Scenario Planning And It's Impotance In Modern Buisness Strategy.

What is Scenario Planning ?

 “Scenario planning is a discipline for rediscovering the original entrepreneurial power of creative foresight in contexts of accelerated change, greater complexity, and genuine uncertainty."

Pierre Wack, Royal Dutch/Shell, 1984

In today’s business world while doing business there is certainly one thing that is certain that is “UNCERTAINTY”. It has become an integral part of the contemporary management concept.Dabbling with uncertainty has become the part and parcel of modern strategic management expert. It the smartness of the management how to eliminate the uncertainty and combat the uncertain  change situations and overcome this at ease or else to carry on with it necessary changes in the management and business process and actions.

Scenario Planning is basically the far sightedness of the management, to what extent it can look beyond and certain unforeseen and unpredictable future and can change fast to combat the turbulent times.

 To manage risks related to innovation investments that extend long into the future, managers must be willing to look ahead and consider uncertainties. But rather than doing that, many people react to uncertainty with denial. They take an unconsciously deterministic view of events. They take it for granted, that some things will or will not happen. Not having tried to foresee surprising events, they are at a loss for ways to act when upheaval takes place. Scenario planning is a tool for helping managers to take a view into the future in a world of great uncertainty. It is the most efficient tool to manage strategic risks and opportunities.

 

History Of Scenario Planning.

 The scenario planning concept first emerged following World War II, as a method for military planning. The U.S. Air Force tried to imagine what its opponents might do, and to prepare alternative strategies. In the 1960s, Herman Kahn, who had been part of the Air Force effort, refined scenarios as a tool for business prognostication. He became one of America’s  top futurist.

 Then scenarios reached a new dimension in the early 1970s, with the work of Pierre Wack, who was a planner in the London offices of Royal Dutch/Shell in a newly formed department called Group Planning.

 

Pierre Wack and other planners were looking for events that might affect the price of oil. And they found several significant events that have been in the air. One was, that the United States was beginning to exhaust its oil reserves. At the same time American demand for oil was steadily rising.

 

The emerging Organization of Petroleum Exporting Countries (OPEC) was showing signs of flexing its political muscle. Most of these countries were Islamic, and they bitterly resented Western support of Israel after the 1967 six-day Arab-Israeli war.

 Looking at this situation, the planning team realized that Arabs could demand much higher prices for their oil and there was every reason that they would. The only uncertainty was when. It seemed likely to happen before 1975 when old  oil price agreements were due to be renegotiated.

 So Pierre Wack and his team wrote up two scenarios – each a complete set of stories about the future, with tables of projected price figures.

 The first story presented the usual opinion at Shell: that the oil price would stay somehow stable. But in order for that to happen, a miracle would have to occur. New oil fields, for example, might have to appear in non-Arab countries. The second scenario looked at the more plausible future – an oil price crisis sparked by OPEC. But after they have presented these scenarios to Shell’s management, there was no change in behaviour happening. The managers understood the implications, but no change in behaviour came.

 

So Pierre Wack went one step further and described for the scenarios the full ramifications of possible oil price shocks and he tried to make people feel those shocks through the scenario. He warned management, that the oil industry might become a low growth industry that OPEC countries would take over Shell’s oil fields. They described the forces in the world, and what sorts of influences those forces had to have. This was when scenario planning for businesses was born. It helped Shell’s managers to imagine the decisions they might have to make as a result. And it was just right in time. In October 1973, after the Yom Kippur war in the Middle East, there was an oil price shock and of the major oil companies, only Shell was prepared for the change. The company’s management responded quickly and in the following years, Shell moved from one of the weaker of the seven large oil  companies that existed at that time to the second in size and the number one in profitability.

 So to operate in an uncertain world, managers need to be able to question their assumptions about the way the world works, so that they could see the world more clearly. The purpose of scenario planning therefore is, to help managers to change their view of reality, to match it up more closely with reality as it is, and reality as it is going to be. The end result, however, is not an accurate picture of tomorrow, but better decisions about the future.

 Please Click For Details:

http://www.strategy-business.com/press/article/8220?pg=0

Strategy Mapping is Becoming A Mandatory Business Tool for Today's Corporate Sustanabilty.

Strategy Mapping Is an Extension Of Balance Score Card Systems, it was Kaplan and Norton of the Famous BCS propounded this particular theory. In Other words it is a destination statement and the proper implementation of Business Strategy.

