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scenarioplanning.pdf

Scenario Planning 1

Scenario Planning

“Thinking the Unthinkable”

© 2009 ~ Mark Polczynski All rights reserved

Scenario Planning 2

In preparing for battle, I have always found that plans are useless but planning is indispensable.

Dwight D. Eisenhower

I love it when a plan comes together! Hannibal

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Scenario Planning

Intellectual Property

Generation

Technology Roadmapping

Voice of the

Customer

New Concept Ideation

Scenario Planning:

Scenario planning provides a contextual basis for the four primary elements of strategic technology management.

To do scenario planning, we need to understand

the art of “scenario thinking”

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Scenarios are imaginative pictures of potential futures,

but the future they picture is just a means to an end.

These conversations …

are designed to help a group of people see past their own blind spots.

From: Doing Scenarios, by Art Kleiner (1999) - http://wholeearthmag.com/

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Herman Kahn developed scenarios to see past the cultural blind spot that

thermonuclear war must never happen.

What if it did happen? asked Kahn. What sort of world might the

survivors face?

From: Doing Scenarios, by Art Kleiner (1999)

One critic coined the phrase "thinking

the unthinkable".

But Kahn embraced the phrase.

Thinking the unthinkable, he argued, is

the only way to keep one's

strategic vision from getting stale.

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From: My Life Sucks, by Mark Polczynski (2009)

• Two biggest contributors to technology development failure:

• Under-resourcing (no project left behind).

• Self-delusion (build it and they will come).

• Scenario building can reduce both problems:

• Alerts you to the magnitude of problems and uncertainty of the environment you are working into.

• Enables you to develop a strategy that optimizes chances of success under all possible scenarios.

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Goal of scenario thinking:

1. Envision “alternate extreme futures” (worst/best case),

2. Create a strategy that works for all extreme futures.

These are the scenarios

Don’t pick one and limit to this!

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Back to Art Kleiner –

• The practice of constructing stories of the future has no single method and dozens of techniques.

• Science fiction writers have been very effective in exploring future utopias and dystopias.

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Kees van der Heijden has identified several general types:

• Project-specific scenarios - What's the best way to beat a rival, or clean a polluted river?

• Crisis scenarios - How can local, independent bookstores survive in the face of Amazon.com?

• Exploration/consensus-building scenarios - What are the possible futures for Colombia as a nation? How can we build democratic institutions in South Africa? How can American elections become free of financial influence?

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Back to Mark Polczynski

Scenario planning is especially important for innovators and entrepreneurs.

• These people enter, and, in fact, create highly-uncertain environments.

• They have a strong tendency toward under-resourcing and self-delusion.

• Scenario thinking can help innovators and entrepreneurs “exploit the unthinkable”.

So, with no further ado, let’s see how this is done…

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Scenario Planning Steps:

1. What problem are you trying to solve?

2. Gather information

3. Identify driving forces

4. Identify critical uncertainties

5. Create scenarios

6. Compose the stories

7. Scenario application

8. Identify key indicators

9. Monitor key indicators

10. Update scenarios and strategies

There are many versions of this process.

Here is one that we will examine.

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Scenario Building – Step 1: What problem are you trying to solve?

Returning to Kleiner…

• Scenarios only provoke genuine learning and strategies when they answer genuine concerns.

• If you are not responding to a specific crisis, then figure out the key question you need to answer.

• If you don't care about the question you are trying to answer, this is all a big a waste of time!

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Scenario Building – Step 1: What problem are you trying to solve?

Returning to Kleiner…

Note: Sometimes you can "jump-start" the process of problem identification by interviewing people before you start the process”

“If you could answer one question about the future, what would it be? “

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Scenario Building – Step 1: What problem are you trying to solve?

When describing your problem, you need to specify a time scale.

- You say: “In X years, event Y will happen”.

- The key is choosing X as the minimum amount of time in which

your strategic actions may produce results.

- If it takes at least 5 years for your actions to produce results,

then your timescale must be at least 5 years.

- The point is that for this process, there’s no sense in addressing

problems that need to be solved before your strategy can

make a difference.

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Scenario Building – Step 1: What problem are you trying to solve?

