Scenario Planning Strategic Webinar Series 15 May 2013

1. Scenario Planning Strategic Webinar Series 15 May 2013

2. Agenda • Opening remarks - Fiona Carter, Executive Officer SPS • Scenarios for India and China to 2015 - Gill Ringland, CEO SAMI Consulting • Scenarios on risks associated with ‘green’ technologies – John Reynolds, Executive Director SAMI Consulting • Q&A 2

3. The Strategic Planning Society • SPS was formed in 1967 and is a global network dedicated to the development of strategic thinking, strategic management and strategic leadership. • Our Members are individuals, corporate organizations and business schools. • We are dedicated to supporting Members to develop their strategic management and leadership capabilities. Our Vision a dynamic, global strategic management community Our Mission improve the practice, development and recognition of strategic management 3

4. About the SPS Strategic Webinar series • A series of Webinars launched in January 2013 for SPS Members worldwide. • Topics chosen for their broad application and appeal to the Membership of SPS. • To provide insight and practical recommendations for strategic managers and leaders. • Future sessions are planned to address subject areas such as strategy and sustainability, strategy and organizational design and strategy implementation. • Let us know if you would like to contribute to an SPS Webinar. 4

5. Scenario Planning • There is ongoingturbulence of the world economy • Scenario planning is being increasingly used in the public, private and NGO sectors. • Asset managers are realising that 80% of their concern needs to be with the global business environment, and 20% with the specific investment – a reversal from the boom years to 2008. • Our speakers will share two case studies with you: • Aset of scenarios for India and China to 2015, examining how they were generated, what the scenarios got right and what not, lessons learnt. • Scenarios on risks associated with ‘green’ technologies. 5

6. Our speakers • John Reynolds • Executive Director of SAMI Consulting • Clients in the UK Europe and the USA. • Previously fifteen years of futures and strategy experience in the Senior Civil Service, Department of Trade and Industry, Laboratory of the Government Chemist, Radiocommunications Agency, UK Trade and Investment and the National Security Programme. . • Gill Ringland • CEO of SAMI Consulting. • Previously head of strategy at ICL now part of Fujitsu. • Currently working with the European Commission, Eurocontrol, the Technology Strategy Board and ACCA. • Scenario planning books, also Beyond Crisis ,co-authored with Oliver Sparrow and Patricia Lustig, and recently, Here be Dragons. 6

7. SAMI Consulting Webinar Scenario Planning 15th May 2013 www.samiconsulting.co.uk

8. SAMI Our offer To enhance the capability to anticipate To transform emergent thinking into strategy and implementation Consulting, backed up by executive education and research to deliver “robust decisions in uncertain times” “You can never plan the future by the past” Edmund Burke, 1729-1797 www.samiconsulting.co.uk

9. Two studies • Report for the Corporation of London • Scenarios for India and China to 2015: implications for Financial Services • Report for the EU OSHA (Health and Safety Agency) • Green jobs and occupational safety and health: Foresight on new and emerging risks associated with new technologies by 2020 • Both in pdf on the SAMI web site • www.samiconsulting.co.uk. Under News & Publications. www.samiconsulting.co.uk

10. India and China to 2015 • Study commissioned by the City of London in 2006 • The City was concerned at the impact of India and China on London’s Financial Services • Were India and China the same or different? • Were India and China a threat or an opportunity? • SAMI worked with Oxford Analytica • 5,000 copies of the report were distibuted www.samiconsulting.co.uk

11. Comparing China and India • It is a mistake to see them as homogeneous – there are many Chinas and Indias. • The dynamics of development apply to China or India as much as they do anywhere else. • China or India can be thought of as a producer, a political power or a marketplace, each raising distinct questions leading to distinct approaches • Our approach was - what are these countries going to be like as places to do business, in which to invest, with which to collaborate or compete? www.samiconsulting.co.uk

12. Attitudinal Distance 70 50 40 30 20 10 60 Australia Canada Market USA UK Industrial Germany France Japan Collective Spain Brazil China Korea Future-oriented Chile S Africa Peru Ecuador Developing Mld Inc Guatamala Mexico Mixed views Pakistan Thailand Turkey India Kenya Poor Indonesia Nigeria Comparing China and India

13. Indexed GDP, 1960=100 (constant money) China Relative size in 2004 2000 China India Lower middle income 1500 Middle income Lower 1000 middle income Middle income 500 India 1960 1970 1980 1990 2000 Annual real GNP growth Comparing China and India 20 China 10 India 0 -10 -20 -30 1960 1965 1970 1975 1980 1985 1990 1995 2000

