Scenario-based Strategic Planning
Scenario-based Strategic Planning
Contents
CEO’s Influence on Scenario Planning
Scenario Planning Sessions
Take Away Message – Scenario Planning
Strategic Implementation
“Global GDP still expected to remain solid at 4.75 % in 2008” IMF, October 2007
Responsibility for Implementation
۱۹۹۷
Impacts of Scenario Planning
Positives
Scenario
“Experience”
THANK YOU!
Q&A
Pre-workshop
Interviews
Define Implications
Outcomes
Strategic
Plan
Establishment of roles and institutions to overview implementation
Project Oversight Committee
Coordinator of strategic initiatives
(John McDevitt)
Member of the Management Committee
Reports directly to CEO
Overview of Scenario Planning
Overview of UPS
Scenario Planning at UPS
Strategy Implementation at UPS
Conclusion
Allows a future “context” for the company to be realised.
Richer outcome than an analysis of a competitive structure
Identify creative and alternative solutions
Effective tool to counteract action-orientated biases (Lovallo & Sibony, 2010)
Validated & reaffirmed UPS’s Direction
Deeper Understanding of Regional Nuances
The Black Swan Events
UPS Timeline
Scenario Planning Sessions at UPS
Strategic Plan
The Long Way of Strategy
“The US have a very powerful intelligence system”
۲۰۰۴
۱۹۰۷: UPS founded in Seattle, Washington
۱۹۹۶: Strategy Advisory Group and Corporate Strategy Group formed
۱۹۹۷: First scenario planning session
No formal strategic-planning process
for 90 years!
۲۰۰۴: Second scenario planning session
۲۰۰۵: Update of Strategy road map
Developed Early Warning Signals
Draft
Storyline
Scenario Planning
Workshops
scenario planning
UPS Centennial Plan
Identification of 4 Strategic Imperatives
Winning Team
Value-Added Solutions
Customer Focus
Enterprise Excellence
Over-Optimism
False Forecast
Strategic Planning at
United Parcel Services
Scenario
Planning
- Tangled Paths
- Regressive World
- Global Scale Prevails
- Brave New World
Outcomes
Creation of Scenarios
“Without scenario planning, you don’t see the big changes until they are history” Vern Higberg, UPS
Negatives
“Scenario planning looks pretty, but does it have any impact on what people do?”
Creation of Scenarios
Extensive
Pre-workshop
Interviews
- Company City
- Bordered Disorder
- Connected Chaos
- Networks without Borders
Corporate Charter
Backdrop for Strategic
Decisions
Mind-set Shift
Out-
comes
Implemen-
tation
Conversion of Centennial Plan and Strategic Imperatives into practice
Implementation in a complex organisation is challenging.
Environment
۱۹۹۰’s: A growing competition from private companies and government-supported agencies
Jim Kelly’s vision
New challenges that needed to be taken into account
Why UPS choose Scenario Planning?
A real strategy was needed to stay a leader,
To face and adapt to the big changes
Deep pockets
Extremely time consuming
Lack of realism – felt by UPS marketing dept
Presenters:
Dang Duy Cuong
Zaina Fikri
Tara Byrne
Jonathan Meurer
Alice Varley
Positioning
Prepares a company for uncertainty
In turbulent industries scenario planning can be effective
Tool for making the unthinkable into real options
Scenario Planning
Workshops
Counter Action-oriented biases by recognizing uncertainties
Premortem
Decision Trees++
Strategic Planning at United Parcel Service
In: Business and Management
Submitted By lvburberry
Words 711
Pages 3
Case questions
What are the strengths and weaknesses of scenario planning? What is your evaluation of UPS’s 1997 scenario planning exercise? Its Horizon 2017 planning exercise? How do the two efforts compare? Evaluate the following elements of UPS’s approach to strategic planning:
The UPS charter The Centennial Plan The Strategy Road Map
Why was John McDevitt put in charge of “strategic integration?” Should he remain in that role?
What is the strength and weakness of scenario planning?
Strength
Build foundation for source of long term competitive advantage Provide backdrop of strategic decision (pg.6)
- Acquisition of Mail Boxes Etc.
Change mind-set
- Make people think beyond the operational mind • Prepare to be proactive and creative
Enable to be sensitive for change in external environment Alternative views of the future Provide and prepare the company for potential change in the future’s market.
Weakness
Lack of realism Requires learning curve to have adequate result Too abstract and difficult to apply Indirect linkage to daily operation or strategy Depend on participants’ motivation and knowledge Not point out the strengths and weakness of company
What is your evaluation of UPS’s 1997 scenario planning exercise?
