presentation - session 02

7/27/2019 Presentation - Session 02

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Environmental Analysisand

Planning for Uncertainty



© 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








Scenario

Planning



Learning Objectives



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




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

© Copyright Coleago 2010



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




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








Scenario

Planning



Learning Objectives



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


Legal

Political

The Business

EnvironmentalTechnological

Socio-Cultural

Economic



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.


Strengths Weaknesses

Opportunities Threats

Results of Internal Analysis

PESTEL Analysis of

External Environment



Example: Technological factors in the mobile industry


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



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




PESTEL analysis: ______________ Factors









Scenario

Planning



Learning Objectives



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.


…but.

Forecasting is relativelyeasy in a stable

environment…

The solution:



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.


A definition

The benefit



The scenario planning process

The process for developing and describing a range of contrasting, credible futures in

which your company may have to operate


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



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.


Business Impact

Low High

Un c er t

ai n t y

Hi gh

L ow

f / f



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




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


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



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.

20© Copyright Coleago 2010



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 ”




“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.”




Exercise – develop a scenario for your company (30 minutes), work in groups


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



Development path template

Factor Path 1 Path 2


Scenario



Scenario

Title


P t i



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


S i l i t th d k



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




Session Summary

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