Corporate Planning (Case)

SCENARIO PLANNING AT CABLE AND WIRELESS



Finding a New Approach

The search for a more effective way to decide what information senior management at the £5.5 billion telecommunications group Cable & Wireless needed for decision-making had begun in the early 1990s. It was accelerated in late 1994 with the establishment of a new unit at headquarters called group development.

The purpose of the group was twofold. First, it wanted to try to address the fact that since the company operated through a federal structure, different technologies, both in terms of delivering products and supporting the company, were being developed in autonomous subsidiaries across the group. There was thus very little work being done in terms of standardization or towards achieving group-wide benefit from any of the best technologies that had been deployed by any of the subsidiaries.

The chief executive of group development also wanted to take a slightly different approach to the adoption of technology. Rather than just looking at the technical merits, which do not always guarantee success in the market, he wanted a method by which to examine why some technologies prosper and how factors like consumer demand and price pressures affect the introduction of a technology. That could then be used as a basis for choosing which technologies to opt for, which was crucial given the long lead times and the scale of investment required.

While the term scenario planning was not used then, an examination of ad hoc reports from around the organization showed that there had been attempts to look at different futures, although not in any sort of systematic way. So Adrian Kamellard former project manager, scenario planning, began to construct a framework for scenario planning. His focus was to create an approach that the business units would use and which would ensure that all of the thinking was done in a fashion that was of good quality, complete, and importantly plugged into the annual planning process so that decisions resulting from scenario planning affected the allocation of resources. That was to be the litmus test of success. He decided that the key to making scenario planning effective was common sense and a grounding in business issues:

One element of scenario planning has to be common sense. The other is taking a particular perspective on the business and having the rigour and the process to complete the work from that perspective. Typically senior managers are involved in line roles that take all their time; so if there is a market going through significant and rapid restructuring very few senior managers can articulate well the current business environment, much less the one that may exist by the time any strategic decisions actually have an effect on the business. They are also working on data about customers and competition, which can be at least several months old.

The other effect is that when managers do think about the future, it is too easy to become a victim of tunnel vision because even if someone has a fairly broad view of the future it becomes relatively fixed. There is little flexibility or capacity to identify the early warning signs that those views are no longer valid. So what scenario planning comes down to is looking at the world from a particular perspective, which examines the industry and the company through the eyes of suppliers, customers, appropriate governments, and others for 5-10 years in the future. Once you have that in your mind the rest becomes much easier. The critical point at that stage is to take each problem as it is posed and adopt an approach appropriate to the problem.

Choosing the Right Method

In some cases, therefore, he used a highly quantitative approach, with a detailed model to understand the issue. This would take months of work and lots of research. In others, there would be one or two days' worth of brainstorming to come up with an answer. But with both, there was still a series of steps to ensure that the right perspective was being adopted and that all the ideas were being captured and that, whatever the outcome, it would connect with the planning process.

For example, he wanted to try to model the impact of the Internet in the UK telecom market. At that point, in the mid 1990s, there was little hard understanding about the Internet, although there was a lot of noise in the company surrounding it. So a quantitative approach was taken to introduce some rigour into the debate because once people were pressed to give their thought on its actual impact. It made them think much harder about the issues. The process of building the quantitative model and understanding the relationship between the variables brought a clearer view and stood the company in much better stead when the output was used to build some decent stories about what could happen. Forcing rigour into scenario construction kept the thinking on target.

In other cases, he found that where the market was relatively well understood and comparatively stable, the knowledge of the senior management could be relied on more for scenario construction because of their good understanding of the dynamics and behaviour of the market.

Aiming at the Business Units

Kamellard would run workshops with the senior management of the business units, not at group level, because he wanted to make sure that scenarios were derived from the particular business drivers the units faced. He would facilitate sessions around a particular project of interest to them to help them learn the process and leave one or two people in the business unit behind who could carry on.

Before running workshops, Kamellard would try and find out what the current state of knowledge was, whether through interviews, papers, or telephone calls, depending on the issue. That would help him set the scene so he would know how to pitch the two-day workshops. He found that it was useful not in the sense of immersing himself in the topic but to understand current thinking. Also, he did an appropriate level of research so that he could introduce support, ideas, or whatever into the sessions. For example, if the scenarios were being developed on an aspect of technology, there would need to be an understanding of how the technology worked, the current players, suppliers, customers, etc., to stimulate the debate. Also, he would have in his own mind an early cut of what the key drivers were. While this was not to be prescriptive, if the research was done well he would have a reasonable chance of picking the right driving forces.

Sessions would he held with between 8 and 10 people with Kamellard as facilitator. The first step would be to identify a series of events that were possible under several headings: politics, economics, society, technology, customers, suppliers, regulation, and competition. Usually the workshops would be separated by time, so that once all the possibilities had been identified under the headings, there would be a filtering process to identify the bullet points which were likely to have any material effect and to get rid of some of the noise.

Validating the Results

There could be an early attempt to construct scenarios at the first session, depending on the participants’ level of understanding of their industry. But irrespective of that, he still found it important to break off after the first session and do research on the key areas that had been identified, whether technologies, or pricing regimes, or regulatory issues or whatever. He would go away and either model particular areas, or do research, so he could return with good quality knowledge about the state of play in each of the areas. He found that even in a stable market it was essential to break between the first and second session to do research and reflect on what had been identified. Sometimes there could be a third session as well.

The three-session process thus worked like this: in the first session do brainstorming, research in-between, construct scenarios at the second workshop, of which there could be two, three of four; do further validation, and then hold a third session to convert the information to decisions and actions that could go into the planning process.

The scenarios themselves had to tell a coherent story and be internally consistent, whether written in narrative, bullet points, or even pictures depending on the audience. Often it was found that there were inconsistencies, with one proposition mutually exclusive to another, although for fairly subtle reasons. That was why it was important to validate the scenarios after constructing them.

He found it crucial that the head of the unit be involved. Otherwise, if the chief executive delegated participation because of the time pressures, when the other managers returned with strategies based on the scenario work, these would very likely be changed or over-written. While holding workshops with lower level executives was useful to stimulate thinking about areas like the Internet, to have the scenario process make a material difference the chief executive would have to be involved.

Weaving the Scenarios into Strategy

The objective was to select one of the scenarios or to extract a combination of them to arrive at a base case to use for key strategic and tactical decisions. What Kamellard found happened in practice was that if there were three scenarios, the strategy would be devised geared to the base scenario and perhaps a second. But a contingency plan would be developed in case the third scenario began to emerge.

What proved more difficult was to get the units to create a process that would alert them to trigger points that indicate that a perceived uncertainty was becoming more likely. Nevertheless the scenarios have become an integral part of strategic planning at the business units where they have been done. For example, the annual plan submitted by one of the biggest units three months after doing scenario planning took almost word for word the two key scenarios that had emerged from the workshops.

Source: (To be added)