Scenarios for business and policy

Manchester Institute of Innovation Research – Scenario Methods for Research April 2009

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(1) Introduction to (1) Introduction to Foresight and Foresight and

Scenarios: Scenarios: Applications of Scenarios in Applications of Scenarios in business strategy and policy business strategy and policy

making making

Ian Miles Manchester Institute of Innovation ResearchManchester Business School

University of [email protected]


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Outline:Outline: Introduction: Fore-thought!

Business and the Future

What are Scenarios?

Why Use them?

Scenarios in Practice

(then Talk 2) Varieties of: ~ Scenarios

~ of Ways of Producing Scenarios


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3 Fs

Forecasting: sets out to predict how something will develop, or systematically examine sources of change and scope for different paths of evolution.

Futures studies (and similar): uses the above, but concerns longer-term futures, explores alternatives, seeks to be more holistic

Foresight (and strategic prospectives): uses the above, but builds in (1) wider participation/sourcing of knowledge (2) link to decision processes.


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Futures Studies Forecasting: systematic work in demography (driven by actuaries and insurance, as well as

health officials and planners), in economic forecasting (growth and business cycles), etc. Roots back to C17th, at least for statistical work. Divination etc. of course very ancient.

Futures studies have been in existence for many decades – big upsurge in ‘60s/70s, then some decline.


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Foresight Foresight as a major area of activity in mid 1990s. Especially focused on

national S&T programmes, with exercises in many large EU countries – and rapid diffusion more widely.


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FuturesStudies Networking

Priority Informing Setting Decisions

Three Facets of Foresight

Prosp

ectiv

es ParticipationFORESIGHT

Planning


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Why has Foresight taken off?

Recognition of the centrality of technological innovation for competitiveness - economic growth & social wellbeing

Difficult decisions about R&D, as new technologies proliferate and converge, and as public budgets come under pressure - creating a drive to concentrate available resources on fewer, more strategic options

Awareness of weaknesses in the innovation systems linking scientific knowledge, technology commercialisation, standards-setting, etc.

Public perception of risk and ethical issues in some major innovations (and even in R&D)

Inability of any single organisation to marshal all relevant knowledge, and need to combine together insights from a wide range of fields


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What sort of Business Foresight?

Why should managers be concerned about the long-term (5y+) future?

Economic forecasts

Market trendspotting

Technology watch

Business environment scanning

Geopolitical outlook

Labour market assessment

Risk analysis


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Few overviews …

Patrick Becker 2002 “Corporate Foresight in Europe: A First Overview” EC Working Paper

3 models: Collecting Post, Observatory, Think Tank Methods: • Publication analyses; • Patent analyses ; •

Benchmarking analyses; • Market analyses, trend analyses; • Database research; • Company’s own, delimited Delphi survey; • Technology Calendars and roadmaps; • Creativity techniques (Brainstorming, intuitive thinking); • Various scenario techniques; • Competitive technology intelligence (Technology monitoring); • Trend extrapolation; • Systems dynamics simulation; • Multilinear modelling; • Internal innovation or future workshops; • Systematic questioning of customers; • Risk analysis/ Cost analysis

I would add Other methods – watching competitors (beyond technology intelligence), other sectors, learning from industry leaders


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Foresight for What?

Why should managers be concerned about the long-term (5y+) future?

Economic forecasts

Market trendspotting

Technology watch

Business environment scanning

Geopolitical outlook

Labour market assessment

Risk analysis


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Knowledge of Actual and Potential Evolution

Competitors

Clients Suppliers

Collaborators RegulatorsFinanciers Markets

Social & Institutional

Env

Natural & Physical

Env

Process Technology

Management

Organisational Structure/ Design

Routines

Techniques

Human Resources

Product Technology & Design

Health and Safety Sustainability

Business Ethics CSR

Science & Technology

Location


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Knowledge of Actual and Potential Evolution

Internal Environment

External Environment

Strategies

Formal versus informal foresight;

Routine versus emergency;

Internal“versus”

External

Trend detecting and watching –

main trends, weak signals

Envisaging possible and plausible futures

Opportunities as well as

challenges

- Coping with, changing,

creating the future


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Functions of Foresight

Public Relations

Building Markets

Influencing other

stakeholders –Regulators, financiers, business partners,

Standards-setters…

Building a shared vision of a desirable

future – or one to avoid at all costs

Selecting priorities

Designing strategies, assessing robustness

Different functions may require

different legitimation and expertise

Exchanging knowledge, creating awareness


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Swiss Re - SONAR


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Swiss Re - SONAR


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Why Scenarios?

