How to Win in Every Scenario: Using Scenario Planning to Create Win-Win Solutions in Ukraine and in Other Complex Situations

By Rom Gayoso

This book is about a business research technique called Scenario Planning. Scenarios were originally created in the 1960s for defense purposes; later on they were adopted by private enterprise with exceptional results. Nowadays they are also used for public policy.
In this book you will learn the theory behind Scenario Planning, walk through three public policy examples and learn the process steps to build your own scenarios. This book will show you how to use both qualitative and quantitative inputs combined into a method designed to help you envision the future and win in every scenario. Go forth and win!

• Language: English
• Publisher: Xlibris US
• Release date: Aug 4, 2014
• ISBN: 9781499057461

Rom Gayoso

Rom Gayoso, PhD. - Educator, Grand Canyon University, Wilkes University Rom Gayoso is a professional economist with 12+ years of experience in the Semiconductor industry and he teaches graduate Economics, Statistics and Management courses at local universities in Phoenix, AZ. His expertise is in Econometric Modeling, Competitive Intelligence and Scenario Planning; he is responsible for developing several forecasting models for a Fortune 500 firm. His materials have been presented both in the United States and abroad - at SCIP, World Future Society, Institute of Business Forecasting, Intelligence for Business Strategy, Executive MindXchange, Market Research Summit, and Future Trends Conferences.

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Copyright © 2014 by Rom Gayoso.

Library of Congress Control Number:   2014913846

ISBN:      Hardcover      978-1-4990-5747-8

                Softcover        978-1-4990-5748-5

                eBook             978-1-4990-5746-1

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

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Rev. date: 08/01/2014

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TABLE OF CONTENTS

Acknowledgments

Introduction

Agents

Winners And Losers

Methodological Session: Theory

Methodological Session: Practice

Scenario Example 1: Stem Cell Research

Scenario Example 2: Renewable Energy

Scenario Example 3: Ukraine Crisis

References

ACKNOWLEDGMENTS

There are so many people I wish to express my gratitude to it would be difficult to contain in a page. Nevertheless, it is important to name a few.

I want to thank my parents, Reynaldo and Mary, for creating in me the passion for reading and discovery. A lot of my thoughts were influenced by exchanges with Oswaldo Nery, my maternal grandfather, who was a journalist before and during World War II, the Korean War, and the Vietnam War; our last discussions of war were during the First Gulf War, before he passed away. This role is fulfilled by my mother, Mary Nery, as she is a wonderful guide in the world of philosophy.

My paternal grandmother, Rosalina Lacerda, was an avid reader of French history, and she shared her passion with me when I was a child, so I was always looking forward to hearing more about her tales.

I thank my wife, Raquel, my son Oswaldo, and my daughter Desiree for the time they graciously allowed me to invest in the making of this book as opposed to investing with them.

I thank Mr. Richard Ojalvo, who inspired and showed me how to use creativity and storytelling in a business context; I grew up to do this professionally.

I thank Ms. Shayna Snyder. She is a very talented graphic artist, and she is responsible for the beautiful artwork on the cover.

I thank Mr. Alejandro Perez for the hours we spent in conjectures and debates over contemporary issues.

I thank the members of the World Future Society and the Society of Competitive Intelligence Professionals for the exchanges.

I also thank the blog readers for the thoughts and ideas we shared.

INTRODUCTION

Ukraine finds itself in the crossroads between East and West, and both economic blocs are vying for dominance, but Ukraine is pushed into a position where it needs to make a decision, one way or another. Who will have the upper hand? Which will be the dominant economic bloc in Eastern Europe and the Caucasus? What are some of the potential outcomes for the Ukrainian conflict?

This book is about scenario planning, a business research tool generally used to help people make sense of reality and to operate as a strategic thinking tool. It is often the case our contemporary society has so many pressures, and the environment is populated with so many stimuli understanding the present becomes a daunting task, let alone making any sense about the future.

As it turns out, human beings exist in three different realities at the same time: past, present, and future. Some dwell in the past, others live for the present, but both past and, to a great extent, present are known, whereas the future is unknown. Humans have the ability to critically think about the past, and generally one can make sense of the present despite all the noise in the environment. However, when it comes to foreseeing, people usually get stuck. Foreseeing is not the by-product of magic but rather a combination of art and science embodied in a method called scenario planning.

Scenarios are just stories; and as such, there is a setting, actors, and a plot. If one picks up the play’s program or watches the movie trailer, it is possible to guess the place, the plot, and the key characters; but in order to find out the end of the story, one needs to buy a ticket. People fall in love with stories because they have a way to connect with them. They become fond of character and root for them, hoping the end will be happy.

