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Analytical Frameworks that Deliver

Value

SLA CID Presentation

Monday June 9, 2014

Derek Johnson & Zena Applebaum

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1. Introductions

2. What is an Analysis Framework

3. Issues Analysis• Exercise

4. Scenario Analysis• Exercise

5. Acknowledgements

6. Questions/Comments

Agenda

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As Chief Executive Officer and Managing Director – Worldwide Services of Aurora WDC, Derek Johnson spends most of his time guiding the overall strategy of the business and directing the firm’s external consulting opportunities with clients. Prior to this promotion in March 2010, he served the prior seven years as Chief Operating Officer and Director of Research with the firm.

Prior to joining Aurora in 2003, Mr. Johnson was in the Investment Management industry as an account and portfolio manager. He served as Wisconsin’s SCIP chapter co-chair from 2007-2009 and remains on the steering committee, was Program Chair of the 2009 SCIP International Conference, and is a SCIP Catalyst Award recipient. He is also a Chartered Financial Analyst (CFA), with this designation conferred upon him in 2001.

Chief Executive Officer@dljalphaDerek.Johnson@AuroraWDC.com

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Zena Applebaum Director of Competitive Intelligence Bennett Jones LLP, a leading national and International law firm based in Canada. Her primary responsibilities include conducting analyses of market and competitor performance to inform the firm’s strategy, business development, client relationship management, counter-intelligence and marketing. Tying it all together, she enables strategic collaboration throughout the firm via the firm's award winning intranet.

She brings a unique perspective to intelligence and the dynamics of market and industry issues as a result of broad business development, marketing, and corporate research experience across a variety of sectors. Zena is a frequent writer and speaker on competitive, market and business Intelligence topics in Canada and abroad. Zena is a member of the SCIP Board of Directors and is currently the Chair Elect Special Libraries Association Competitive Intelligence Division, and a member at large of the Professional Marketing Forum. Zena has a joint academic and applied Masters degree in Communication and Culture from York and Ryerson Universities.

Director, Competitive Intelligence@ZAppleCIapplebaumz@bennettjones.com

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Analysis Frameworks

At its most basic definition, an analysis framework is problem solving tool. It is a way in which information can be assessed and analyzed in a particular context to solve a specific issue.

Not all frameworks are created equally, and not all frameworks are appropriate to answer any strategic question. The framework used to assess data should match the issue.

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Issues Analysis

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Outline Issue Analysis

n Introductory case: McDonald’s issues

n Overviewn Advantagesn Limitationsn Process for Applying the

Methodn Complimentary Analysis

Methods

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n McDonald’s was founded in 1940 by businessman Ray Kroc and is now headquartered in Oak Brook, Illinois.

n McD’s faces a variety of external challenges, some like nutrition concerns, employment, global growth have become “issues.” Many of these issues are listed and described in some detail at: www.mcspotight.org

n Already facing increased competition from formidable rivals like Subway and fighting to grow market share on many fronts, it now has government policy makers, activist groups and regulators in many countries putting the company in their sights and want to restrict its discretion to operate.

Introductory Case Study: McDonald’s Issues

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A Current, Strategic Issue for McDonald’s

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n What legitimate criticisms is McD’s receiving from its key stakeholders?

n In which countries are laws or rules changing that impact McD’s operations?

n Are there laws or regulations changing anywhere around the globe that can reduce McD’s discretion to operate?

n Relative to identified issues, which groups support us? Which ones oppose us?

n What institutional arenas do we need to be active in to influence public policy making?

n What actions should McD’s be taking to level the competitive “playing field level?”

