Yesterday, I was one of six judges invited to assess future scenarios and contingency plans developed by MBA students at Hong Kong University for Science and Technology (HKUST) for some of the world’s major corporations. I love working with students: whether they are still fresh to the business world, or whether they have taken time out from it, their appetite for open enquiry primes them for exploring possible futures. A big thank you, then, to Professor Roger Levermore, who leads the MBA program in the Department of Management at (HKUST), and who has made scenario planning a core component of the course. No strategy today can be resilient without contingencies for multiple future scenarios - and while it’s helpful to ground these scenarios in trends we already see emerging, the more we can stretch our imaginations to contemplate what may seem unlikely today, the more resilient we can become.
The short, packed morning I spent with the students was the culmination of a scenario-planning sprint. Over the course of just one week, competing teams of MBA students developed future scenarios and contingency plans for a company of their choice, picking the likes of Monsanto, Exxon Mobil, Volkswagen, Ted Baker and L Brands. First they got to grips with their company’s strategy, vision, business model and resource needs, asking what its success depends on today. Then they explored possible futures, based on two factors: growth in its market, and the availability of key resources. In reality, many more factors converge to shape a company’s future, but taking two is a good way to set key parameters. Plot them on a 2x2 axis, and you get four frames for thinking about the future: high growth, high access to resources; low growth, low access to resources - and so on.
The teams explored the various challenges these different frames present, and chose one as the basis of their future scenario. For instance, the team representing the clothing brand Ted Baker explored a scenario of high growth but low access to resources: to weather a water-price increase of 500%, they recommended the contingency of sourcing more cotton through the Better Cotton Initiative, which encourages farming techniques that reduce its water dependency. The team representing Monsanto also explored low access to resources - with both water shortages and an increase in land nationalisation. One contingency in their plan was to invest in indoor farming, so as to recycle water in closed loop systems, and reduce land dependency.
For each scenario, the teams had to show weak signals (aka ‘signals of change’ on the Futures Centre) of the emerging future they imagined. What signs today offered some evidence that this future may be possible? Too few companies take the practice of spotting signals seriously: the team representing Exxon Mobil recounted how it had suffered a 50% profit loss after failing to consider the implications for the oil price of lifted sanctions on Iran. They explored the scenario of high growth and high access to resources, in which more oil is found and barriers to extraction are removed. They spotted interesting (disturbing) signals - such as microwaves replacing fracking, and the exploration of pre-salt reservoirs, spotting new market opportunities. Personally, I would encourage Exxon to develop contingencies for a low-growth scenario, acknowledging the rise of divestment, emissions regulation, sustainability targets and the rise of renewables.
The winning team was L Brands - the group behind Victoria’s Secret and other lingerie and personal care retailers. I enjoyed the edgy panache of their presentation, calling their low growth, low resource scenario ‘Wedgies’: here, costs rose due to scarcity of water, energy and land, and margins slim down to cater for consumers during the economic slowdown. On top of this, the brand faced a range of challenging signals, including the gender revolution, with rising demand from LGBT and gender-neutral customers, and low growth due to the consumer trend for minimalism. In response, they proposed a subscription-based lingerie service called ‘Bare Necessities’ (the loan model also reducing the water dependency of their sales) and marketing activities focused on enhancing body image.
If you’re inspired by the insights that can come out of a scenario planning sprint and would like to give it a go, drop me a line!