Why scenarios?– The future is uncertain: there are alternatives (and for longer-term,

important to break away from Business as Usual/Most Likely– Exploring alternatives is important for policy (robustness of

strategies, neglected issues, challenging contingencies)– Debating alternatives (and the rationale for alternatives) is a useful

approach to understanding important (practically important =#=statistically significant!) causal dynamics

– Scenario analysis forms a framework for dialogue (including dialogue across regions/perspectives/etc.)

– Scenarios can be a compelling format for presenting results


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Some examples


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Shell“Shell global scenarios … to 2020 explore the social consequences of three forces: globalisation, liberalisation and advancing technology. … to understand what that might look like, we needed to ask how real human beings will respond, and which social groups in the world may dominate those responses. Our scenario team studied this by thinking about ‘the three Rs’—the Regulations, Restraints and Rules which people may use to resist these trends. … we started from the concerns of our clients, to ensure that our work was consistent with their needs; then we gathered a wide range of data and challenging ideas from a variety of different sources, ensuring the involvement of a broad diversity of people and opinions.

The world in Business Class focuses on efficiency and individual choice and is driven by an interconnected global elite influenced by US values and ideas.

Prism describes a world shaped by the interplay of our differences, where countries find their own developments paths to suit their particular circumstances.

In one, business success depends on focusing on the value-creating ‘core’ of the enterprise. The need to find and sustain elusive competitive advantage drives a relentless search for efficiency and innovation.

In the other, multinational companies must be ‘local’ in many different environments. Access depends on relationships and reputation.

Developing relationships and building trust are vital in both scenarios—with staff, customers, partners, suppliers, society and, of course, shareholders.

… our scenario practice has reflected new, salient and challenging insights about the changing world. And this has contributed further to the strategic conversations ongoing at different levels in the organisation. As strategy has become a more devolved, inclusive and participatory process, so has our communication and application of scenarios”


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Daimler Chrysler

From Frank Ruff


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Daimler Chrysler

From Frank Ruff


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The point being…

Foresight is used for many things, as are scenarios:

Grand strategies Priorities Even designs And marketing, PR, other extra-firm functions.


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Can managers afford NOT to?

Dynamic changing environment, even for “mature” goods and services

Opportunities to change and create futures Entrepreneurship needs Foresight: the only

question is what sorts of Foresight, when and how!


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What is a scenario?What is a scenario? A scenario is a Systematic, explicit vision of a

possible future.

Image of the Future vs Future History


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ContrastsContrasts Scenarios, Vignettes, Profiles:

Scenario – covers a wide range of features of the future, provides a multidimensional overview.

Vignette - illustrates one element of the scenario in detail, usually through a narrative. Focuses on one dimension, others contextual.

Profile - skeletal description of future in terms of key parameters.


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Dual meaningDual meaning

histories

Now: where are we, what should we

do...

IMAGE OF THE FUTURE -

description of a future set of

circumstances, a portrait of the

state of affairs (at a more or less

tightly specified date or period, or after a particular

set of developments)

FUTURE HISTORY - description of a future course of events, sequence of developments,

often highlighting key events, decisions, or turning points

Image A

Image B

Image C


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Two classic approachesTwo classic approaches

histories


do...









Image A

Image B

Image C

“Exploratory”; outward; forecasting

“Normative”; inward; backcasting


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Dual meaningDual meaning

histories


do...









Image A

Image B

Image C



Starting from the present

Starting from the future

What next?What if?

Where to?

How to?


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And more..And more..

histories


do...









Image A

Image B

Image C



Starting from profiles

What alternatives?

Profile-based

approaches


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• Exploratory/Outward - May select particularly interesting trends, uncertainties – e.g. where

high importance and high uncertainty. Various methods. 2x2 common result.

Normative/Inward -Typically select desirable future

Profile-based - use standard structure and process drivers (etc) through these. E.g. IAF archetypes. May include normative vision.

• Exploratory/Outward - May select particularly interesting trends, uncertainties – e.g. where

high importance and high uncertainty. Various methods. 2x2 common result.

Normative/Inward -Typically select desirable future

Profile-based - use standard structure and process drivers (etc) through these. E.g. IAF archetypes. May include normative vision.

Choosing Scenarios


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Why do scenario analyses?

Multiple scenario analysis ~

To illustrate alternatives, indicate a range of plausible developments (not one inevitable future path).