Introductory Case Study: KITs/KIQs for McD’s Using Issue Analysis

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Description

n Issues are controversial inconsistencies caused by gaps between the expectations of a business and its stakeholders

n Issue analysis aids in the firm’s management efforts by enabling managers to anticipate changes in their external environment and to become more pro-active in shaping their external environment through their influence on public policy. It is a key part of issues management

n Issues management is a strategic process by which organizations identify issues in the stakeholder environment, analyze and prioritize those issues, develop responses to the issues, evaluate and monitor the results

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Overview and Strategic Rationale

n Someone in the company (SLA pros!!) must monitor the socio-political environment for opportunities and threats (aka, issue signals).

n Info pros can assist decision makers to identify, monitor, and select issues for action that may impact the firm’s bottom line and competitiveness.

n Helps decision makers to avoid surprises that emerge from STEEP factors.

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Advantagesn Gives management an advantage in

selecting the highest impact issues.n Allows for the early identification of

emerging issues.n Active monitoring allows ability to

transform emerging trends into opportunities.

n Provides an organization wide process for anticipating and dealing with STEEP factors.

n Can reduce the uncertainty of adapting initiatives in a changing environment.

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Limitations

n May not always assist in achieving a competitive advantage.

n Issue analysis must be carried out on an ongoing basis- overwhelming amount of data.

n Many issues contain an emotional or attitudinal factor, defying logic.

n There are few yardsticks by which to evaluate IA effectiveness.

n Many executives don’t get IA.n The ability to provide correlations

between issues and financial measures can be tenuous.

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Process:

n Before an issue can be analyzed, it has to be identified.

n Three tasks are precursors to issue analysis:

- Identifying issue categories.

- Identifying their source.

- Assessing their evolutionary development.

n Information-search techniques for identifying issues:

- Content analysis.

- Scenario development.

- Survey techniques.

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Process

n The issue analysis process consists of

1. Ongoing Monitoring, Scanning of the external environment

2. Issue Identification - Briefing, Forecast

3. Analysis, Assessment

4. Selection of issues to allow the organization’s decision makers to determine the nature of potential responses.

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Process: Step 1Identification, Forecasting

n To identify – specify the controversy, the expectations gap

n Define the issuen Next, write an issue briefn To forecast -- Use the

issue life cyclen 4 stage PP progression

1. Formative

2. Politicization

3. Legislative

4. Regulation/ litigation

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Process: Step 2Analyze, Assess the Issue

Use issue priority, leveraging, and scoring matrices.n Where is the issue in its stage of

development? n How probable is it that the issue

will evolve? n What is the likely affect of the

expected PP on the organization’s bottom line?

n Does the organization have the capabilities to influence the issue evolution process?

Variables most frequently used are probability and impact (PIGs)

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Process: Step 3Selection of Issues

Response patterns and types.n There are several ways that an issue

may be responded to by an organization (Cochran & Nigh, 1987). An organization might:1. Alter its behavior

2. Try to bring its stakeholders’ expectations of corporate behavior closer to its own

3. Enhance education of stakeholders

4. Contest the issue in the public opinion arena

5. Ignore the issue and hope it goes away

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Process: Step 3 Cont’d

n Mahon’s (1989) political issues alternative matrix.

n Two dimensions to consider when planning a response:

- Whether a direct or indirect mode of attack should be launched

- Whether the focal unit should be an issue or the organization.

n Four different tactics arise from these two dimensions as follows.

- Defuse the issue.

- Blur the issue.

- Attack the group.

- Undermine the group

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Process: Step 3 Cont’d

n Alternative classification scheme for preparing responses to public issues. (Mahon, 1989)

- Total Resistance

- Bargaining

- Capitulation

- Termination

- Cessation of Activity

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SummaryIssue analysis is a method that SLA

pros can/should easily support.Issue identification, analysis and

response process rarely unfolds in sequential fashion.

Issues are multi-layered & require continuous scanning, monitoring.

Must continuously adapt to the evolving conditions.

Uncertainty is ever present. Companies that manage issues well

can achieve competitive advantage vs. companies who do not.