Wouldn’t it be wonderful if in real life we could have a good idea about the story, which direction the plot is going, and some potential endings? This study posits it is entirely possible to use this method in order to not only to predict some outcomes in given situation but also to help one better understand reality.

Reality, at least for social scientists, is perceived according to a set of values, experiences, and preconceived ideas one calls bias. This study offers ways to classify those biases in a way to help the reader first acknowledge them and then effectively work to minimize or otherwise to neutralize them. Once bias is mitigated, then a completely different picture of reality emerges, and the process of discovery takes place.

This study navigates through a lot of theories in order to present ways those in business research arrange our thought process and then move to understand the literature in this topic, with all its intricacies and nuances.

This study also presents many theories behind the scenario planning process for those who are avid about structure; there is always someone who wants to know how things work, and that reader will find great pleasure going through the methodological session.

In addition to theory, this work is designed to offer a practical strategy designed to help any person engaged in scenario planning on their own. The Five Steps in the Scenario Planning Process section was designed with a practical application in mind. Economists, just like architects, like blueprints and schema designed to walk someone through the steps necessary to complete a task. The author works in education, so there is a constant drive for simplification and better ways to communicate complex ideas, which is the author’s ultimate goal.

Scenarios are mechanisms to help one navigate through complex problems, make sense of them, and predict plausible outcomes. This study takes the reader through three different examples in increasing levels of complexity. The first example focuses on stem cell research, so the key question is mostly a moral dilemma—that is, should one place more value on protecting life or on alleviating suffering? The second example is more politicized, involves many more players, and presents formidable challenges in the world of renewable energy. The third example and the piece de resistance is an even more complex problem involving several powerful agents; and unlike the prior examples, the story brings incredible opportunities, offers a window on ways to better the lives of millions of people, but also presents extreme risks.

One should place a lot of value in making sense of the present and one’s ability to discover the future exactly because in some potential future outcomes reality could lend itself a friend, and in others reality can be harsh. Researchers put so much effort into understanding the future because if some alternative future reality is desirable, then one will put a lot of energy to make it happen; and conversely, if some alternative reality is not desirable, then one can put an equal amount of effort, if not more, into preventing such situation from unfolding.

After understanding how the technique works and covering the basics of the method, then one will concentrate on indicators, and those operate like mile markers on a road or the signs on a highway: they tell direction. Once one understands direction, then it is entirely possible to discuss likelihood—that is, if one alternative reality is more likely than another. Researchers also describe scenarios as plausible futures exactly because the key point is to first determine if something is plausible before one can address likelihood.

The last part of each scenario is actually its most important: how to add value. One can go through any amount of discovery, and nowadays there is so much information it is actually difficult to sort through it. Nevertheless, it is key for any effort both in the private enterprise and in the public policy arena to deliver value—that is, some form of payback. The very last step of the scenario is exactly to offer some strategies or recommendations for each agent to take in order to maximize one’s payoff.

The author puts a lot of effort into showing the reader a way to understand somebody else’s perspective as it becomes a critical part in the process of understanding each agent’s motivation. It is a good idea to remember economics is amoral—that is, we are not preoccupied with values. Rather, economists seek to observe social phenomena and behavior toward what society values in order to make sense of how people interact with each other. It is also a premise of this book the notion of homo socialis—that is, people are social creatures and actions need to be understand within a given context and set of experiences.

The author invites the readers to look at the world and at a situation through somebody else’s eyes in order to develop an appreciation for those who hold a different perspective. As a scientist, it is not one’s goal to convince the reader one way or another but rather to help the reader navigate through the different perspectives. The author’s opinion can be deduced, but a great deal of effort goes into making a fair representation of the other sides and perspectives for the sake of intellectual honesty.

As someone who grew up in a Western culture and educated in the United States, the author invests a lot of time to understand others’ perspectives, and those of the Russians in particular. What is at stake is not if one agrees with one or the other but if one can make an accurate representation of the other.

The author also invested a good deal of time and effort in order to make this study friendly to electronic book readers: there are in excess of one hundred different links throughout the book, and one can find them in the annotated reference section of each chapter, with the exception of the literature review. Feel free to navigate on and off the work at your own leisure; the links are included in order to make the experience more enjoyable.

The work is also presented in three different types of discourse. One scenario follows an abbreviated business format and is designed for quick reading. There is a methodological section and one scenario written in academic form, thus populated with peer-reviewed references. There is one scenario designed to confront a very complex situation, so it follows a process where the key concepts appear in an introduction, the concepts are presented, then there is a summary at the end of the chapter and a key message section. The book makes use of introduction and summarization as a learning technique designed to help one retain information.