To stimulate reflection on underlying assumptions. To assess robustness of strategies.

To give insight into contexts and outcomes (intended or otherwise) under which actions may be undertaken, events may happen, objectives may be realised.

To help identify turning points, key decisions, indicators, early warnings of change.

…


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Why do scenario analyses?

Single scenario analysis ~

To elaborate on a particular future (usually desired one, but may be as warning)

To demonstrate implications of assumptions and/or trends elaborated into future.

To help identify goals and set targets; to explore actions and instruments, to build a roadmap.

Any scenario analysis ~

To provide a novel basis for sharing knowledge and ideas, developing common visions and shared understandings.


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Multiple scenario analysis

Common to use 3 or 4 scenarios: Mainly because this is usable by sponsors and manageable by producers

Should thus be structured so as to capture MAJOR variations – parameters, drivers – not usually Wild Cards (elaborate scenarios from these is a separate task)

But some work uses many more.

e.g. in Canadian Foresight, one scenario (set) per major driver. And often “multiple scenarios” are just (a) canonical variations on a theme, or (b) vignettes within a standard framework

A single scenario may be developed especially for aspirational purposes – e.g. to set a target.


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Illustration: Scenarios in UK Foresight

Little used in UKF1; increasing use in UKF2 Some topic studies use intensively in

UKF3 Scenarios used in Foresight work outside

OST Foresight Programme (e.g. “success scenario” studies)

UK 2010 - a social scenario study within UK Foresight


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Scenarios in UK Foresight - deskwork

One future – illustrated with vignettes – but these were labelled scenarios.

(For a period there were even videos of these “scenarios” on foresight.gov.uk)

Common approach eg Coates 2025

This study by Scase – mainly based on deskwork

Current UKF - Environmental Scenarios


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Scenarios in UK Foresight 2/3

Current UKF - multiple Environmental Scenarios


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Scenarios Used in “Flooding and Coastal defence” Study

So: scenarios used in one study can be

used to “seed” work in other studies – deskwork and/or

groupwork


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Process

Who to engage – expertise and information sources; insiders and commentators; stakeholders and possible implementors.

What methods to use to provide inputs and to elicit scenario development?

Typically use several methods, with (for example) literature review and trend analysis being fed into scenario workshops


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(2) Varieties of (2) Varieties of scenarios and uses scenarios and uses

of scenarios: of scenarios: Scenario Planning ProcessesScenario Planning Processes

Ian Miles Manchester Institute of Innovation ResearchManchester Business School

University of [email protected]


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Methods

Modelling tools like simulation, cross-impact; gaming (not discussed here)

“Genius” forecasts Expert Groups, deskwork, literature

reviews Surveys, clustering articulated viewpoints Workshops

Choice depends on objectives and

resources


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Methods

Modelling tools like simulation, cross-impact; gaming


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Methods


Computer model – may be an established model (e.g. economy, demography); may be customised (e.g. adding tech. to economic); may be made to order.


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Employment in EU-15 Software & IT Services Sector under the six Scenarios

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Year

To

tal N

AC

E 7

2 E

mp

loym

en

t le

vels

(E

U-1

5)

ScenarioC

ScenarioA

ScenarioD

ScenarioB

Scenario F

ScenarioE

Modelling e-skills


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Examples of Methods

“Genius” forecasts


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Genius scenarios - Joseph Coates 2025Early 2000s – flat screens from office/domestic furniture or decorative tool for work &

entertainment; International Global Warming Federation transfers technologies in response to global warming; breakthrough in battery technology for electric vehicles, giving range of 250 kilometres per charge; US formal industrial policy promoting greater industrial concentration; … US Energy Transition Act, mandating reduced energy use & providing tax incentives for switch to renewables; Human genes & functions fully matched, testing for susceptibility to genetic-based traits & diseases (many more are located than anticipated) with near certainty possible, eventually becomes routine.

2004 – Genetic Recording Act, safeguards for people’s genetic information reduces social resistance to genetics testing.

2006 – Authentication & Certification Act, requires certification of images with respect to authenticity or extent of doctoring.

2007 – Lima Space Weapons Treaty, preserves space as a weapons-free zone.2009 – Adoption of global patent system.2009 – ISO establishes materials characterisation standards covering composites &

other advanced materials, enabling greater recycling & reclamation, easier materials choice & development of new applications..

2010 – Recognition of prenatal psychology as a scientific discipline, establishment of practices of prenatal intervention for mental stimulation & personality shaping.

