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We have had a very positive experience working with Organized Change. They designed a survey for one of our global teams to help design an organizational change and develop scenarios for our strategies. Organized Change is a dependable collaborator who can be relied upon to help us meet our goals.

Integrating scenarios and strategic planning using Consensus Builder: A case study


Introduction

Our client was an established, publicly-traded company. Because of its origin, it was heavily focused on property development and management of hotels. The purpose of their hiring was to assist the Board of the company develop an investment company not in this space, and would allow them to receive income in a way that counter-cyclical to the real estate business. Our firm has had several years of experience in the GCC (Gulf Cooperation Countries), helping a variety of firms.

This new entity they were creating had no mission, structure, or resources. As a result, there was no “change management” that could be done to it.

As one can see below, however, the parent company’s processes for strategic planning and some cultural assumptions is what needed to change.



Method

Organizational structure

The company had a relatively simple organizational structure: A holding company had three main subsidiaries- one involved in real estate, the other in services to hotels, and a new one for their non-real estate, counter-cyclical holdings, the subject of this paper.


The process

We use the Organized Change management process for strategic planning, now incorporated into Consensus Builder™, our proprietary software to assist our clients in collaborative decision-making. For more details on this software around this process, please view https://www.organizedchange.com/consensus-builder.htm.

The cycle for this process is above. We help organize the effort, gather and present data, provide for individual input, look at group summaries of those inputs, faciltate discussion, help the client brainstorm solutions and come to agreements. This process cycles through scenarios, SWOT(strengths, weaknesses, opportunities and threats), goals, mission, measures, strategies, and plans for change. For a more detailed overview of this process, please go to https://youtu.be/2kgjUQFGwtw. It is also described in Dr. Chaudron’s book, Nailing Strategy to Your Business Tree, available on Amazon at https://www.amazon.com/s?field-keywords=nailing+strategy+jelly+to+your+business+tree

It should be noted we use this process in a way that different strengths and weaknesses may appear in different scnenarios, which may require our clients to develop several plans for change. In this case, four scenarios were developed and presented by Organized Change, and four strategic plans developed. After the process was partially completed, commonalities in good investments across all scenarios were choseen, and other investment areas chosen should a scenario come about.

A schedule for these tasks are below. Some tasks are kept summarized for brevity.


Description of scenarios
Scenario 1: Status Quo

The recovery of the world economy after the crisis of 2008-2009 has slowed. As greed overcomes fear again, speculative money, on the sidelines since 2008, has become resurgent again, causing significant fluctuations in commodity markets. While the controls put in place after the last crisis seem partly effective, there are worrying signs that a “bubble” is appearing again. In response, some governments have instituted capital controls on inflows.

India and Asia have continued their slow progress towards modernization, with infrastructure hurdles in India and political barriers in China still providing a significant break on growth. Tensions on the Korean peninsula still exist, with Kim Jong Un still clinging to power. The United States’ economy has resumed its usual rambunctious self, moderated by a less aggressive foreign policy compared to the Bush era.

The enthusiasm for “green” power and ecological concerns has faded somewhat, as the potential for these activities has clashed with technological and political barriers. There is still significant continuing investment in development of non-petrochemical based energy sources and remediation technologies.


Scenario 2: Moderately Positive Scenario

The recovery of the world economy after the crisis of 2008-2009 has slowed. As greed overcomes fear again, speculative money, on the sidelines since 2008, has become resurgent again, causing significant fluctuations in commodity markets. While the controls put in place after the last crisis seem partly effective, there are worrying signs that a “bubble” is appearing again. As of yet, countries have not instituted capital controls on inflows.

India and Asia have continued their slow progress towards modernization, with infrastructure hurdles in India and political barriers in China still providing a significant break on growth. However, due to heavy investment and political will, India is finally coming to grips with these issues, and the tremendous bottlenecks in roads and housing are being dealt with. China’s program of local elections has been a success, though the Communist Party retains political control at the national level. Tensions on the Korean peninsula still exist, but North Korea is finally succumbing to the “carrots and sticks” of the international community, and has not undertaken another nuclear test. The United States’ economy has resumed its usual rambunctious self, moderated by a less aggressive foreign policy compared to the Bush era.

The enthusiasm for “green” power and ecological concerns has surged again, thanks to significant investment by petroleum-based economies investments in these areas. Third-world countries have begun to seriously address their own ecological issues on their own initiative, not solely at the behest of NGOs and Western governments. Saudi Arabia and surrounding GCC countries have gotten occasional accolades for their progress in human rights.


