Fortune Telling: A look at OPX’s Scenario Planning

Fortune Telling: A look at OPX’s Scenario Planning

What is Scenario Planning
Scenario planning is like predicting the future, but won’t tell you tomorrow’s weather or who will win the World Series. Scenario planning’s value, if done correctly, is derived from its ability to provide information on all possible futures from any given decision. Imagine you are married with a child and decide to move out of your two bedroom apartment into a house. You decide to buy a three bedroom home knowing you plan to have only one more child. Two years later, you have twins. Your investment two years ago doesn’t seem as smart anymore. Scenario planning doesn’t predict the twins, it predicts the need to accommodate many futures which may include twins. You can let things happen to you or you can imagine what might happen and be prepared.

Imagine a different scenario. Imagine you own a business and your lease is running out on your current office space. Leases are usually ten years. What will your business look like in 10 years? Will it grow or shrink? Will more or fewer people telecommute? Is your current office space layout conducive to your work? A portion of revenue goes to rent, computers, furniture, and other equipment. Wouldn’t it be good to ensure that what you are spending is going to help you work better? Scenario planning can help.

How it started

Our brand of scenario planning has its roots in programming. Programming is an exercise that looks at the quantitative room and space needs of an organization (how many offices, workstations, conference rooms, and what sizes) and provides the skeleton for design, usually through an extensive spreadsheet. Room and space requirements are only a fraction of what an organization needs to make their new workplace successful. We were giving our clients something they liked, but were we giving them everything they needed? We realized that our programming methods were limiting. This limited focus on quantitative room and space needs left knowledge on the table. In 1999 we were presented with our first situation which required scenario planning on top of our standard programming exercise. We were working with a dot com client, and as standard practice at the time when creating the program options, we asked what their projected growth was for the next ten years. They couldn’t answer the question, and more importantly, didn’t understand the ramifications of leasing a new space without understanding their business growth. Growing 2% a year versus 10% a year requires very different real estate and financial needs over a 10 year period. By providing different program options with differing growth rates, our client was able to tie their growth to their real estate needs and make a more informed decision while planning for the future. While this sounds like standard practice now, at the time it was difficult for dot com companies to understand what it meant to grow.

How we developed it

During this time, we developed proprietary spreadsheet software that allowed testing of a range of program options with minimal user input. By simply changing several key entries, the software
calculated the resulting scenarios. We were able to run more scenarios across a broader range of factors than before, providing us more opportunities for single and cross scenario analysis. Below is an example summary of the current programming and growth outlook for an organization, generated from all available programming and personnel data from a client.

current state

Once this current state scenario has been created, we can easily manipulate different input information to develop new scenarios. As shown below, by changing only the inputs summarized under Notes on the left, the software calculates the scenario summary below.

Summary numbers.xlsx

Scenario 1 reveals the drastic change in real estate space needs that results from adjusting office sizing and distribution. In addition to reducing the square footage need by more than 20%, the amount of people on the perimeter with better access to natural light has almost tripled. While this kind of analytical progress was leaps ahead of our previous programming exercises, it still lacked the ability to model and confirm strategic resonance. This version of scenario planning focused heavily on decision making as a cost exercise. It also still left out any information about people and technology.
Fortunately, we had collected people and technology data. Our operational process surveys and focus group interviews gather quantitative and qualitative information on the client’s employees to understand the operational, cultural, and technological needs of the client. Although the IOE analysis was being used as a framework to help guide the direction of scenario options, the output was still only describing spaces and costs. The scenario planning output needed to include more information about people and technology. Drawing further from our IOE analysis, we identified a number of important workplace values like Growth & Attrition, Organizational Change, Leveraging Technology, and Collaboration & Interaction. Different attributes of the program would either raise or lower each of the four scores depending on their relevance to each workplace value. The scores provided a skeleton from which we could compose a story. Once all the scenarios are developed, the scores below can easily be tied to strategy. If one of your strategic imperatives is to improve collaboration and interaction among the staff, Scenario 1a below becomes a
clear favorite over Scenario 1.

3076_Scenario Summaries 1


3076_Scenario Summaries 1a

Telling a better story
In the beginning nothing other than our personal opinions guided these scores. Granted scoring was informed by experience, but it was inconsistent, and relied on the skills of a couple of people. While the potential for value for our clients was high, we couldn’t be sure that our scoring was correct. If we were going to provide the client with scores about how their real estate and space planning decisions were going to affect their organization, they needed to be objective. They needed to be derived from the programming spreadsheet, and they needed to be created consistently. Items like increasing telecommuting in an office would have not only technological implications, but would change the culture of the office. Culture would also change if an organization moved from multiple office sizes to single sized offices. See below for two scenarios. The change to having 30% of employees telecommute allows the organization to be much more flexible but would require the culture to adjust and would have large technological and collaborative implications.

3130 IOE_scenario_bar_charts_101012


3130 IOE_scenario_bar_charts_101012 6

As you can see, while we are telling more of a story, at this point we were conducting largely a cost exercise. Unfortunately, other values like Growth & Attrition above, were being guided by subjective means. We assembled a team to brainstorm this subjectivity issue, putting together individuals with different backgrounds (design, business, strategy, economics, sales, and information technology) to think about how to tell better stories from the application output. Through many iterations, we developed a series of rules to more objectively grade the workplace value scores. Rules are based on different qualities of an organization (its people, place, and tools), such as whether the space has multiple office sizes versus one office size; whether the company has a telecommuting policy, and if so, what percentage of employees participate; whether video conferencing capabilities exist; whether the company has a cafeteria, etc. To date, we have identified over 40 rules, each having a unique effect on each of the 10 value categories. These score values adjust, both individually and relative to each other, as elements of scenario data change. This extensive series of rules and calculations of scores, called the rules engine, now quantitatively determines the workplace values based on every change made to the

The rules engine, in conjunction with the scenario planning spreadsheet software, provides sophisticated calculations to valuate qualitative client-defined principles driving the decision making. The rules engine does these calculations objectively and in real time. Below see side by side the workplace value scores for two scenarios. These are calculated from the Current State and Scenario 1 programs earlier.

Only charts-1

Note how the workplace value scores have changed: the score for Focused Work has dropped because the number of private offices has decreased, but the value scores for Interaction and Mobility have increased. Now, in addition to the real estate savings, the client can also see how the space sizing and distribution changes affect the way they work.

What’s next?
We are now able to create scenarios that quantifiable and quantitatively measure an organization’s people, tools, and place needs and give the client more actionable information than ever. Scenario planning is an incredibly valuable and powerful tool that should be made available to anyone. Hence, we have developed a web and mobile app that allows anyone to use our proprietary rules engine to run their own scenarios with complete control over the inputs. This allows users to quickly test assumptions and immediately gauge the impact on their organization’s values. While not currently on sale, it is fully functional, and can even optimize scenarios targeting specific goal values of categories. Contact us for a demonstration.

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