2010s – Rise of the Quality of Life movement, emphasising improved everyday life, aesthetics & amenities of home & community.


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Methods



reviews


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Profile 1

Profile 3

Profile 2

Profile 4

High Growth

Low Growth

How could world economic development mean:

1970s WORLD FUTURES: THE GREAT DEBATE – Deskwork Example (Inward Scenarios)

1970s WORLD FUTURES: THE GREAT DEBATE – Deskwork Example (Inward Scenarios)

Futures capturing major controversies in literature - not necessarily desirable futures :

thus a PROFILE approach

What would it be like?

How do we get there?

WorldviewsLow

EqualityHigh

Equality


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Deskwork – advantages, limitations

Possible to be highly systematic and conceptually elaborate, drawing on substantial data, literature, analysis

Can deploy extensive documentation and argumentation

Danger of becoming ivory tower

Lacks enlistment and recruitment of users (unless can embed as placements or similar)

May lack articulation with sponsor approaches

Deskwork often stand-alone, but also often designed as input to groupwork


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Methods



reviews Surveys, clustering articulated

viewpoints


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Clustering Outward Scenarios from Survey ResponsesClustering Outward Scenarios from Survey Responses

IT Futures SurveyedIT Futures SurveyedSurvey asked a series of

questions about how far IT applications and

implications would have developed 10, 20 years on:

results were factor analysed to obtain simplified structure

First two components led to four scenarios, with

numerical estimates, etc.

Pace of Change: Faster

Slower

Results of Change more:Negative Positive

1 2

3 4


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Methods



reviews Surveys, clustering articulated viewpoints Workshops


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Scenario Workshops in Foresight

Product Orientation: Develop “narratives” for wider consumption and use in raising awareness,

helping planning, etc. Help small groups define and establish priorities, etc.Process Orientation: Exchange and share expertise, fusing different types of knowledge Vision-building process as way of transcending narrow perspectives and

routine appraisals of future Creating awareness of participant capabilities, expectations, likely

behaviour Shared understanding useful for future work in Foresight or acting on

resultsParticipant mix should reflect orientation


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Workshops

Scenario Analysis as Methodological Tool to structure work, ensure robustness of strategies, stimulate and

challenge informants, help define priorities..

Scenario Reports as Products for synthesis and presentation of results, integration and

checking coherence of outputs; communication and illustration of major results and conclusions.

Scenario Workshops as Process frameworks for exchange and elaboration of views and (shared)

visions, provoke and legitimate thinking “out of box”, help in constituency-building, etc.


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Planning the Scenario Process

Define objectives – illuminating a specific issue – or providing general strategic intelligence for an organisation?

Preparation required – “design workshop” or steering group useful. Can help embed scenario work, fostering “ownership”

Technical facilitators valuable (whether posters or PCs). Planning team, drawing on relevant expertise (within and outside

organisation) Background Material for common information base

– “starter scenarios”– SWOT, benchmarking and relevant statistics– Useful analyses– Orientation

• But don’t overhwelm or rely too much on this! Prepare presentations Workshop Material

– Presentations– Instructions– Equipment, software, pencil and paper tools, etc.


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Workshop Process

Social engineering is needed – ice-breaking, ways of getting people to know each other, exchange freely. GROUNDRULES are important (e.g. “Chatham House” rules in UK).

INSTRUCTIONS need to be explicit and detailed: what you are to do, how, when. These need to be written down and be available for inspection and probably discussion/clarification.

Facilitators: it helps to have staff in the break-out groups to explain tasks, to keep people to time, to get communications and other outputs in the right form. (this does not necessarily mean that they should be rapporteurs – possible legitimacy issue)

TIME: to encompass all activities plus possible delays and novel events.


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DRIVERS• Social

• Technological• Economic

• Environmental• Political• Values

A

B

C

Common Workshop Approach - Exploratory, Outward


STEEPV or similar framework used to:• systematically analyse “drivers and shapers”• group trends and events

Pathways diverge

according to varying

Events/Trends

Select alternatives by major uncertainties/

groups of drivers

Cu

rre

nt S

itua

tion


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DRIVERS• Social

• Technological• Economic

• Environmental• Political• Values

A

B

C




Pathways diverge

according to varying

Events/Trends

Select alternatives by major uncertainties/

groups of drivers

Cu

rre

nt S

itua

tion

STEP 2: identify drivers –

brainstorming (and prior work)

STEP 1: immersion in topic – e.g.

presentationsSTEP 3: select drivers around

which to structure scenarios

STEP 4: develop

scenarios

STEP 5: analyse

scenarios


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DRIVERS• STEEPV etc

PROFILES

A

B

C

Another Common Workshop Approach – Profile-based

Another Common Workshop Approach – Profile-based


Pathways diverge –

what are the key

Events/Trends here?