It is very much a process driven system in order to achieve the goal of the organization by the management who has drawn the strategy.

“Strategy Mapping” is the process of determining objectives and means of getting there. The balanced scorecard (Kaplan and Norton) is one framework that can be used for strategy mapping. The balanced scorecard has four common perspectives: financial, customer, internal business, and innovation and learning.

Each perspective commonly has from four to seven goals and corresponding measures. The scorecard is balanced in that it contains elements that are short-term and long-term, financial and non-financial, and leading factors and the  lagging factors . An impotrance  characteristic of a balance scorecard is that it should represent a translation  and perfect implimentation of strategy.

In the Balance Score Card model we have seen that the ultimate goal is the profitability .But the profitability can come only by a systematic process which the business has to identify. Kaplan and Norton identified the components of strategy mapping which includes

(1) financial strategies,

(2) strategic themes,

(3) value propositions, and last but not the least

(4) critical internal processes.

For financial strategies, an example of an overriding strategy may be to maximize 

shareholder wealth, then the market capitalization of the firm in the stock exchange 

increases which may be attained by other financial strategies, such as maximizing 

revenues, productivity and asset utilization. In setting strategic themes, the overall

 strategy must be decomposed from an internal viewpoint. The focus is on 

determining what prudent business must be done to achieve desired strategic 

outcomes.

Three generic strategic themes are to increase customer value, achieve operational 

excellence, and exhibit good corporate citizenship. In setting value propositions, 

it is important to recognize that it is impossible to do it all. 

Instead, it is essential to focus on excelling in a few select areas. 

Three possible value propositions are product leadership, customer intimacy 

and operational excellence.

Critical analyses of internal processes are those crucial  functional operations 

that must be executed properly to achieve the value proposition and the value 

addition chosen. They must be identified so that the organization can assess 

the short comings of the current situation and rectify and develop any new skills 

sets and technological or process enhancement. The process of determining 

critical internal processes assists in prioritizing spending in hiring and training 

of human capital in order to increase productivity along with profitability.

Strategy mapping are used in for example for the following issues. 1.    Determining target market, focusing on target audience. 2.    communicating and understanding strategy and transparency in communication which makes the understanding easy. 3.    Detecting errors and continuous improving strategic planning. 4.    When determining target market, the chosen value proposition dictates the focus of the organization while the related critical internal processes chosen dictate which customers will come calling. 5.    Using strategy mapping to refine the customer base is an iterative process. Using strategy maps to communicate to managers assists senior management with ‘thinking out’ the strategic plan, allows senior management to articulate the plan to lower-level managers, and allows managers to link their relevant map segments to operational objectives. Strategy maps for communicating allows non-manager employees to see where they fit into strategy (including high-level goals), avoid strategy distortions, and link their relevant map segments to operational objectives. Strategy mapping can help in error detection by making inconsistencies and gaps in cause-and-effect linkages more visible. Periodic review of the strategy map will assist in error detection before related problems become an issue.The management level introspection is required at all levels and at frequent intervals of time.  The graphical depiction of strategy make the entire strategy more understandable to all levels of employees and make it much more likely to get valuable input from a variety of sources. Two common resistance to strategy execution are as follows strategy and people.  Strategy barriers include  (1) Problems and errors not being identified soon enough.  (2) Ineffective coordination of activities amongst the management people.  (3) Goals that are not very specific.  People resistance  includes the following points:  (1) Insufficient employee capabilities, the knowledge base is to be enhanced  and a proper communication is required.  (2) Insufficient Training and Development,  (3) Inadequate leadership and very often direction less. (4) Very poor line managers capabilities.  Strategy mapping is part of the solution to these barriers to strategy execution. Conclusion: All major organisation in order to avoid the the direction less attitude must adopt the Strategy Mapping process. The masterminds of Kaplan and Norten has made an excellent models which can really streamline the proper strategic function in order to achieve the business goals.

"Capturing The People Advantege" By Booz&Co

Booz&Co has recently published a copy of all the interviews and write up about the Strategic HR and the importance of HR and the paradigm shift that is happening in the HR world.In the present context of change management this particular Booklet is very useful and a must reading for all Management students and Management practitioners.

I am attaching the Hyper Link of " Capturing the People Advantage"

Please click:

http://www.booz.com/media/file/Capturing_the_People_Advantage.pdf

I consider this to be one of the most insightful story and a very assertive thoughts which has been shared by many veterans in the HR Strategic Management practitioners and masterminds.

