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Environmental Analysisand
Planning for Uncertainty
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© Copyright Coleago 2010 1
Uncertainty Understanding the nature of uncertainty in the
telecoms industry and responses to it
PESTEL Learn how to apply PESTEL analysis – a tool for
analysing the environment
Scenario
Planning
Using scenario planning to generate alternative
views of an uncertain future
Learning Objectives
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© Copyright Coleago 2010 2
Uncertainty Understanding the nature of uncertainty in the
telecoms industry and responses to it
PESTEL Learn how to apply PESTEL analysis – a tool for
analysing the environment
Scenario
Planning
Using scenario planning to generate alternative
views of an uncertain future
Learning Objectives
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The telecoms sector is subject to rapid, discontinuous change
Factor Rapid Change
New technologies
New products and services
New market segments
New competitors
New applications
New pricing paradigms
New business models
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What dramatic changes can you observe?
Factor Examples
New technologies
New products and services
New market segments
New competitors
New applications
New pricing paradigms
New business models
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Quantitative forecasting techniques that rely upon extrapolation of past
trends may yield the wrong answer
Change
“Forecasting based on trend is like driving while looking at the rear -view mirror”
Business as Usual Discontinuity
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The value of planning in the face of uncertainty
Apply the management tools that allow you to appreciate – what factors influence the future, and
– what different futures there may be.
The process of applying such tools helps you to gain an insight into how your
company may be affected.
One of the most valuable aspects of planning is to go through this process and
think through the different possibilities.
– Your company’s strategy will be more resilient.
Two useful tools to plan for uncertainty are the PESTEL analysis and Scenario
Planning.
6© Copyright Coleago 2010
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© Copyright Coleago 2010 7
Uncertainty Understanding the nature of uncertainty in the
telecoms industry and responses to it
PESTEL Learn how to apply PESTEL analysis – a tool for
analysing the environment
Scenario
Planning
Using scenario planning to generate alternative
views of an uncertain future
Learning Objectives
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PESTEL analysis examines a broad range of external factors that impact a
company
The Political, Economic, Socio-cultural, Technological, Environmental and Legal factors
which have an impact on the environment in which the business has to operate
© Copyright Coleago 2010 8
Legal
Political
The Business
EnvironmentalTechnological
Socio-Cultural
Economic
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PESTEL Analysis as an input into the SWOT matrix
The factors identified through PESTEL Analysis that present opportunities or
threats for a business are often presented in the classic SWOT matrix.
© Copyright Coleago 2010 9
Strengths Weaknesses
Opportunities Threats
Results of Internal Analysis
PESTEL Analysis of
External Environment
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Example: Technological factors in the mobile industry
© Copyright Coleago 2010 10
WiFi and WiMax becoming alternatives to GSM and HSPA
ADSL roll-out, household penetration is now xx%, and is forecast to reach xx% in YYYY
FTTx (Fibre to the cabinet, home) being rolled out, xx% of homes passed by YYYY
HSPA, LTE, 4G increased data through put per MHz of spectrum by a factor of x
VoIP (e.g. Skype) share of traffic now, growing to x by YYYY
Multi-function device: MP3 music player, camera will account for x% of shipments by YYYY
New applications, apps stores and proliferating
New business applications
Video content widely available by YYYY
New spectrum licences in X.X GHz (upper band) in YYYY and X MHz (lower band) in YYYY
Security issues – viruses on mobile phones
Technological
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PESTEL Analysis – Group Exercise
Depending on the number of groups, each group takes one or two of the PESTEL
factors
Brainstorm a list of factors that will impact telecoms operators in your country in the
future
– Think laterally and creatively
Be specific and use numbers whenever possible
– For example instead of simply saying “unemployment” you might say unemployment
is forecast to increase from 6% of workforce to 10%
Please use the flipchart
You have 5 minutes to complete this exercise
Present your findings to the whole group
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PESTEL analysis: ______________ Factors
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© Copyright Coleago 2010 13
Uncertainty Understanding the nature of uncertainty in the
telecoms industry and responses to it
PESTEL Learn how to apply PESTEL analysis – a tool for
analysing the environment
Scenario
Planning
Using scenario planning to generate alternative
views of an uncertain future
Learning Objectives
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High levels of change and uncertainty invalidate many approaches to
forecasting
Forecasting is usually based on an extrapolation of past trendsand observable variables.