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Related Tools and Techniques

Driving Forces

Analysis Forecasting

Industry Forces

Analysis

Institutional

AnalysisScenario Analysis

Stakeholder

Analysis

STEEP Analysis

CSF Analysis

Issue Analysis

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Scenario Analysis

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n Introductory Casen Short Descriptionn Backgroundn Strategic Rationalen Advantagesn Limitationsn Process for Applying the SAn Case Study: Scenarios for

Traditional and Emerging Forest Products Enterprises

Scenario AnalysisOutline

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n Founded by Bill Gates and Paul Allen in 1975, Microsoft is one of the most successful computing-industry companies of the last 3 decades.

n It has seen 3 major shifts occur, all of which it successfully navigated from the front: 1) MS-Dos, 2) Windows, 3) Office Suite.

n Today, it faces a new breed of challenges and rivals, from large rivals like Google, Linux, Apple, open sources, the cloud, and its own momentum.

n What will the future look like for Microsoft? Will it still lead in 10 years?

Introductory Case: The Future for Microsoft

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n Is the industry an attractive one for us to enter or to remain in?

n What technology platforms will be dominant in 5-10 years?

n Will personal computing be done primarily by mobile telephony, or other means in the next decade?

n What new applications and uses can be found for our current products and services?

n Can/How can our company influence the industry forces that are reducing our profits?

Some KITs/KIQs for Using Scenario Analysis

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n A scenario is a detailed, consistent description of what the future may look like and is based on a set of assumptions that are critical for an economy’s, industry’s, or technology’s evolution.

n Scenario analysis is a structured way of developing multiple scenarios that address two common decision-making errors —under-prediction and over prediction of change.

n The overall purpose of scenario analysis is to build a shared baseline for strategic thinking and provide strategic early warning.

Sce

nar

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Short Description

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n Scenario analysis was first developed for military applications.

n Strategists at RAND were the first to formally define scenarios as ‘hypothetical sequences of events constructed for the purposes of focusing attention on causal processes and decision points’ (Kahn & Wiener, 1967).

n This was followed by the now famous scenario analyses of sustainable global economic growth in Limits to Growth (Meadows et al., 1972) and Mankind at the Turning Point (Pestel & Mesarovic, 1974).

n 1982 study conducted by SRI International, Seven Tomorrows (Hawken, Ogilvy, & Schwartz, 1982).

n Most of these early scenario techniques were highly quantitative, though recent years have seen the evolution of blended qualitative forms as well.

Background

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n According to Schoemaker (1995), organizations facing the following conditions will especially benefit from scenario planning and analysis: Uncertainty is high relative to managers’ ability to predict or adjust. Many costly surprises have occurred in the past. The firm does not perceive or generate new opportunities. The quality of strategic thinking is low.The industry has experienced significant change or is about to. The firm wants a common language and framework without stifling

diversity. There are strong differences of opinion, with multiple opinions.

having merit. The firm’s competitors are using the technique.

Strategic Rationale

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n A scenario is a detailed, consistent description of what the future may look like.

n There are four general types of approaches to scenario development: Quantitative methods

- 1. Computer-generated econometric models.Qualitative methods

- 2. Intuitive methods.

- 3. Delphi method.

- 4. Cross-impact analysis.

n Most effective method in most CI work: mixed scenario analysis, with a bias toward the qualitative approach.

Strategic Rationale and Implications

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n Testing resource-based view strategy options n Organizational flexibility n Filling the forecasting void n Information overload management toon Scenario analysis improves an organization's

ability to respond nimbly: Ensures that an organization is not focusing on

catastrophe to the exclusion of opportunity. Helps an organization allocate resources more prudently. Preserves an organization's options. Ensures that organizations don't look backwards but look

forward. Provides organizations with the opportunity to rehearse

(Stauffer, 2002).

Advantages

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n Relegating strategy formulation solely to scenario analysis.

n Inherent bias. n Group consensus difficulties.n Connecting scenarios to competitive and

financial concerns.n Cognitive limitations and biases.