Evaluation on 1997 Scenario planning
Initiative to build foundation for source of long term competitive advantage Positive aspects
- Become backdrop of UPS Charter and changed mission statement • Initiate to have foundation of unified corporate level decision making
Early years: $11bn project was initiated by small project group
- Lead to define four themes • Provide common vocabulary which unify the organization’s mind-set • Guide to investigate opportunities
Negative aspects
- No early warning signal is defined • Initiate dramatic presentations
importance doesn’t lie on…
Scenario-based Strategic Planning
Contents
CEO’s Influence on Scenario Planning
Scenario Planning Sessions
Take Away Message – Scenario Planning
Strategic Implementation
“Global GDP still expected to remain solid at 4.75 % in 2008” IMF, October 2007
Responsibility for Implementation
۱۹۹۷
Impacts of Scenario Planning
Positives
Scenario
“Experience”
THANK YOU!
Q&A
Pre-workshop
Interviews
Define Implications
Outcomes
Strategic
Plan
Establishment of roles and institutions to overview implementation
Project Oversight Committee
Coordinator of strategic initiatives
(John McDevitt)
Member of the Management Committee
Reports directly to CEO
Overview of Scenario Planning
Overview of UPS
Scenario Planning at UPS
Strategy Implementation at UPS
Conclusion
Allows a future “context” for the company to be realised.
Richer outcome than an analysis of a competitive structure
Identify creative and alternative solutions
Effective tool to counteract action-orientated biases (Lovallo & Sibony, 2010)
Validated & reaffirmed UPS’s Direction
Deeper Understanding of Regional Nuances
The Black Swan Events
UPS Timeline
Scenario Planning Sessions at UPS
Strategic Plan
The Long Way of Strategy
“The US have a very powerful intelligence system”
۲۰۰۴
۱۹۰۷: UPS founded in Seattle, Washington
۱۹۹۶: Strategy Advisory Group and Corporate Strategy Group formed
۱۹۹۷: First scenario planning session
No formal strategic-planning process
for 90 years!
۲۰۰۴: Second scenario planning session
۲۰۰۵: Update of Strategy road map
Developed Early Warning Signals
Draft
Storyline
Scenario Planning
Workshops
scenario planning
UPS Centennial Plan
Identification of 4 Strategic Imperatives
Winning Team
Value-Added Solutions
Customer Focus
Enterprise Excellence
Over-Optimism
False Forecast
Strategic Planning at
United Parcel Services
Scenario
Planning
- Tangled Paths
- Regressive World
- Global Scale Prevails
- Brave New World
Outcomes
Creation of Scenarios
“Without scenario planning, you don’t see the big changes until they are history” Vern Higberg, UPS
Negatives
“Scenario planning looks pretty, but does it have any impact on what people do?”
Creation of Scenarios
Extensive
Pre-workshop
Interviews
- Company City
- Bordered Disorder
- Connected Chaos
- Networks without Borders
Corporate Charter
Backdrop for Strategic
Decisions
Mind-set Shift
Out-
comes
Implemen-
tation
Conversion of Centennial Plan and Strategic Imperatives into practice
Implementation in a complex organisation is challenging.
Environment
۱۹۹۰’s: A growing competition from private companies and government-supported agencies
Jim Kelly’s vision
New challenges that needed to be taken into account
Why UPS choose Scenario Planning?
A real strategy was needed to stay a leader,
To face and adapt to the big changes
Deep pockets
Extremely time consuming
Lack of realism – felt by UPS marketing dept
Presenters:
Dang Duy Cuong
Zaina Fikri
Tara Byrne
Jonathan Meurer
Alice Varley
Positioning
Prepares a company for uncertainty
In turbulent industries scenario planning can be effective
Tool for making the unthinkable into real options
Scenario Planning
Workshops
Counter Action-oriented biases by recognizing uncertainties
Premortem
Decision Trees
Introduction
In 1907, a small company was formed to deliver messages from Seattle and Washington with a capital of $100. Today, the company stands as a $37 billion multinational corporation known as the United Parcel Service (UPS). The company now provides air transportation and logistics services, in addition to package deliveries. In 2005, UPS was ranked as the largest package-delivery and Logistics Company. The question arises; how did this company make it this big? With a meager $100 initial capital, how did the company turn in to a multinational within a span of less than 100 years? The answers lie in the Strategic Planning and Implementation Policies of UPS, as quoted by its CEO in the following words, “The future of our company is entirely dependent on the quality of planning we are willing to do.” This paper aims to provide an understanding of the strategic planning, the key elements involved and the effectiveness of strategic integration.