Main alternatives based on profiles,

though may need to select alternative instantiations

Cu

rre

nt S

itua

tion

STEP 2: identify drivers –

brainstorming (and prior work)

STEP 1: immersion in topic – e.g.

presentationsSTEP 4: elaborate profiles by

describing in

terms of drivers etc.

STEP 5: analyse

scenarios

implications

STEP 3:introduce

profiles


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Common Workshop Approach for Profile-based scenarios: IAF adaptation of GBN

scenarios for workshops:

• BETTER THAN EXPECTED, favourable developments and opportunities, grasped

effectively

• HARD TIMES (major, but not “over the cliff” challenges)

• PARADIGM SHIFT 1 –different from expected

• VISIONARY/PARADIGM SHIFT 2 – radically different trajectory


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Some examples (1) ESRC Genomics Scenarios


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Project Overview

IAF/CRIC input for Forecasts and Scenarios:– Dec. Design Meeting – IAF/CRIC Research – Interviews with 22 Experts (activists, social scientists, scientific

researchers, business professionals)

Convened January 2002 Workshop.– Used three different “lenses” to help clarify the role of Social

Science Research for Genomics – COUNCIL group collaboration software – 24 Participants


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Multiple Approaches for Determining Priorities

Key Drivers for Genomics

Thematic Priorities

Genomics Applications

ScenariosPriorities for

Social Science

Genomics Scenarios Project: Identifying Social Science Research

Priorities


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Framework for thinking about social research in relation to scientific (and other?) knowledge:

Research can examine Social Structures, Processes, and Relations contributing to and resulting from:

The production and ‘distribution’ of

knowledge

The application of knowledge in new

products, processes, etc

The social reception of knowledge in

cultural discourse, etc

The utilisation of new products and

processes to achieve social and

economic ends; influences on

users and subjects of

knowledge and associated

instrumentalities


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Key Drivers of Genomics

1. Functionality of Genomics2. Regulation of Genomics3. Business Forces and Beyond4. Genomics Itself5. Politics and Geopolitics6. Demand7. Social Attitudes8. Social Mobilization9. Governance of Knowledge10.Events 11.Risk12.Environment


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Scenarios

4 Scenarios constructed out of variations of the Drivers:

• Genomics, Inc.

• Broken Promises

• Out of Our Control

• Genomics for All


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Themes from Discussion of Social Science Thematic Priorities

Specificities of Genomics • nature and impact of scientific activity

Science and Technology Knowledge• relationship between public and private science

Regulatory Issues• privacy and data protection

Social and Health Policy Challenges• insurability and health impacts

Interfaces Between Disciplines• effects on social and economic structures

Cultural Implications and Institutional Resources• social science in relation to natural sciences


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Social Science Research Priorities – How? & What?

How?: Priorities related to Research Organizations and Process

What?: Priorities related to Genomics Research Issues for Social Science:


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Social Science Research Priorities – How?

Priorities related to Research Organizations and Process:1. Interdisciplinarity – outreach to natural

scientists2. Engaged Research – provide context for

innovation3. International Research – role of

developing world4. Conflict and Inequality – social division

and equity 5. Communication of Results – enhance

dialogue


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Social Science Research Priorities – What ?

Priorities related to Genomics Research Issues for Social Science:1. Social Perceptions and Ethical Structures

2. Critical Analysis of Key Social Constucts

3. Business and Economics

4. International Politics and Institutions

5. Cultural Reception and Consumption Practices

6. Co-Evolution of Laws and Legal Structures

7. Food and Agricultural Applications

8. Mobilization of Groups

9. Inter-relations Between Technologies

10. Corporations, Innovation, Technology Transfer

11. Genomics Innovation and the State


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Social Science Priorities

Challenge for Social Science going beyond specific research topics :– Grasp the technical issues – Deal with topics that cross disciplinary boundaries– Interact with researchers from a wide variety of disciplines– Help envision alternative paths of development for the technology– Critically examine conceptual frameworks– Confront social conflict and inequality and how it changes – and is

changed by – Genomics


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End of Presentation

Scenarios for business and policy

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Transcript of Scenarios for business and policy