Limitations

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n Follows systematic and recognizable phases.n The process is highly interactive, intense and imaginative.n Phases of Scenario Development:

Process for Applying the Technique

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n There is no “one right way” to conduct scenario analysis. n Several practical guidelines have been developed

(Schoemaker, 1995). This one is time-tested.

1. Define the scope of the analysis. 2. Identify the major stakeholders. 3. Identify basic trends. 4. Identify uncertainties. 5. Construct initial scenario themes

Process for Applying the Technique

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n There is no “one right way” to conduct scenario analysis. n Several practical guidelines have been developed

(Schoemaker, 1995). This one is time-tested.

6. Check for consistency and plausibility.7. Develop learning scenarios.8. Identify research needs.9. Develop quantitative models.10. Evolve toward decision scenarios

Process for Applying the Technique

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n Should culminate in three or four carefully constructed scenario plots.

n Can also be represented in a scenario matrix as follows:

Process for Applying the Technique

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n Once the number of scenario ‘plots’ has been decided upon, the strategic intent of the firm must be proactively determined.

n 3 options when dealing with future uncertainty: Shape the future.Adapt to the future. Strategic options.

Process for Applying the Technique

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n These scenarios were identified by Don Roberts and Dr. Sten Nillson

n The main scenario inputs are energy, carbon and fiber prices

n Scenarios were given these names: The World Continues its CourseRepeated Economic MeltdownSkyrocketing Energy PricesEmerging Carbon Economy

Case Study: Scenarios for Traditional and Emerging Forest Products Enterprises

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n Scenario 1: The World Continues its CourseForest product industry suffered

dramatically during the global recession of 2006

The scenario sees the beginning of indicators suggesting that the recovery had begun by 2009 – 10

As such the demand levels and prices would return to pre-crisis levels

Case Study: Scenarios for Traditional and Emerging Forest Products Enterprises

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n Scenario 2: Repeated Economic MeltdownThe U.S suffered one of the worst

financial meltdowns in history during 2007

In this scenario recovery never actually comes to the extent that many forecasters predict.

As a result the demand for and consumption of traditional lumber products stay at the low levels of the crisis

Case Study: Scenarios for Traditional and Emerging Forest Products Enterprises

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n Scenario 3: Skyrocketing Energy PricesDemand for new energy products is tied

to the forest products sector. This scenario does not see the supply

keeping up with the demand, pushing prices higher.

Case Study: Scenarios for Traditional and Emerging Forest Products Enterprises

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n Scenario 4: Emerging Carbon EconomyContinual burning of fossil fuels and

deforestation have contributed to global warming

Governments forced into investing into alternative energy resources causing a boom in the carbon market.

Under this scenario, a dramatic growth in the pricing of carbon occurs through voluntary compliance efforts as well as regulatory penalty.

Case Study: Scenarios for Traditional and Emerging Forest Products Enterprises

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n Business Implications of These ScenariosEach of these four scenarios suggest conditions for the future

emergence of winners and losersUnder the first scenario, the traditional analysis of companies

markets, and industry attractiveness should help you better understand who is likely to win and lose competitive battles.

Although many products will continue to see eroded profitability under the second scenario, some products will find favor.

Scenario three will require companies to be astute in their choices of where to operate and with whom they choose to collaborate and partner

Scenario four has some highly robust and potentially valuable possibilities for strategy.

Case Study: Scenarios for Traditional and Emerging Forest Products Enterprises

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Exercise

n What does the “future” look like for Libraries and Librarians?

n Sketch three possible sceneriosWhat research would you need to do to support this

scenerio?What trends does this scenerio take into account?What themes and uncertainties does the scenerio

address?n Define the the strategic impact of each scenerio your

organization.

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Connect with Dr. Fleisher via:Email:Craig.Fleisher@AuroraWDC.com Twitter: http://twitter.com/CraigFleisher

Acknowledgements

Dr. Craig S. Fleisher is Chief Learning Officer and Director, Professional Development at Aurora WDC.

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Questions?

Thank you!