14. Scenarios for India and China • Methodology • Worked with Oxford Analytica’s country experts to develop the scenarios • Held workshops in the City of London to explore implications for asset management, insurance and international banking • Published report in October 2006 • Will focus here on • What were the scenarios and what has happened since? www.samiconsulting.co.uk

15. The big questions for India India is a very complex and consensus driven society Would frustration about China’s example Loss of esteem in Asia New generation with new views lead to further liberalisation of economic, regulatory and social controls? How would the balance of power between a federal style of government with localism, and a more centralised system, play out? www.samiconsulting.co.uk

16. The Elephant Lumbers along The Elephant Breaks its Chains Scenarios for India Federal style of governance Retreat to the Woods Liberalisation is reversed Liberalisation accelerates 2006 Centralised system of governance

17. What has happened in India? • India is one of the fastest growing economies in the world as a result of liberalization of the last decades, covering manufacturing, agriculture and financial services. • The balance of power between the central government and the states has shifted slightly towards central government as India moves to play a bigger part on the world stage viz-a-viz the UN, Pakistan, etc. For comparison purposes, the central government of India has more power than the US Federal Government. www.samiconsulting.co.uk

18. The Elephant Lumbers along Scenarios for India: Direction Federal style of governance Retreat to the Woods Liberalisation is reversed Liberalisation accelerates 2006 The Elephant Breaks its Chains Centralised system of governance

19. The big questions for China How long can China’s rapid economic growth persist? Can China cope with the complexity it is creating? What are the adaptation mechanisms? How will China interact with the rest of the world? Will she be seen as a source of economic wealth and growth? And/or a threat on the world stage, a source of instability? www.samiconsulting.co.uk

20. Scenarios for China 2006 www.samiconsulting.co.uk

21. What has happened in China • China’s economic growth has continued • No longer as connected to US trade after 2008: • focus on growing internal consumer markets • 7.7% growth annualised in last quarter • China has a foreign policy to protect its interests • investments in raw materials in Africa, Latin America, SE Asia, ex-USSR countries ,--- • Seen as a source of cyber-crime • aggressive in South China Sea • Supports North Korea (shared road bridge) www.samiconsulting.co.uk

22. Scenarios for China: Direction 2006 www.samiconsulting.co.uk

23. What can we learn from these? • Scenarios need to build on history but not be constrained by the past • Experts can find it difficult to recognise signs of change • Thinking about the trajectory – how the organisation might get from A to B is important for identifying early indicators that might show which scenario was emerging • Elephant Breaks its Chains – early indicator: Indian companies off-shoring to lower wage economies. • Lion leads the Dance – early indicator: gradual liberalisation of the renminbi $ exchange rate • The scenarios allowed for discussion of previously less explored future directions for China and India. www.samiconsulting.co.uk

24. Scenarios on risks associated with ‘green’ technologies • Project for European Agency for Safety and Health at Work (EU-OSHA) http://www.samiconsulting.co.uk/4EUOSHAreport2013.pdf • Worked with UK Health and Safety Laboratory (HSL) and Technopolis • Looked at new and emerging risks from new technologies in ‘green jobs’ to 2020 • Scenarios central to the project www.samiconsulting.co.uk

25. Process • Selection of (16) key drivers of change • Selection of key technologies (Nanomaterials; bioenergy; waste management; construction; transport; manufacturing; decentralised energy production & transmission; energy storage; wind energy) • Developed a set of base scenarios • Developed timelines for each key technology • Analysed new and emerging risk for safety and health at work www.samiconsulting.co.uk

26. Main Drivers of Future Change • Economic Growth • Growth In Europe • Global Growth rates • Green Culture and Values • Public Opinion • Government Incentives and controls • Energy Efficiency and Resource Use • Waste Management and Recycling • Rate of Innovation in Green technology

27. Scenario axes Deep Green Strongly green culture and values Win - Win High innovation in Green Technology Very Strong Scenario 4 No progress over a lost decade Bonus World Strong Growth Global and European Green Values Economic Growth Weak Low Growth High Growth

28. Innovation Axis For Green Growth For Green Future For Profit (Diagrammatic representation only)

29. Win - Win Defined by • Strongly Green Values • High economic growth • High rate of Innovation in Green Technologies

30. Win - Win • Green growth is sustainable. • Green activities are seen as a major contribution to economic growth rather than simply as a cost • Technology is delivering on its promise to make green growth achievable.

31. Strongly Green Values • Growing public concerns over climate change and other environmental threats • Mandate for deeply green legislation • Green behaviour is strongly approved of • Better models show how vulnerable the human race will be to climate change and the loss of ecosystems services.