There are a few ways to read this book. Pick one that works best for you. If you are interested on the theory behind the technique, then jump straight into the theoretical section and go through the literature review. If you are interested in a real-life example, then jump straight into the stem cell research scenario. If you are a hands-on person, then jump into the Ukraine scenario and walk through it. If you are passionate about technique, then go into the scenario planning process steps and skip through the rest. Of course, it is the author’s sincere hope one will find the entire work worthwhile of one’s time, but just like any work, the author hopes one will take the time to navigate through the entire content of the book.

The book does not stop here. As an educator, the author is always seeking to learn, and there is no better way to do that than to network with others. The debate did not start in this book, and certainly it will not end here. You can find a lot more about these scenarios on the live blogs the author maintains. You are more than welcome to join the discussion! There are blogs, pages on Facebook, groups on Google+, and threads on LinkedIn on these subjects. The author hopes to see you there!

You will find the discussion on Ukrainian crisis listed under the term Ukraine Crisis not because of grammar rules but because the hashtag #ukrainecrisis is more popular than #ukrainiancrisis.

Here is where to find more information:

• You can reach the author at

- Google: www.google.com/+romgayoso

- LinkedIn: https://www.linkedin.com/pub/rom-gayoso-ph-d/2/5/42

• On the web

- Renewable Energy: http://phoenixeconomist.blogspot.com/

- Ukraine Crisis: http://ukrainecrisisscenarios.blogspot.com/

- Competitive Intelligence: http://appliedcompetitiveintelligence.blogspot.com/

• Special interest

- In Portuguese: http://acrisedaucrania.wordpress.com/

- In Russia via Vkontakt: http://vk.com/public71760459

• Ukraine Crisis on Facebook

- In the U.S.: https://www.facebook.com/Ukrainecrisisscenarios

- In Brazil: https://www.facebook.com/pages/A-Crise-da-Ucr%C3%A2nia/663310693734652

AGENTS

Sometimes when you stand face-to-face with someone, you cannot see his face.

—M. Gorbachev

Actors

For the purpose of this book, and since the goal is to understand the many possible ways Ukraine’s situation may unfold—that is, we are telling a few variations of a story—it becomes imperative to address the actors in the stage. Actors in a play are aware of their roles, have a certain way they go about doing things, and their behavior dictates the way they interact with others. If one looks to other cultures’ art forms, it is a lot easier to understand actors’ behavior. For example, if one looks to ancient Greece for some guidance, then the tragedy offers some perspectives; in it actors assumed a persona, a certain behavior dictated by the masks the actors were wearing. This way the use of the persona helped the storyteller convey messages in a way the public could quickly understand, and the mask helped actors assume some desirable characteristics of the role they played; masks helped one assume a given character. The ancient Greeks were not the only culture known to use masks to convey roles; rather, a great many cultures adopted not only masks but rather a complete attire to help the actors, or the storytellers, form a character and facilitate their ability to convey a message in a way the public can quickly grasp. Here in the American Southwest the Hopi people created the kachina, which are ways for the spirit world to convey a message to the living using concrete images. The Japanese go one step further: even though the masks used in the traditional Noh performances did not cover the actors’ entire body and rather just the face, the performers had the advantage of a standardized stage design and presence of pillars (hashira) to help them orient themselves. In other words, Noh actors used masks to convey information, had a known space to play, and had the benefit of those pillars to help them locate themselves in the stage. What a complete picture!

Since the actors in Ukraine for the most part are not wearing masks, yet they are in a given location and appear on stage according to their tempo, it becomes imperative for this effort to find a structured way to describe characteristics and predict the actor’s behavior in a systematic way. In order to better understand the actors in the international stage and for the mechanics of the scenarios this book describes henceforth actors will be referred to as agents, that is a country, entity, organization or person with given goals or objectives to achieve and the means to do so. These agents are further defined by their ability to selectively process information, analyze the many stimuli of the environment they encounter, juxtapose reality in respect to their past experiences, and possess the ability to make decisions in a way that maximizes their perceived benefits. In other words, this effort assumes agents are rational. They seek to maximize their perceived benefits, and therefore securing the maximum pay off becomes their sole goal in life. This behavior-simplifying assumption is necessary in order to allow for the scenarios to unfold and take direction given the choices presented to the agents; it is true this economic concept is mostly based on Jeremy Bentham’s utilitarianism, as opposed to, say, Veblen’s evolutionary economics’ view of decision-making behavior, which is seen as a by-product of much more complex interactions. In other words, this work opts for the utilitarian view of the world embodied by the rational agent; yes, it is a hard assumption but a much-needed simplification instrument.

