Axes of uncertainty

Axes of uncertainty While the axes of uncertainty chosen by the participants addressed
demand and marketplace characteristics and were thus similar to the axes from the 1997 session, the
Horizon 2017 axes incorporated more complex facets of each. This time, the horizontal axis was the
range of possible business models and demand characteristics, moving from traditional, proprietary
business models and focused, incremental demand to a more proactive, open, and collaborative
world of commerce. The vertical axis addressed the global and regional business environments,
which ranged from bordered, chaotic, restricted, and fragmented to borderless, harmonious, free, and
holistic.
Scenarios These axes formed the framework for four scenarios (see Exhibit 8 for Horizon 2017
scenario characteristics). In the upper-left quadrant was the “Company City” future dominated by
large corporations, with a growing middle class and the proliferation of powerful, integrated supplyfocused
technologies. The lower-left quadrant described a “Bordered Disorder” world, with a highly
regulated, protectionist environment with slow growth in developing nations, guarded intellectual
property and technology, and an increase in security threats and environmental and financial shocks.
In the lower-right quadrant, “Connected Chaos” defined a future full of global unrest, “amoral”
commerce, and informal connectivity that was difficult for governments to control. Finally, the
upper-right quadrant, called “Networks without Borders,” defined a highly connected, stable world
with low barriers to market entry and fast-moving technologies aimed at consumers.
The participants then drafted story lines and provided more detail for each of the four scenarios.
Subsequently, consultants turned this work into cohesive, internally consistent scenario stories at the
UPS global level and provided broad descriptions of the four scenarios at the regional level. These
documents were then distributed to participants for review prior to the third session. Finally, the
participants met in regional teams to define implications for technology and infrastructure initiatives,
growth strategies and options, and workforce development at both the global and regional levels (see
Exhibit 9 for Horizon 2017 implications and strategies). Unlike in the 1997 session, the participants
also identified early warning signals to indicate movement toward one scenario or another. However,
the system to monitor the signals was, according to one CSG manager, “loose” (see Exhibit 10 for
Horizon 2017 early warning signals).
As it had in the first scenario-planning exercise, the Strategy Advisory Group served as both an
incubator and a skeptic for the process. It reviewed the results as the teams progressed through
critical points and had many discussions around the scenarios, their implications, and possible
strategies.
Results
The 2004 session produced scenarios that had more similarities than differences when compared
with the 1997 scenarios. For Higberg, this was not a concern. “I was more worried that it would be a
90-degree turn rather than a 10- to 20-degree change. Roughly 60% of the characteristics of the
scenarios were the same as in 1997. The other 40% were what’s interesting.” Some of the hypotheses
developed in 1997, such as industry consolidation and continued growth of the Internet, had become
reality. In addition, some of the huge open technological issues had been clarified. However, there
were some surprises; they included the rise of safety and terrorist threats and the fall of the dot-coms.
Despite the lack of major changes in direction, Higberg was convinced the session was valuable: “It
validated and reaffirmed our direction. It also provided a much richer understanding of regional
nuances.”
In March 2005, senior management was still digesting the scenarios that had been produced. Since
most of the company was focused on executing the Centennial Plan and Strategy Road Map,
discussions about implications were limited to the Strategy Advisory Group members and staff in
CSG, Marketing, Public Affairs, and Investor Relations.
Participant Reactions
Participants in the sessions also had a variety of reactions to the exercise. Some participants
struggled with the process. According to one: “At first, everybody had trouble seeing the possible,
since most managers in the company are so focused on the short term. It was also difficult to keep the
perspective in mind that this was not about UPS but rather about how the world affected UPS. It was
irrelevant that UPS existed.” In addition, despite the desire to limit the transfer of knowledge from
the 1997 session, it was difficult to keep the two exercises separate and distinct. One participant
commented: “The two axes caused problems. They were very similar to the previous versions, and
the names of the 1997 scenarios were well ingrained in our minds.”
There were several other concerns with the sessions. Most revolved around value, purpose, and
goals. Some participants were skeptical about the value of the sessions. According to one: “Scenario
planning looks pretty, but does it have any impact on what people do?” Another admitted the session
had had no impact on his work. A third participant observed, “It was hard to understand what
scenario planning was all about. It was very clear that sessions were not to be used to develop
strategy. And we didn’t really feel we were in a strategy process in the first meeting. Instead it felt
like we were in Saturday Night Live. It was wacky. It felt fun, but frivolous.” However, he went on to
acknowledge that the impact of the session was more subtle and affected his own thinking process: “I
used to lay out a series of steps and say, ‘Here’s where we need to go, here’s the plan.’ What I had
never done is say, ‘If this happens, is the plan still right?’ Now, I’ll say, ‘Let’s look at what might
happen if our competitors do x. How would things change? Are we prepared?’”
Strategic Planning at United Parcel Service 306-002
17
Exhibit 3 UPS Timeline of Selected Key Dates in the Strategic-Planning Process
1907 United Parcel Service (UPS) founded in Seattle, Washington
(as American Messenger Company)
1991 Corporate Mission and Strategy Statement introduced
1996 Strategy Advisory Group and Corporate Strategy Group formed
1997 First scenario-planning session
1999 UPS Charter completed and broadly communicated
2002 • Management Committee off-site, resulting in Centennial Plan
• Strategy Road Map developed
2004 Second scenario-planning session
2005 Management Committee review and update of Strategy Road Map
Exhibit 5 1997 Scenario Characteristics
Focal Issue: “The future of UPS’s global business in an ever-changing competitive environment”
Demand Characteristics
Regional/ Market Environment
National
Tangled Paths Brave New World
Regressive World Global Scale Prevails
Strong local and regional government regulations
Restrictions on flow of goods
Technology available and governments struggle to regulate
Consumers demand more variations in products
Highly competitive market, with non-traditional niche
players
Strong local and regional government regulations
Restrictions on flow of goods
Technology a mix of proprietary systems
Traditional supply chain and product offering
More traditional competition from domestic and regional
players
Deregulation and globalization
Scope economies vs. scale
Technology with open standards and fluid systems
Customization of goods and services
Virtual organizations, non-traditional competitors
Global
Traditional
Consumers
Pro-sumers
Deregulation and globalization
Scope economies vs. scale
Technology adopted at a slower pace, proprietary systems
prevalent
Traditional consumption and consumers
Industry consolidation of competitors
***
***
***
306-۰۰۲ -۲۱-
Exhibit 6 1997 Scenario: Implications and Strategies
Focal Issue: “The future of UPS’s global business in an ever-changing competitive environment”
Demand Characteristics
Regional/ Market Environment
National
Tangled Paths Brave New World
Regressive World Global Scale Prevails
Global
Traditional
Consumers
Pro-sumers
Logistics solutions based on ability to manage
through government regulations
Local, regional brand identification for “solutions
company”
Extensive involvement in government affairs to
reduce barriers to trade
Limited demand for logistics solutions; maintain
transportation focus
Local, regional brand focused on operational
excellence
Extensive involvement in government affairs to
reduce barriers to trade
Marginal value for logistics, maintain transportation
focus
Global band with local flavor focused on operational
excellence
Limited involvement in government affairs to
maintain level playing field
Global, value added solutions aided by robust,
customized technology
Global brand focused on solutions, premium
offerings and agility
Limited involvement in government affairs to