Second, it can be very beneficial for you to specify the “stakeholders”

in the problem and solution.

In general, we can categorize stakeholders as:

1. Who experiences the problem?

2. Who causes the problem?

3. Who pays for the problems?

4. Who supplies the solutions?

5. Who pays for the solutions?

One person can be in different categories.

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Scenario Building – Step 1: What problem are you trying to solve?

Here, we demonstrate Step 1 on a real-world problem.

• The Marquette University Master of Science in Engineering Management (ENMA) program addresses issues that are critically important to engineers and their employers:

(program relevance = high  good).

• What happens if the ENMA program is not financially self-sufficient:

(program costs > tuition income  bad).

Talk about thinking the unthinkable!

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Scenario Building – Step 1: What problem are you trying to solve?

Our ENMA stakeholder list and key problems might look like this:

• Students: How can I keep my current job and advance in my profession?

• Employers of students: Where will my future leaders come from?

• Marquette University: How do I maintain/improve my image and balance

my budget?

• College of Engineering: How do I enhance my “product portfolio” and

balance my budget?

• ENMA staff: How do we maintain a program that attracts students?

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Scenario Building – Step 1: What problem are you trying to solve?

The high-level problem that we are trying to solve is that ENMA program is not financially self-sufficient (loosing $).

We want to solve this problem so that all of our stakeholders are happy.

This could be solved by (and/or):

1. Increasing number of students in the program (tuition income),

2. Reducing program expenses,

3. Obtaining outside funding to support the program.

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Scenario Building – Step 1: What problem are you trying to solve?

Here are three specific problem statements that we can consider:

Over the next five years:

1. How can we increase enrollment in the program?

2. How can we reduce program expenses?

3. How can we obtain outside funding to support the program?

For this example, we will focus on the first question.

Note that scenario thinking is really an ongoing process.

So maybe we do question 1 this year, and do the other questions over the following 2 years.

It’s all about the conversation!

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Scenario Planning Steps:

1. What problem are you trying to solve?

2. Gather information

3. Identify driving forces

4. Identify critical uncertainties

5. Create scenarios

6. Compose the stories

7. Scenario application

8. Identify key indicators

9. Monitor key indicators

10. Update scenarios and strategies

Increase enrollment in

ENMA program

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Scenario Building – Step 2: Information Gathering

• After defining the problem to be solved, you need to gather information relevant to the topic.

• This can be time-consuming, tedious, and frustrating, since you don’t really know all the types of information that you need (you are going to think the unthinkable).

• This is why scenario planning should be an ongoing process – your databases will continue to improve over time.

For our example, here are some things we know about ENMA...

0

5

10

15

20

25

30

Fall 2004 Spring 2005

Fall 2005 Spring 2006

Fall 2006 Spring 2007

Fall 2007 Spring 2008

Fall 2008 Spring 2009

Fall 2009

Regular Non-Degree Temporary

ENMA program enrollment

Virtually all tuition-paying

students

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0

50

100

150

200

250

300

350

2004 2005 2006 2007 2008 2009

Fall Spring Total

COE ENMA course credits by all MU students

Predict 63 students in 3 ENMA courses

for Spring 2010

23Scenario Planning

$-

$50,000

$100,000

$150,000

$200,000

$250,000

2005 2006 2007 2008 2009

Tuition on MU credits taken my ENMA students ($800/credit)

Predict $255K

24Scenario Planning

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Scenario Building – Step 2: Gather Information

• Now, given this information, do we want to stick with the same problem statement?

• Do we want to revise our crystal ball questions?

• If we want to balance the budget by increasing enrollment (increasing tuition), which problem are we trying to solve:

• Increasing enrollment in ENMA program?

• Increasing enrollment in ENMA courses?

Well, of course, this depends on the University’s accounting practices!

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Scenario Building – Step 2: Gather Information

Important Note!!

• Even though information gathering is a critical step in creating scenarios…

• Scenarios are NOT straight-line extrapolations from historical/statistical data – this is just thinking the thinkable.

• Again, the goal is to think the unthinkable – what are the alternate extreme futures?

• So, this is more like Chaos Theory (Catastrophe Theory).

What small changes could have drastic impact?

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What Next?

• At this point, you might be tempted to seize on one strategy for increasing enrollment in the program.