۱۹۹۷ Scenario Planning
In 1997, UPS hired consultants from Global Business Network to facilitate the drafting of various long-term planning strategies. These strategies were designed in congruence with the organizational objective of attaining long-term competitive advantage. Under this type of planning, the managers created two major aspects that could impact the future of UPS. A vertical axis representing Demand Characteristics and a horizontal axis representing Market Environment were identified. This plan enabled the organization to create four possible (and mutually exclusive) future outcomes; namely Tangled Paths (highly competitive business with strong governmental influence and high consumer demand for heterogeneous products), Regressive World (same as Tangled Path, except with homogenous product demand), Global Scale Prevails (De-regulation, stable demand and more consumers) and Brave New World (globalized marketplace, proactive consumers, virtual organizations and competition and alliances and MOUs).
This plan became the foundation of the UPS Charter and mission statement until 2002. It also helped the company generate $11 million in its initial years of implementing the plan and provided the managers with simple, easy-to-understand scenarios of future outcomes and a basis for decision making, leading to goal congruence and corporate governance. It also enabled creative and proactive thinking among managers, changed mind-sets and enabled the acquisition of mailboxes. However, it did impose certain negative effects. These scenarios were not based upon any empirical calculations or mathematical formulas. Practically, all the conditions defined in these four scenarios may not exist simultaneously. Any future investment decision, based on the existence of certain characteristics, would prove disastrous. Furthermore, the importance of decisions does not lie on the outcome, but on the process. It also ignores daily operational activities and focuses solely on future, unpredictable environmental detriments. It also depends primarily on the participant’s knowledge and motivation level.
Horizon 2007 Planning Exercise
In 2005, the CEO of UPS stressed the need to prepare another scenario-preparing strategy, in light of technological and market demand changes. It gave confidence to organization on 1997 scenario planning & validates the scenario planning process. Under the new plan, the vertical axis was redefined as Business Environment and the horizontal axis as the Commerce (Demand). The four new future scenarios generated included the Company City (large-scale corporations and growing middle-class), Bordered Disorder (highly regulated environment with slow growth potential), Connected Chaos (unrest) and Networks without Borders (highly-connected world with free market entry and ever-changing technology).
On a positive note, this plan appealed to a wider range of participants and was more adaptive to changes in complex environment by reaching down to a regional level. It also provided early warning signs. However, it had its own drawbacks. Firstly, it was seen as similar to the 1997 approach. Secondly, operational level managers found the new strategy to be impractical and difficult to apply. Participants also could not relate to the practical applicability of this approach.
Comparison- 1997 Approach vs. 2007 Approach
The 1997 approach was more of an initiative for scenario planning, while the 2017 strategy serves as validation of 1997 approach and aims to improve the process itself, by involving more people (esp. from the operational level of management). It is a globally diverse approach which can identify early warning signals and signs. Unlike the 1997 approach, the 2017 plan has implications on not only a global level, but on regional levels as well. The 2017 plan is better geared towards a complex and ever changing economy, taking account of the rapid changes in technology and involves more initiative as compared to the 1997 approach.
UPS Charter
This charter was drafted as a result of the 1997 Scenario planning exercise and redefined the company’s objectives from “delivering packages” to “global expansion”. It also lists down detailed strategy approaches. Under the Brave New World outcome of the scenario planning, listed the charter, Mailboxes Etc. was acquired in 2001. The decision to launch UPS’s own logistics services were also initiated under the charter.
Centennial Plan
Using the diverse opinions presented by the managers regarding the future of UPS, the Centennial Plan was launched that addressed the need to improve internal processes to gain market share and focused on brand management, quality, cost control and efficiency of operations. The plan aimed at unifying the company under one corporate vision and one brand. Finally, the plan also introduced concepts such as the Winning Team, Value-Added Solutions, Customer Focus and Enterprise Excellence and a basis for Strategic Planning.
Strategy Road Map
Individual managers were assigned different strategic plans to implement among various functions of the organization. This was achieved by breaking down the strategic plan into several routine transactions, detailed operational procedures, control measures and appropriate allocation of resources by the management. These detailed plans (or crucial initiatives) were collectively known as Strategy Road Map.