MERGER,ACQUISITION AND CORPORATE RESTRUCTURING

MERGER,ACQUISITION AND CORPORATE RESTRUCTURING

Corporate Sustanability And Adaptablity In The Changing Business Envoirnment

In today's very competitive environment and for a widely held public limited company business sustainability has become a buzzword.

As we say cost is an important part of any business but on a broader terms the environmental cost was not taken in to account.In recent years the Environmental cost is being looked upon and are given due diligence.

Top Management looks for opportunities and business areas where it can sustain for along time and can emerge as a winner without harming the society.

Specially for well diversified conglomerate like General Electric, 3M and Indian domestic conglomerate like HUL, ITC ,Wipro ,Reliance sustainability has become a necessity.

Financial Institutions, Retail Investors ,other stake holders watch very carefully into all the well diversified projects that these conglomerate takes.

It's the maturity of of the professional management to look into and to audit all these areas on a continuous basis.

In recent years WalMart has made Corporate Sustainability as a major tool a guiding force in the business.

As Change Management has become an integral part of the business Corporate Sustainability is gaining importance.

Life Cycles of Business Ideas are becoming shorter (ie PLC,TLP,Ideas getting replicated) and globalisation in full swing business are becoming vulnerable no

practice can be made which can harm the consumers or to the environment.

It's now becoming mandatory for organisations to appoint auditors to audit the external business environment, including the emission effect and to make the disclosure.

Management has to adapt it's workforce and business plans accordingly and gain momentum in the existing or diversified business.

Here is an example of ITC Ltd and Coca cola.

Please Click:

http://www.itcportal.com/sustainability_report_2007/index.htm 

CocaCola

http://www.thecoca-colacompany.com/citizenship/

Wikipedia Defination Of Corporate sustanability.

http://en.wikipedia.org/wiki/Corporate_sustainability

Management Matrix And It's Measurement.

Management Matrix have an operating model (not just a collection of people), which allows you to scale better, ie economies of scales in production, sales, and in optimization.

Management Matrix understand the key drivers of output in your operating model in production ,sales, materials management.

Management Matrix are consistently managing the unit to your operating model.

Management Matrix have a set of early warning signs (your key drivers) that you can focus more attention on when they get below certain thresholds (i.e., it helps you to know where to spend your time).

Management Matrix have a set of measures that you can benchmark against other companies to understand where you have opportunities to move to best practices, and

Management Matrix know when you need to add staff or other resources well before you get caught short.

It is an approach in measuring the effectiveness of the business operation.

Metric driven management can and should be applied in every functional unit in an expansion stage company, from product development activities (e.g., project management, bug fix reports, usability testing) to marketing (lead generation ROI, website path analysis, shopping cart abandonment, number of daily quality leads) to sales (e.g., movement through the sales funnel, salesperson activity analysis) to customer service (response time, close rates, close times, etc.) to overall customer satisfaction measured both qualitatively (surveys, interviews, etc.) and quantitatively (usage reports, retention rates, etc.).

The key to getting the right metrics program in place is to eventually understand the minimum number of measure that give you an accurate understanding of the state of your company.

In different situations and in the transformation time Matrix Management helps an organization.

Many (most of the organizations) very early stage companies can get by without metrics-based management, as there are very few people in the organization, the processes you have are quite simple, and you can manage staff a lot easier. But as soon as you start getting any measurable number of users/customers, metrics-based management starts becoming useful, and as you grow more metrics become difficult to live without.

There is no sense building systematic operating models and a set of metrics if you are not going to manage to them. I have met many intuitive managers who don’t get (or don’t want to get) this approach. If you don’t believe in the approach, shoot me a note or comment to this post. If you don’t completely get the approach, hire someone to work for you who does (I have done this multiple times at my portfolio companies).IT comes in to operation it enhances the efficiency of an organization.

Once you lock into a set of metrics (it will take some time to determine the best most simple metrics), you should try to use the same metrics over time. I am amazed when I go into certain board meetings and see a different set of metrics each quarter…sometimes managers feel the need to present the metrics that show off the accomplishments of the company…I would rather see the metrics that show the improvement opportunities for the company…this is where the real upside is!

Many consulting companies are there who are operating in the matrix plans and operate accordingly.

Here is an example of Wipro Infotech

http://www.wipro.com/datadocs/brochures/Metrics.pdf

 

 

Business Process Reengineering

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Business Process Reengineering

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