Scenario based planning and decision-making
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Transcript of Scenario based planning and decision-making
SCENARIO-BASED PLANNING AND DECISION-MAKING:
GUIDELINES FOR USE IN THE U.S. ARMY CORPS OF ENGINEERS PLANNING STUDIES AND
LITERATURE REVIEW
By Charles Yoe
CONTENTS
1.Introduction
2.Uncertainty and a Culture of Uncertainty
3.Scenario Planning
4.Scenarios in Corps of Engineers Planning
5.Conclusions
“ALL OUR KNOWLEDGE IS ABOUT THE PAST AND ALL OUR DECISIONS ARE ABOUT THE FUTURE”
IAN WILSON 1/31/75
Planning in an uncertain world
Charles Yoe Professor of Economics at Notre
Dame of Maryland University
Recent publications include three textbooks:
• Principles of Risk Analysis: Decision Making Under Uncertainty• Primer on Risk Analysis: Decision Making Under Uncertainty• Natural Resources Planning
Experience
Consultant and Risk analyst U.S. and other government Involvement: International trade, Natural disasters, Ecosystem restoration, Navigation, Planning, Water resources.
Figure 1: Planning Process (P&G)
US Corp. Planning Process
Problem & Opportunity
Inventory & Forecast condition *
Plan Formulation
Evaluation
Comparison
Selection
TRADITIONAL P&G PLANNING
Is largely deterministic*
Process relies on a single most likely alternative future forecast with and without condition.*
Desire for single right answer Often anchored in present Adversarial--legitimate differences in
views of uncertain future
MOST LIKELY FUTURE CONDITION
Single forecast of the future will be wrong
Thus, planning is based on what could be
not necessarily what will be What could be is wide open to debate –We cannot ignore it The consequences of being wrong may
be serious
TRADITIONAL CORPS’ PLANNING METHODS
During the postwar years the future could indeed be adequately described as an extension of the immediate past.
But now world is rapidly changing and growing complex world.*
Future could no longer be characterized accurately as an extension of the past.
2. UNCERTAINTY AND A CULTURE OF UNCERTAINTY 2.1 UNCERTAINTY IN THE WORLD
- World is rapidly changing and growing complex world.
-A new phenomenon of “known
unawareness” has entered.* -In an uncertain world we cannot know
everything and we will make mistakes despite our best efforts to the contrary.
2.2 THREE DECISION CONTEXTS FOR THE CORPS
Risk involves known probabilities of events with potentially undesirable (or less desirable) outcomes.*
Situations of uncertainty involve known states of the world, but with unknown probabilities.*
Ignorance involve unknown states of the world and their probabilities.
-Catastrophic events such as the 9/11 attacks
2.3 A CULTURE OF UNCERTAINTY
Stakeholders and principals are ready, prepared and able to openly talk about an approach to risk, uncertainty and ignorance.
Successful companies will be those best able to handle uncertainty through adaptive attitudes, structures, and processes.
FOUR ESSENTIAL THINGS FOR ESTABLISHING A CULTURE OF UNCERTAINTY
Knowledge of Uncertainty Environment That Supports Uncertainty
Analysis. Infrastructure* Stakeholder Involvement*
Non-federal
planning partners
Citizen& stakehol
der
US Corp
Academia
*Environment That Supports Uncertainty Analysis*
3.0 SCENARIO PLANNING
Developed in second half of 20th century (Europe)
Result of failure of traditional planningDeterministic view of futureForecasts were wrong
SCENARIO PLANNING
Explores several alternative futures Developed by blending data and
analysis with intuition and creativity wellcrafted like novel stretch the imagination without going
outside the bounds of believability. consistently address issues that are
critical to decision makers.
Schriefer and Mercer, 1996
SCENARIO PLANNING
More than one possible future and they are significantly different.
Examination of a complete range of futures that could be realized.
The plan that performs best across all future without project conditions is deemed the best plan.
3.1 SCENARIOS IN THE CORPS CONTEXT
Scenarios have always played a significant role in the Corps’ planning process.
