilmiöistä sekä tulevista tapahtumista.