32. High Innovation in Green Technology • The trajectory of technology accelerates • More and more young engineers and scientists qualify around the world, • Developments are propagated immediately • Technology has made green growth achievable. Most innovations use fewer resources and less pollution. • Energy science continues to deliver • The path to a zero-carbon future is now clear

33. Win-Win Human systems “We scored 8 out of 10 in the last green audit… how can we do even better next time?” “every day we continue to re-design the human-machine interface...” “welcome to the L.Z.C. Safety & Health @ Work training module. Today we look at everyday hazards...” “I guess every smart grid needs a call centre but it’s still pretty stressful”

34. ‘Win-Win Manufacturing now that robots or “co-bots” do most of the work.... What’s there to worry about ??? +++ THIS HUMAN HAS A POOR TRAINING RECORD+++ KEEP HER UNDER ACTIVE SURVEILLANCE +++ Boredom ... insecurity ... Keeping up with innovation ... And, what if they do not keep out of our way...

35. Bonus World Defined by • High economic growth • Low Green Values • Medium rate of Innovation in Green Technology (directed towards profits)

36. Bonus World • People will choose the route of increased prosperity • when faced with the costs of going green. • Technology is helping the world to be more efficient in its use of resources • but this efficiency merely translates into increased consumption • Carbon emissions and resource use are still rising. • High resource price stimulate increased supply

37. Medium Innovation in Green Technology (directed towards profit) • Technology continues to advance, driven by the profit motive • High levels of overall innovation • High growth allows capital-intensive inventions to be implemented quickly. • Energy sciences continue to deliver, • but it is not clear how or whether a zero-carbon future can be achieved without unacceptable compromises

38. ‘Bonus World’ Human systems “Drilling at 4000m is easy... no-one can see anything, so you just get on with it” “you seem to have good job satisfaction… it also pays for the new sports car” “they call this the graveyard shift - 7pm to 7am ... lucky we’re allowed to go to the toilet at midnight” “we’re freezing in here... Would love to invest in efficiency but that would reduce this year’s profits

39. ‘Bonus World’ Manufacturing New Zpad v4.2 CUSTOM PRINTED WHILE-U-WAIT “Hello - how may I help you??” (....I used to work just in retail... Now I am expected to be a manufacturer as well. I just press the buttons and hope it is OK! ) I’ll have a Zpad4.2 ... in lime green and purple ... and a cup of coffee while I wait please

40. Deep Green Defined by • Strongly Green Values • Low economic growth • Medium rate of Innovation in Green Technologies

41. Deep Green • A Green economy is achievable • but at the cost of economic growth. • Sustainability and Greenness are valued by people more than economic growth • Green activities are seen as a cost that needs to be borne. • High taxes on pollution and carbon emissions • Technology is helping to deliver a green future

42. Strongly Green Values • Growing public concern over climate change and other environmental threats • Mandate for green legislation • Green behaviour is strongly approved of • Better models show how vulnerable the human race may be to climate change and the loss of ecosystems services • Repeated resource shortages reinforce the need to be green

43. Medium Innovation in Green Technology • Technology continues to advance, driven by a desire to achieve sustainability • Restricted levels of capital investment restrict the adoption of capital-intensive innovations • Energy sciences continue to deliver • but it is now clear that low economic growth is necessary to achieve a zero-carbon future

44. ‘Deep Green’ Human systems “Solar panels are great because they are ‘green’... You don’t need skills or qualifications, just get up there and do it” “We can power the firm on these out-of-date ELV batteries... is it the yellow wire to white?” “everybody loves this green bicycle delivery service ... but the trailer gets heavier and heavier” “welcome to the community wind energy cooperative …”

45. ‘Deep Green’ Manufacturing Today it’s plasma TVs – very hi-tech.... Tomorrow, washing machines and hoovers. Day after... Radios and alarm clocks. Yeah right – who needs the latest model when you can fix anything you want ??

46. Outcomes • The scenarios facilitated important discussions between different groups of stakeholders in a neutral and safe environment • Many current assumptions were challenged (including targets that are unlikely to be met) • Some organisations realised that their plans were not robust • The scenarios could be used for the analysis of a broader range of technologies and policies • The scenarios were a robust tool for the anticipation and analysis of future challenges; and developing more robust ‘future proofed’ strategies and policies www.samiconsulting.co.uk

47. Thank you! Open for Q&A If you would like to get our monthly enewsletter eSAMI ---- please ask – esami@samiconsulting.co.uk. For details of our training courses (with the Horizon Scanning Centre of the Government Office for Science) contact training @samiconsulting.co.uk. For details of our Blowing the Cobwebs off our Mind events, please ask, cobwebs@samiconsulting.co.uk. www.samiconsulting.co.uk

48. Next on the SPS Calendar The webinar series continues: • 11 June – Strategy and Sustainability • 2 July – Global Trends in the Consulting Market • Annual General Meeting • 4th June 2013, 18.00-20.00 Central London