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Managing Uncertainty


December 1, 2006
By Pulp & Paper Canada

Perhaps these or similar questions have arisen within your organization: “How do we access more useful perspectives on the future business environment of [blank]?”or “To what extent are our plans for …

Perhaps these or similar questions have arisen within your organization: “How do we access more useful perspectives on the future business environment of [blank]?”or “To what extent are our plans for [blank] dependant on uncontrollable outside conditions?” [you fill in the blank].

The blank may be: markets in China, fibre supply, critical skill-sets, new competitive arenas, technology outsourcing, consumer behaviour, government/political rules, advertising preferences, energy cost dynamics, climate change impacts, supply-chain dynamics, customers and our value-chain. Many organizations find it useful to manage uncertainty with a pre-determined business scenario or decision options framework. The creation of this framework should be a participatory process that captures and synthesizes the internal wisdom and experience of the organization. Critical supplementary information may also be gathered from external subject experts. This participatory process ensures a committed coalition for needed actions or change situations.

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Process for envisioning alternate scenarios: Many aspects of the future are uncertain and multidimensional, yet businesses are forced to make decisions based on just a few assumed future business conditions. What might be right for one future parameter [e.g. markets] might be incompatible with another parameter [e.g. government regulations]. This dilemma of multiple future parameters can be resolved by planning with a scenario framework as an enabler for improved decision-making. Decisions may involve issues such as capital planning, recruitment, outsourcing, market dynamics, new technology acquisition, or fibre supply, but in all cases, success or failure is dependent on a multidimensional set of assumed future conditions. Most organizations already possess the internal wisdom, experience and insight resources that are needed to create future business scenarios – however this information frequently needs to be organized into a more analytical and actionable format. The scenario creation process requires a] the identification of key influencing driving forces and b] the linking of self-consistent future projections for each of the driving forces. The most useful driving forces are those that have high impact and high uncertainty. Alternate projections for each driving force should represent diverse but plausible future situations. As many as 16 driving forces may be identified, along with three to five possible projections for each driver. This will give a useable business scenario frame that is unique to the organization’s needs and the critical issue at hand.

It is convenient to envisage business scenarios as “self-consistent probability islands” in a sea of uncertainty or if you’re more inclined to astrophysics, as “galaxies” in 3-D space. This visualization is expressed in the figure where each of four example scenario themes or decision option spaces is indicated as a zone of component data-points or “bubbles” [the image is derived from decision-making software]. Each scenario/decision option is given a memorable theme title. An example of some driving forces for the future of newspaper readership is shown in the second figure. Plausible projections for three of the drivers are shown along with how these might be linked to create four scenario spaces.

Why is this important? Predetermined future business scenarios or decision options facilitate more informed operational decision-making. Each scenario/decision option has a supporting analytical database of driver information relevant to the decision space in question. It is important to recognize that the scenario framework is not fixed, but is a dynamic space. The detail of the scenarios/decision options is readily fine-tuned as new driver/projection information becomes available. Once a business scenario framework is in place, it can also form the basis for a “Foresight Intelligence” discipline. Here, critical information from outside of the organization is collected and analyzed for signals as to which scenario space is unfolding. In this way, the organization is better prepared for “what if” uncertainty and can act preemptively.

Alan Procter is an international consultant in the areas future awareness. He can be reached through www.alanprocter.com


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