Scenario is called the “without condition” if no any specific action taken to alter the path of the future.
If without condition future scenario is undesirable, planning partnership may decide to take action in the present to alter that future.
This scenario is called the “with condition”
3.2 EARLY HISTORY OF SCENARIO PLANNING 3.2.1 WHAT IS IT?
Herman Kahn (RAND Corporation ,1950s) “A description of possible actions or events in the future”.
3.2.3 Why do it? “Scenarios are most appropriate under conditions
where complexity and uncertainty are high” (Schoemaker, 1993)
3.2.4 Who’s doing it? Firms, Industries like Aerospace &
telecommunications Agriculture, Banking, Chemicals, Data-processing, Petroleum, Public- utilities
3.3 PURPOSE OF SCENARIO PLANNING
3.3.1 Scenario Planning is Strategic 3.3.2 The Shell Experience 3.3.3 The Role of Stakeholders 3.3.4 Forecasts Are Usually Wrong
3.4 CONSTRUCTING SCENARIOS
1. Develop case for scenarios
2. Get executive support and participation
3. Define decision focus
4. Design process5. Select facilitator6. Form scenario
team
7. Gather data & view
8. ID key decision factors
9. ID critical forces & drivers
10. Conduct focused research on key issues, forces, & drivers
Getting Started Laying Environmental-Analysis Foundation
SCENARIO PLANNING STEPS
11. Assess importance & predictability/uncertainty of forces/drivers
12. ID key axes of uncertainty
13. Select scenario logics to cover uncertainties
14. Write stories for scenarios
15. Rehearse future with scenarios
16. Decision recommendations
17. Identify signposts to monitor
18. Communicate results
Creating the ScenariosMoving from Scenarios to Decisions
4. SCENARIOS IN CORPS OF ENGINEERS PLANNING
Uncertainty
Consequence
Grave
Minor
Much
little
P&G Planning
Scenario Planning
Standard Decision Making
P&G Planning
When to Use Scenario Planning
FORECASTING & COMPARING CRITERIA
`
Baseline Risk
Existing Risk
Without Condition (Single scenario)
With ConditionBefore & AfterComparison
With & WithoutOption Comparison
Target Gap Analysis
Time
4.1 CURRENT CORPS PLANNING METHOD
4.2 PLANNING WITH MULTIPLE WITHOUT CONDITIONS
. Problem & Opportunity
Inventory & Forecast
conditions *
Plan Formulation
Evaluation
Comparison
Selection
4.3 PLAN SENSITIVITY TO ALTERNATIVE FUTURES AND REGRET
4.3.1 A Selected Plan’s Sensitivity to the Future
Scenario A
Recommended plan 1
Scenario B
Scenario C
Scenario D
Benefit Benefit Loss(regret)
4.3.2 PLAN SELECTION’S SENSITIVITY TO THE FUTURE
Scenario A
Scenario B
Scenario C
Scenario D
Recommended plan 1
Recommended plan 2
Recommended plan 1
Recommended plan 3
How To Decide?Compare Net Benefit of Plan 1, Plan 2, Plan 3.
4.4 SENSITIVITY ANALYSIS
Sensitivity analysis has been described as “what if” analysis.
systematic investigation of the model inputs, parameters, and assumptions used, future condition scenarios
SENSITIVITY ANALYSIS
4.4.1 Assumptions Sensitivity 4.4.2 One-At-A-Time Analysis 4.4.3 Joint Analysis 4.4.4 Scenario Analysis 4.4.5 Subjective Estimates* 4.4.6Importance Analysis*
4.4.7 What Does It All Mean? Sensitivity analysis enables planners to
experiment with the performance of their plan and to revise it according to what they learn about its performance
5.0 CONCLUSIONS
Traditional P&G Planning is deterministic, relies on a single most likely alternative future forecast often anchored in present.
failure of traditional planning in rapidly changing and growing complex world.
“Scenarios are most appropriate under conditions where complexity and uncertainty are high” (Schoemaker, 1993)
The benefit is not more accurate forecasts but "better decisions about the future."