Space

Actors need a stage to play in, a delimited area where the important action takes place and the limited area the public views; much the same way actors do, agents also need a space where activity takes place. It is tempting to say the stage for the Ukrainian scenarios is the Ukraine itself, but that would be a dangerous simplification, one that needs to be avoided. In reality Ukraine, Crimean Peninsula, and the Eastern provinces are the main stages were action is taking place; but the agents’ behavior and the outcomes of such strategies are affecting Eastern Europe, the Caucasus, Western Europe, Asia, and even the United States. One could say the stage is truly global in nature. It is crucial to highlight the importance of space in this context and in all contexts for that matter. Spengler (1932, 1991) even used Kant’s expression to explain ultimately space is the form of perception which underlies all world impressions, thus giving space a lot of credit for forming reality or the way people perceive the world. It might be a good idea to borrow a little bit from Kant and a little bit from Veblen to say space is perhaps one of the strongest determinants of reality, and it is the locus where other complex social interactions take place. Space is important because it helps us perceive reality; it is the background or the context around us. For example, it is complicated to read Franz Kafka in sunny Hillsboro Beach, Florida, but one trip to Prague and one’s eyes can read those interesting words within context. Similarly one can talk about Michelangelo’s works, but it is difficult to understand the concept of his work without actually seeing the Pieta inside St. Peter’s Basilica in Rome. Some experiences are so difficult to describe and some concepts require so much explanation that it is perhaps almost impossible to discuss them without the benefit of space or a location. For example, the United States Holocaust Museum in Washington (DC) offers visitors an opportunity to learn about the darkest moment of modern human history in a way that no book ever could. Clearly there were never concentration camps in the United States, but the museum uses the space to create an environment where one can attempt to understand the human experience and the suffering associated with that. One could read about 9/11/2001 and the tragedy that unfolded, but it is difficult to visualize that reality without the World Trade Center Twin Towers in mind, and the chief argument is, in fact, the physical evidence: the collapse of the towers following the airplane impacts.

Time

Actors appear on the stage at given moments in the play, and so do agents: they remain mostly hidden up until they play their role. Agents’ behavior needs to be understood within the boundary of time so that we can comprehend how events unfold. This work does not assume the time-space continuum is broken; rather, events unfold in a sequential way. For example, one of the liveliest exchanges between President Putin and President Obama on the Ukrainian crisis happened sequentially. Initially President Putin accused the United States of fomenting the Ukrainian crisis. President Obama timely responded to this accusation during his visit to Brussels where he directly addressed President Putin informing him those were Ukrainian people protesting at Independence Square in central Kiev, not Americans. The trips EU officers, Polish diplomats, the German foreign minister, and Secretary Kerry took to Kiev were not only necessities but rather happened in a timely manner. Immediately after the onset of the crisis, both Poland and Germany were very proactively engaging Ukraine and Russia in an effort to find solutions to the crisis; Guido Westerwelle, then Germany’s top diplomat, was on Independence Square on 12/05/2013 (DW) among the protesters and just days after then President Yanukovych announced his government was not engaging the EU proposal. Coincidentally and at the same space of time, Russia’s foreign minister Sergei Lavrov was in Brussels defending President Yanukovych’s decision not to ratify the treaty with the EU. It appears in the Ukrainian crisis, now more than ever, the old adage time is of the essence is an imperative. If Moscow intends to show support for the Russian separatists, then it needs to act timely—and, in fact, it did—when it immediately recognized Crimea’s vote to join Russia as legitimate. Similarly the West will need to continue to be physically present in Ukraine in order to show support for the new pro-EU government and not just rhetoric or vague statements of support read from Brussels or from Washington but rather timely responses to the pleas of Ukrainians. Another example of how time is an important equation in the Ukrainian crisis happened in early March 2014 (Financial Times 03/03/2014) when then acting prime minister Arseniy Yatseniuk requested an emergency loan to the IMF and received not only a positive response to the initial $2 billion request but also additional emergency funds of €1 billion from the European Commission to be distributed along with the IMF’s rapid financing scheme. That is timely commitment. In fact, the IMF has been acting toward Ukraine in a very timely manner as it later announced a $17 billion emergency loan to help Ukraine avoid a default and to help stabilize its currency, the hryvnia (Bloomberg News 04/24/2014).

Perspective

It is important to understand