• A more experienced person might come up with several strategies (see next slide), and then pick the “best” one.

• But which IS the best one? Why?

• According to scenario thinking..

The ideal strategy is the one that leads to success under all possible future conditions.

The key to scenario thinking is to not select or eliminate any scenarios, but to optimize across all scenarios.

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Four Possible ENMA Strategies

• Strategy 1: The same, but more No major program structural changes, heavy emphasis on local recruiting, initiate pro-active international recruitment.

• Strategy 2: Go it alone Sever bond with GSB, expand required ENMA courses to 9 (27 credits) plus 2 elective courses (6 credits) from any MU program.

• Strategy 3: Take it outside Terminate ENMA program, but maintain ENMA courses. Offer 12 credit ENMA certificates based on ENMA courses. Market primarily to local industry and COE grad students from other programs.

• Strategy 4: Shut it down Terminate ENMA program, eliminate ENMA courses/faculty.

Which one?! Why?!

Think the unthinkable!

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Scenario Planning Steps:

1. What problem are you trying to solve?

2. Gather information

3. Identify driving forces

4. Identify critical uncertainties

5. Create scenarios

6. Compose the stories

7. Scenario application

8. Identify key indicators

9. Monitor key indicators

10. Update scenarios and strategies

This is where the unique elements of scenario

thinking come in

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Scenario Building – Step 3: Identify Driving Forces

• OK, we’ve identified the primary problem to be addressed by our scenario planning process,

• And we have collected whatever data we could given the uncertainty of the situation.

• Now, we could just dream up some strategies off the top of our heads and randomly pick one.

• But no, we’ll try a more systematic route to developing strategies.

• Our approach will start by identifying “driving forces”.

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Scenario Building – Step 3: Identify Driving Forces

• We will start by identifying “driving forces”.

• Different scenario planning approaches use different terms and describe driving forces in different ways.

• But by-and-large, these are “megatrend” forces, many of which are almost certain to occur.

• A good example is demographics.

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Demographic Megatrends

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Scenario Building – Step 3: Identify Driving Forces

Here is a list of categories of “standard” driving forces:

• Political

• Economic

• Societal

• Technological

• Environmental

• The ScenarioThinking.org website has a nice expansion of this standard list:

http://scenariothinking.org/wiki/index.php/Driving_Forces

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ScenarioThinking.org has a format for describing driving forces –

http://scenariothinking.org/wiki/index.php/How_to_determine_a_driving_force%3F

Name: It helps to be specific, e.g. rather than “Demographics”, call it “The ageing of America” to indicate direction of the force.

What: A short description of the driving force.

Enablers: Factors which strengthen this driving force.

Inhibitors: Factors which weaken this driving force.

Paradigms: Changes in ways of thinking about the world due to driving force.

Experts: Sources for additional information about this driving force.

Timing: Dates for key milestones in the development of the driving force.

Web Resources: Useful resources on the web relating to this force.

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Scenario Planning Steps:

1. What problem are you trying to solve?

2. Gather information

3. Identify driving forces

4. Identify critical uncertainties

5. Create scenarios

6. Compose the stories

7. Scenario application

8. Identify key indicators

9. Monitor key indicators

10. Update scenarios and strategies

Here, we eliminate “uninteresting” drivers

Let’s look at a way to eliminate uninteresting driving forces and focus on unthinkable factors…

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Scenario thinking is not straight- line extrapolation.

It is thinking the unthinkable…

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Scenario Building – Step 4: Identify Critical Uncertainties

• First, come up with a list of many drivers impacting your problem.

• Next, plot your drivers on an uncertainty/importance plot.

• Now, choose drivers in the high uncertainty, high importance quadrant of the plot.

U n

ce rt

a in

ty

Importance

Driver A

Driver B

Driver C

Driver E

Driver D

High Uncertainty

High Importance

Low

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Scenario Building – Step 4: Identify Critical Uncertainties

• For example, the “ageing of America” has low uncertainty, and high importance.

• Thus, for scenario planning, it is “uninteresting”.

• The purpose of scenario thinking is to “think the unthinkable”.

