Two case studies
using scenario sketching for decision making.
Last week I made the
argument for using scenarios as a decision making technique, rather
than as an ongoing planning methodology. Let me illustrate
this technique through two case studies.
Case 1 (1995) - National Specialty
Retailer
In 1995 this specialty retailer had about 40
stores spread across the United States. They were exceptionally
well managed and had generated double digit annual growth rates
in both revenues and profits for several decades. Annual revenues
were about $500 million. The CEO wanted to expose his management
team to a new planning method for one year that was different from
their well honed, rolling five-year plan that served them so well.
The clear expectation was that at the end of the year, the company
would revert to their existing planning methodology. In essence,
he wanted them to take a step off the treadmill for a year.
The question developed (with considerable difficulty)
at the two-day kickoff retreat was "How do we position ourselves
to be a $5 billion company in our industry by 2013?"
We worked together for six months - the CEO,
his senior team of a dozen folks, and the Board - to develop three
scenarios. One scenario was built around technology, another
around life style, and the last around competition. The CEO
stated there were creative strategies that came out of each of the
scenario teams that probably would not have arisen through their
traditional planning.
But one strategy stood out.
The Web was just starting to rear its head in
1995, and a few retailers were beginning to put their catalogs on-line.
This didn't seem to fit the culture or business model of this company,
yet it was clear that something was needed. The technology
scenario painted a rich, pervasive technology infrastructure that
would facilitate all kinds of interaction worldwide, both business
and personal.
The stroke of genius was the CEO's. He
finally asked, "What would our Internet initiative look like if
it were a store?" The room fell silent, for everyone around
the table knew the company was good at opening stores in new places.
Their mindset instantly shifted from an unfamiliar technology to
simply another new location. The CEO asked for and got a business
plan in hardly more than a week. He approved the initiative
and appointed the first employee of the new Internet store - the
store manager. The Internet store was not put into the hands
of the IT department, but into those of a seasoned store manager
who was given full P&L responsibility.
Four years later their Internet store stands
fifth or sixth in sales revenue amongst its now 50+ stores across
the country and has been profitable since its inception.
Did this company develop the three scenarios
further and set up a tracking and review system to decide when and
what actions to take. No, they came out of the half-year scenario
process with a particular strategy, a single decision to address
an issue that wasn't even the focal point for the scenarios!
Case 2 (1999) - Credit Union
League
This Credit Union League is the (nonprofit)
trade association for the 200 or so credit unions in their state.
Credit unions are facing enormous changes. The financial services
industry is blurring the traditional lines that once separated companies
and organizations into well-defined sectors. In the words
of the League's CEO, "We are living in an era of hyperchange."
The question developed (with relatively quick
consensus) at their annual board retreat was "How do we position
the League as the premier interstate and international leader in
2010?"
In one afternoon - the CEO, a few senior managers,
and a small Board - sketched three scenarios. One was built
around technology, another around image, and the last around competition.
(Technology and competition are hardy perennials as driving forces!)
Several creative strategies came out of each scenario that the CEO
and his team are now considering for implementation. But again
one strategy stood out.
Credit union leagues are organized for one state
alone. The two themes that ran through the three scenario
teams' implications and responses were to provide expanded services
to credit unions within its own state and to take these beyond its
borders. By the end of the afternoon the participants had
shifted their mindsets from the posed question which implied they
wanted simply (!) to be the best and shifted them towards being
a credit union league that spanned several states with a single
organization.
The major impact, unplanned and unspoken, was
to build support for a novel idea the CEO had already been thinking
about, but which had not been voiced at the retreat. His senior
team (as this is written) is fleshing out a strategy to expand the
League to embrace credit unions in several states, in competition
with existing leagues perhaps, but more likely through acquisition
or consolidation. This is a bold initiative, flying in the
face of tradition within the very conservative, stable credit union
movement environment.
Decision making, not planning.
There you have it! Two quite different companies - one for
profit, the other nonprofit - and two radically different timeframes
- six months versus one afternoon. Neither pursued scenario
planning beyond the project. Yet, each found a superb strategy
through the scenario process and made the important decision to
pursue it, even though neither was a direct answer to the question
they posed.
The Internet store strategy clearly has been
a smashing success. The regional credit union league initiative
is still under development.
In the real world, most companies use scenarios
as aids to decision making, not as an ongoing planning methodology.
The value lies not in the scenarios, but in the discipline of thinking
creatively about the future. Recognizing this, you should
help put this creative tool of sketching scenarios into the toolkit
of every manager in your company. It will enrich their thinking
and make them more nimble, better decision makers.
Could you benefit from using scenarios
for decision making in your company?
Contact
us. We would be delighted to assist you.