The telecommunication industry’s future will be determined by a
set of circumstances that currently do not exist and, therefore,cannot be accurately quantified, measured or predicted.
Scenario Planning provides an alternative approach to
forecasting in the face of uncertainty because is explicitly deals
with different futures.
© Copyright Coleago 2010 14
…but.
Forecasting is relativelyeasy in a stable
environment…
The solution:
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Defining a scenario & benefits of scenario planning
“Scenarios are descriptions of vividly different, contrasting and relevant
future environments in which the business may have to operate. Thescenarios describe the key trends and interactions that may characterise
the development of a particular future environment.” The Economist’s Guide to
Business Modelling
Scenarios are not simply “High”, “Medium” and “Low” variations of a
“Base Case”, i.e. scenarios are different from sensitivities
The benefits of scenario planning in the context of business planning are:
Helps to “tell the story” behind the business plan, assumptions and
outputs.
Supports the logic of the plan.
Ensures that a detailed, consistent set of business plan assumptions
are produced.
© Copyright Coleago 2010 15
A definition
The benefit
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The scenario planning process
The process for developing and describing a range of contrasting, credible futures in
which your company may have to operate
© Copyright Coleago 2010 16
PESTEL Analysis
2. Analyse
the factors in
an uncertainty
and business
impact matrix
1. Brainstorm all the
factors which might
determine the future
environment for the
business
3. Identify
development
paths for high
impact / high
uncertaintyfactors
4. Generate a
range of
scenarios and
the “story”
behind each
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2. Analyse the factors in an uncertainty and business impact matrix
Scenarios should be developed around the factors that have the highest degree of
uncertainty and the highest potential impact on the business i.e. revenues, costs, capexand tax.
We may know that something is happening, but it may highly uncertain in which way it is
going to happen.
© Copyright Coleago 2010 17
Business Impact
Low High
Un c er t
ai n t y
Hi gh
L ow
f / f
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Example of mobile sector Impact / Uncertainty Matrix, the factors are derived
from the PESTEL analysis
18
Low Business Impact High Business Impact
Hi gh Un c er t ai n t y
Extension of the driving banCompetition law
24x7 lifestyle
Increased familiarity with data services
Advertising overload
Current youth market maturing
Public nuisance and the acceptance of using phones
Increased travel
Terrorism and security and contact needs
Security issues – viruses
Changes to spectrum allocationsVoIP (e.g. Skype)
Health and safety issues
WiMax
Convergence
New applications
Data traffic volume
L ow Un c er t ai n t y
Mobile technology evolution (HSPA+, LTE)
ADSL roll-out
Terrorism and compulsory registration
Change of government
Foreign trade regulation
GPS
Interest ratesExchange rates
Inflation
Unemployment
An ageing population
Changes in working patterns – increased home working
New mobile licence
Regulation of termination rates
New accounting standards
Employment law
Reducing loyalty from customers
Additional taxation
Rates of obsolescenceDevice capabilities and battery li fe
Environmental protection laws
Disposals and environmental charges
World Trade Organisation rules
Planning issues for new sites
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3. Identify development paths for high impact / high uncertainty factors
Path 1 Path 2
WiMax
WiMax remains a marginal
technology with limited coverage,
even in major cities, and few devicemanufacturers fully embrace the
technology
WiMax coverage increases dramatically
covering all urban areas. Device
manufacturers embrace the technologyand all new mobile devices are WiMax
enabled
Convergence
Customers perceive little benefit in a
single supplier for their telephone,
internet and mobile needs,
preferring to shop around on a
regular basis for individual, best
deals, fixed network bandwidth stays
well ahead of wireless bandwidth
Customers rapidly embrace the idea of
convergence as they value the ability to
access easily their email, internet and a
range of services via a range of
alternative access platforms such as
wireless and fixed broadband provided
by a single supplier through a UMA
enabled device
© Copyright Coleago 2010 19
Describe alternative development paths for the highly uncertain, high impact factors
Paths should be plausible and significantly contrasting
Two alternative paths are often sufficient, three is usually the maximum
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4. Generate a range of scenarios and the “story” behind each
The technique now requires the creation of a range of scenarios by combining
development paths for different factors.