U n

ce rt

a in

ty

Importance

Driver A

Driver B

Driver C

Driver E

Driver D

Low Ageing of America

Germs rule!

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Step 4: Identify Critical Uncertainties

• You can use other axes on the plot, as shown below.

• Whatever the axes, the point is to come up with drivers that will ultimately produce “interesting” scenarios.

U n

ce rt

a in

ty

Uncontrollability

Driver A

Driver B

Driver C

Driver E

Driver D

High Uncertainty

Highly Uncontrollable

Low

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Step 4: Identify Critical Uncertainties U

rg e

n cy

( T

im e

)

Importance (Impact)

Task A

Task B

Task C Task E

Task D

High Urgency

High Importance

Scenario Planning 41

Scenario Building – Step 4: Identify Critical Uncertainties

Let us return to our example of the Marquette ENMA program,

One key factor for the program, obviously, is the

need for engineering managers!

• It seems to be a given that the world needs more technology.

• Therefore, the world needs more engineers.

• Therefore, more engineering managers.

But these are obvious and “uninteresting” drivers for ENMA program.

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Scenario Building – Step 4: Identify Critical Uncertainties

But this need for more engineering managers has some interesting dimensions, such as:

• Where will these engineering managers be working?

• What will be the primary functions of these managers?

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Recall our ENMA stakeholder list:

• Students (current and future): How can I keep my current job and advance

in my profession?

• Employers of students: Where will my future leaders come from?

• Marquette University: How do I maintain/improve my image and balance

my budget?

• College of Engineering: How do I enhance my “product portfolio” and

balance my budget?

• ENMA staff: How do we maintain an attractive program and keep our

jobs?

Are the questions on the previous slide interesting to these stakeholders?

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Scenario Building – Step 4: Identify Critical Uncertainties

• Are these questions important: - Where will engineering managers be working? - What will these engineering managers be doing?

• These questions are important to our stakeholders:

• Students (current and future): How can I keep my current job and

advance in my profession?

• Employers of students: Where will my future leaders come from?

• Marquette University: Where will my future students come from?

• College of Engineering: What will my future student do?

• ENMA staff: What should I teach??!!

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Scenario Building – Step 4: Identify Critical Uncertainties

• Are these questions uncertain: - Where will engineering managers be working? - What will these managers be doing?

• Recall my observation:

• Two biggest contributors to technology development failure:

• Self-delusion (build it and they will come),

• Under-resourcing (no project left behind).

• If you think you know the answers to these two questions, I suggest to you that you are:

• Experiencing the first contributor, and

• Will be experiencing the second, or

• Fast-tracked to be the CEO of your company.

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Scenario Building – Step 4: Identify Critical Uncertainties

Here are two interesting drivers for our example. U

n ce

rt a

in ty

Importance

Driver A

Driver B

Driver C

Driver E

Driver D

Where engineering managers will be

working.

Low

What engineering managers will be

doing.

Scenario Planning 47

For this example, we will refine our scenario planning even further.

We said there were two interesting issues:

- Where will engineering managers be working? - What will be the primary functions of these managers?

For this example, we will focus on only the second issue:

What will be the primary functions of engineering managers?

We can always address the first issue in a future scenario planning session.

Our primary question:

- What will be the primary functions of these managers?

Engineering managers have many functions, but most are “uninteresting”: • Project management • Balancing the engineering budget • Hiring people • etc…

In our example, we will focus specifically on two critical functions of engineering managers:

- Innovation – Devising new solutions to problems.

- Entrepreneurship – Bringing solutions to customers in new ways.

Scenario Planning 48

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Scenario Planning Steps:

1. What problem are you trying to solve?

2. Gather information

3. Identify driving forces

4. Identify critical uncertainties

5. Create scenarios

6. Compose the stories

7. Scenario application

8. Identify key indicators

9. Monitor key indicators

10. Update scenarios and strategies

Let’s use the innovation and entrepreneurship functions to

create scenarios

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Scenario Building – Step 5: Create Scenarios

• You have identified a two highly important but highly uncertain drivers.