Strategic Integration and the Role of John McDevitt
In March 2003, John McDevitt joined the Management Committee and placed in-charge of Strategic Integration. McDevitt’s role was to oversee and ensure the implementation of the company’s Strategy Road Map and the Centennial Plan and efficient allocation of resources. He also made sure that the detailed plans (or crucial initiatives) were in congruence with the overall strategic plans and implemented at the right time in the right direction (Quality Control). He also acted as an intermediary between the CEO and the employees.
During this time, McDevitt’s role in the Trade Direct project illustrates his competence. A part of the Value-Added Solutions under the Centennial Plan, this initiative allowed UPS to link goods manufactured abroad to US Delivery systems. McDevitt took over direct responsibility for this project and reported directly to the CEO. He had a firm command over the employees and met Management Committee members and Team Leaders separately. He practiced a policy of “leading through accountability”, making him eligible to continue his role in that regard.
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The CEO of United Parcel Services (UPS) Michael Eskew wants to develop a strategic process through which the company would remain competitive in the packaging supply and logistic industry. An external strategic planning group has asked to prepare a strategic process which ensures a continuous transformation of the company as it has been performing since its existence over the past several years.
The company is performing this task along with an external organization by evaluating vital processes of UPS. In this evaluation, the company does its strategic development with the help of scenario forecasting procedures. However, in the scenario planning the company identifies critical elements that includes the upgrading of company’s licenses, strategic organization of individual business entities along with their decision-making criteria and applications.
Introduction
The corporate has earned $ 37 million till 2006 from its existences and became one of the ten largest airlines. It is the world’s major package-delivery company. Due to UPS’s continuous improvement, it is serving as a leader in transportation and logistics industry in more than 190 countries. The company possesses 3,400 retail locations with 383.5 thousand employees that makes the process of package transportation very easy for the customer. The company is based on the principle of centralization with a traditional hierarchal structure followed by the higher management of the company. Priorities, investment decisions, and innovation are being performed by the senior management with involving employees from different departments.
The company makes strategic plans on two basic levels, one on the regional and the other on the corporate level. However, provincial business units are not allowed to make decisions on their own. Currently, the company is facing a variety of difficulties that the company will handle in its coming future. UPS is planning to develop a new technology that serves their information system for its competitiveness in the market. However the company is putting its efforts to tickle its strategic problem that repeatedly asks to grow UPS’s air services business.
Strengths and weaknesses of scenario planning
Scenario planning makes the company able to critically analyze the unforeseen events that are going to accrue in the future. However, strategic planning is a long-term forecast for the combined operations performed by the company and is not only for a specific event or a situation.
Strengths
It identifies key issues that possess a certain degree of the possibility of events that will be occurring in the future.
In scenario planning, we analyze the reasons due to which the company will be facing unforeseen events. These driving forces will be related to the economic, political and social environment.
The most important strength of scenario planning is its in-depth documentation for each event and its sorting of uncertainties on the basis of predetermined and critical difficulties.
Weaknesses
The process is too much longer and requires a lot of time and market research to forecast potential problems regarding a particular context. It also possesses a risk of market dynamics that eventually changes all other variables that exists in the previous analysis.
This process is an expensive plan for the company as when its officials get engaged in the making of scenario planning then it will hurt their performance in their concerned areas. However, company officials can help the “ad hoc group” who are conducting this planning in their company as an external resource service provider.++
Evaluation of UPS’s scenario planning
Previous scenario planning was taking international market as their playing field. From a global perspective, UPS’s was performing scenario planning in order to cater foreign competitors and to make their delivery system more effective and efficient. However, currently the company is focused on the building of scenario setup for its regional business units. Scenario planning secession held in 2004 highly emphasizes on the importance of mail security issues and terrorist activities. However, the planning done in 1997 was preparing to defend themselves from government institutions.
The administration was having an impression that the company was moving in the right direction by conducting the situation analysis on competitive forces and the global marketing scheme. An addition made by the CEO, that with the help of the scenario building the company has not been forecasting the future, but it has developed various alternatives to handle different kinds of potential threats and opportunities ……………..
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In March 2005, CEO Michael Eskew asked the Corporate Strategy group to recommend changes in the strategic process to make sure that enables United Parcel Service (UPS), to continue to transform itself over the next few years. Describes the evolution of the strategic unit, with special attention to the use by the scenario planning techniques, as well as other important elements of the process: the development of the company’s charter, strategic planning, strategic decision making and implementation. We also discuss the role of the various participants in the process, paying particular attention to the CEO and employees of corporate strategies. “Hide
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