– This step is somewhat unstructured!
Selecting pairs of development factors is usually the easiest approach although this
still can generate a vast multitude of scenarios.
– A potential solution is to rank the high impact / high uncertainty factors and then
develop 5 or 6 alternative scenarios from combinations of the top 3 or 4 highest
ranked factors.
– In the example we have chosen “WiMax” and “Convergence”.
The objective is to create the basis for 3 to 4 relevant, credible and highly contrasting
alternative scenarios. In our example we have developped one scenario.
The scenarios should be internally consistent, i.e. free of contradictions.
– For example, high prices are inconsistent with market penetration.
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4. Generate a range of scenarios and the “story” behind each
Using prose, describe your scenario and introduce other factors, initially from the
high impact / high uncertainty quadrant.
– Avoid bullets, as written prose forces the author to examine the logic of the
scenario.
– Capture the key trends and interactions that may characterise the
development of a particular future environment.
– Examine the dynamics and evolution of the scenario.
Select an evocative title that captures the essence of the scenario.
– For example “Mobile Armageddon”.
– Avoid the usual “Medium”, “High” and “Low” cases.
For our worked example we have chosen the title.
– “All Out War ”
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“All Out War”
“ As more and more households adopt broadband and the population becomes ever more
technology savvy a growing frustration arises among customers, that they cannot accesseasily a common set of desired services (email, music, voicemail, etc) over both
broadband and mobile.
Manufacturers of devices from mobile phones, through MP3 players to gaming consoles
imbed communication capabilities into their products in the hope of providing a source of
additional service revenues.
Device manufacturers incorporate multiple access technologies, including HSPA, WiFi,
WiMax and develop UMA on the road towards all IP networks. As a result, WiMax
becomes effectively a mobile access technology which is reinforced by the inclusion of
WiMax in the IMT-2000 standard for advanced mobile technologies.
The combination of an increasingly clearly articulated need from customers and theavailable technology provides a clear opportunity for fixed operators to encroach on mobile
operators and vice versa.”
© Copyright Coleago 2010 22
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Exercise – develop a scenario for your company (30 minutes), work in groups
© Copyright Coleago 2010 23
Step 1 Focus on the factors from the PESTEL analysis that have a high
impact and high uncertainty
Step 2 Describe 2 development paths each for 2 high impact / high
uncertainty factors (upper right quadrant of the matrix)
Step 3 Select a pair of development paths to create a scenario
Step 4 Describe the scenario in prose
Step 5 Give it an evocative title
Step 6 Be prepared to present to the group
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Development path template
Factor Path 1 Path 2
© Copyright Coleago 2010 25
Scenario
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Scenario
Title
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P t i
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Present your scenario
Be ready to present your scenario to the group
Identify the key inputs
The evocative title
Read your scenario to the group
© Copyright Coleago 2010 27
S i l i t th d k
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Scenario planning – strengths and weaknesses
Weaknesses
May not actually identify the final outcome, thus creating a “blind spot”
Can be difficult to communicate
Difficult to capture the full complexity of market dynamics
Does not fit comfortably with the deterministic view of strategy
Strengths
Creates a range of potential outcomes which can be used for risk management
and testing how robust strategies are to future change
Can be quick and relatively easy to perform
No primary research or historic data required
A great many uses can be made of the scenarios once constructed
– Use scenarios as the basis for War Gaming
© Copyright Coleago 2010 28
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Session Summary