• Next, you must envision the extreme conditions for each driver: - Extreme positive vs. extreme negative, - Extremely optimistic vs. extremely pessimistic, - Etc…

• Now, draw another four-quadrant plot, with the extremes on the axes:

Driver A-

Driver A+

Driver B+

Driver B-

In this way, you generate four highly-differentiated scenarios:

Scenario 1: A-/B- Scenario 2: A-/B+ Scenario 3: A-/B- Scenario 4: A+/B+

1

2 4

3

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Scenario 2 Scenario 4

Scenario 1 Scenario 3

Entrepreneurship

In n

o v

a ti

o n

+

-

- +

Here’s our scenario diagram:

Scenario Dimensions:

Innovation – Devising new solutions to problems.

Entrepreneurship – Bringing solutions to customers in new ways.

Example: In Scenario 4, engineering managers are highly involved in devising new solutions to problems and bringing them to customers in new ways.

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Note:

• This is just one way to come up with scenarios.

• It’s systematic, and generates a manageable number (four) of highly- differentiated scenarios.

• It’s good way to start.

• But if you get into this way of thinking, you don’t need to be tied to this approach.

• You can even just come up with them off the top of your head, as long as they are interesting and highly-differentiated.

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Scenario Planning Steps:

1. What problem are you trying to solve?

2. Gather information

3. Identify driving forces

4. Identify critical uncertainties

5. Create scenarios

6. Compose the stories

7. Scenario application

8. Identify key indicators

9. Monitor key indicators

10. Update scenarios and strategies

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Scenario 2 Scenario 4

Scenario 1 Scenario 3

Entrepreneurship

In n

o v

a ti

o n

+

-

- +

Innovation – Devising new solutions to problems.

Entrepreneurship – Bringing solutions to customers in new ways.

Example: In Scenario 4, engineering managers are highly involved in devising new solutions to problems and bringing them to customers in new ways.

Scenario Planning 55

Scenario Building – Step 6: Compose the Stories

• For each of your (4) scenarios, you must now write a short story.

• Each story should capture a vision of how the world will be under this scenario.

• It can be quite beneficial to come up with a catchy name for the scenario.

• Names stick in the mind and capture the essence of the scenario.

• You might attempt to describe the state of the world that characterizes your scenario.

• Or you might choose an archetypical person that would characterize your scenario.

For example…

Scenario Planning for

Nuclear-Powered Generation of Electricity

Tony Roder, Sharath Tadepalli, Keith Sherer, Matt Osburn

Dr. Mark Polczynski

56Scenario Planning

Problem Statement

Economic, political and environmental issues are expanding the demand for alternative energy sources.

As oil prices rise and reserves are depleted pressures to develop alternatives to petro-energy increase.

Reducing the dependence of the country on foreign oil is in the interest of National Security.

As awareness of global climate change rises there is a greater call for alternative energy sources.

The obstacle at hand is how to make the nuclear power industry a viable and desirable energy source for the future.

57Scenario Planning

Critical Uncertainties:

Social/Political Climate: Political and social climates are historically very unpredictable in the realm of nuclear power.

Technology: Technology can play a very important role in giving nuclear power a new way to reuse or dispose of spent fuel.

58Scenario Planning

Social/Political

Embracement

+

Spent Fuel

Technology+

Happy Homer

Who Needs It?Not Only No…!

Yucca World

Scenarios

59Scenario Planning

Scenarios: Happy Homer: Nuclear power is seen as environmentally friendly, safe and low-cost. New technologies have been developed to allow full reprocessing of spent fuel into more usable fuel to be placed back into a reactor.

Yucca World: Demand for nuclear power outweighs any opposition to the storage of nuclear waste.

Not only No…!: Worst case scenario for the nuclear power industry. No new technologies emerge to help solve the problem of spent fuel and the general public and politicians do not want nuclear power.

Who Needs It?: Technology exists to cleanly and safely reprocess spent nuclear fuel, but a different alternative energy source has shown itself to be more efficient and more easily implemented.

60Scenario Planning

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Scenario Building – Step 6: Compose the Stories

For our ENMA example, two classic archetypes are:

- Engineer as Entrepreneurial Innovator  Westinghouse

- Engineer as Innovator  Edison

Or you might call the entrepreneurial innovator scenario “The Messiah”.

And you might call the engineer as innovator “The Geek.”

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Scenario 2: Edison Engineer as

innovator

Scenario 4: Westinghouse Engineer as

entrepreneurial innovator

Scenario 1: (TBD) Engineer as

resource manager

Scenario 3: (TBD) Engineer as

entrepreneur

Entrepreneurship

In n

o v

a ti

o n+

-

- +

Innovation – Devising new solutions to problems.

Entrepreneurship – Bringing solutions to customers in new ways.

Scenario Planning 63

Example - Scenario 4: Westinghouse

In this world, the engineering manager is looked to as a leader in the global virtual village.

The engineering manager is capable of:

• Identifying and clearly defining current, emerging, and future economic, social, cultural, political, environmental, and technological problems,

• Conceptualizing technically and commercially viable new solutions,

• Packaging and delivering the solutions in a manner that delights the customer.

Scenarios can be more “lyrical”. You could write a short story on a “Day in the Life of G. Westinghouse”.

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Scenario Planning Steps:

1. What problem are you trying to solve?

2. Gather information

3. Identify driving forces

4. Identify critical uncertainties

5. Create scenarios

6. Compose the stories

7. Scenario application

8. Identify key indicators

9. Monitor key indicators

10. Update scenarios and strategies

Now the work starts!

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Scenario Building – Step 7: Scenario Application

• Given your (4) short stories, it is time to return to the original question.

• When you first asked the question, you couldn’t come up with a good answer, because you did not know what the future looks like.

• But now you have (4) visions of the future!

• So now you must answer the original question for each of the (4) scenarios!

• Your strategy must work for all 4!

Social/Political

Embracement

+

Spent Fuel

Technology+

Happy Homer

Who Needs It?Not Only No…!

Yucca World

Scenario Planning 66

Engineer as innovator

Engineer as entrepreneurial innovator

Engineer as resource manager

Engineer as entrepreneur

The strategy for balancing the ENMA budget by increasing enrollment

must work in all four of these alternative future worlds!

The key to scenario planning: The best strategy covers all possible futures!

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So What!?

• This set of 3 lectures on scenario planning is about creating the context for strategic technology planning and development.

• The scenarios that we develop are not the strategy, they are only stories about the future.

• The rest of this course is what we must do to develop the strategies.

• The point here is that the strategies we develop must work in all the scenarios that we create using the scenario planning tools we just reviewed.

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OK, what is the strategy for increasing enrollment in the ENMA program?

www.mu.edu/enmacerts

Scenario Planning 69

Certificates and courses intended for: Innovators, entrepreneurs, and engineering resource managers.

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Are we done yet? Heck no!

Recall that your scenario planning should have a specified target date, for example, 5 years.

As your 5 year scenario target approaches, you need to know which (if any!) of your scenarios is closest to reality.

To do this, you need to identify a few key indicators relative to your scenarios that give some clues as to which way the world is evolving.

So, the last steps in the process are:

• Step 8: Identify Key Indicators

• Step 9: Monitor Key Indicators

• Step 10: Update Scenarios and Strategies

Here are examples of key indicators for the ENMA example…

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Key Indicators for ENMA Program Strategy to Increase Enrollment:

Internal indicators:

• Enrolment in program and courses (OK).

• Completion of MS and Certificates (OK).

External indicators (TBD):

• Where are graduates working?

• What are they doing?

Original important and uncertain drivers!

Benchmark other programs, too.

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Scenario Planning Steps:

1. What problem are you trying to solve?

2. Gather information

3. Identify driving forces

4. Identify critical uncertainties

5. Create scenarios

6. Compose the stories

7. Scenario application

8. Identify key indicators

9. Monitor key indicators

10. Update scenarios and strategies

Scenario Planning 73

Final words from Wendy L. Schultz - http://www.infinitefutures.com/tools/sb.shtml

• The benefits of scenario building rest not in the completed scenarios, but in the process of development itself, and in the subsequent common language participants in the process share.

• They can use this common language as a tool to explore the benefits, costs, and trade-offs of any potential decision, initiative, or plan.

• More specifically, they can consider the short-term trade-offs in comparison to long-term trade-offs; the scenario building process creates a language to facilitate that comparison.

In preparing for battle, I have always found that plans are useless, but planning is indispensable.

Dwight D. Eisenhower