Scenario 3: Threatened Scenario

The recovery of the world economy after the crisis of 2008-2009 has slowed. As greed overcomes fear again, speculative money, on the sidelines since 2008, has become resurgent again, causing significant fluctuations in commodity markets. While the controls put in place after the last crisis seem partly effective, there are worrying signs that a “bubble” is appearing again. World-wide inflation has spiked, just recently having come down. In response, several countries have instituted capital controls, in some cases “freezing” existing investments in various industries.

India and Asia have continued their slow progress towards modernization, with infrastructure hurdles in India and political barriers in China still providing a significant break on growth. Mumbai is being crushed under its own weight, and China still suffers from significant ecological damage. Tensions on the Korean peninsula are worrying, with the power struggle after Kim’s death still ongoing. The United States’ economy has had anemic growth for several years, with foreign policy turned mildly isolationist. GCC countries have begun to turn a deaf ear to their own ecological and human rights issues.

The enthusiasm for “green” power and ecological concerns has faded somewhat, as the potential for these activities has clashed with technological and political barriers. As a result investment in in development of non-petrochemical based energy sources and remediation technologies has slowed. The large-scale natural gas deposits found in the United States, and the methylates off of Alaska have begun to create a significant dent in other uses of petrochemicals.


Scenario 4: Worst Case scenario

The recovery of the world economy after the crisis of 2008-2009 has slowed. As greed overcomes fear again, speculative money, on the sidelines since 2008, has become resurgent again, causing significant fluctuations in commodity markets. While the controls put in place after the last crisis were not effective, there are significant signs that a “bubble” is appearing again. World-wide inflation has spiked, just recently having come down. Capital controls are slowly becoming the norm in the world economy.

India and Asia have continued their slow progress towards modernization, with infrastructure hurdles in India and political barriers in China still providing a significant break on growth. Mumbai is being crushed under its own weight, and China still suffers from significant ecological damage. Several health-related crises, due to poor safety practices and industrial pollution has the population in an uproar. Tensions on the Korean peninsula are worrying, with the power struggle after Kim’s death still ongoing. North Korea has tested several nuclear devices, and its political relationship with the military dictatorship in Myanmar has continued to improve. The media have entitled this the “Nukes for Food” program. The United States’ economy has had anemic growth for several years, with foreign policy turned isolationist. The US seems more focused on its internal problems, principally concerned with avoiding major international crises and providing arms to an increasingly militarized Middle East. “Fortress Arabia” is becoming a reality. GCC countries have turned a deaf ear to their own ecological and human rights issues.

The enthusiasm for “green” power and ecological concerns has faded, as the potential for these activities has clashed with technological and political barriers. As a result, investment in in development of non-petrochemical based energy sources and remediation technologies has slowed. The large-scale natural gas deposits found in the United States, and the methylates off of the Alaskan coast have begun to create a significant dent in other uses of petrochemicals. The United States and Brazil, with its large ethanol-producing factories, have begun talk of an energy-independent North and South America.


Outcomes
Mission statement and areas of investment

We will invest in the food & beverage, chemical, and fabrication & assembly sectors in GCC countries. These investments will promote the social good, encourage good environmental practices, and will be within the bounds of Shar’ia. We will invest in companies whose return is not less than risk-adjusted 10% return on capital over an average of three- to five- years, and in companies whose returns are counter-cyclical to other components of the holding company. We will not invest in industrial sectors related to other holding company affiliate.

The company will use world-class research to identify opportunities to invest in the sectors defined above, and invest based on the following priorities: 1. To become the lead investor in new “start from scratch” opportunities (50% of capital); 2. Participate with other lead investors in either “start from scratch” or expansion of existing companies(7-32 % of capital); 3.And in existing companies(18% of capital)

The company will use this research and the contacts of the holding company to identify co-investors, with the aim of investment company having a 20 to 40 percent share of ownership or stock of the companies in which it invests.


Financial structure

The Board decided it would be open to partners collaborating with them to buy and run the companies they invest in. This would especially be the case when partners brought industrial subject-matter expertise, in addition to investment money.

At a later stage, the Board would consider allowing other partners to direct shareholders of the investment company itself, rather than just its investments.


Cultural influences
The use of scenarios

The assumption behind using scenarios is the belief that the future is partially predictable, and to some extent is influenced by human actions.

These assumptions are somewhat contrary to Arabic culture. Their language does not have an explicit “future case” as western European languages do, so it easier for them to consider the future as part of the present, and the present as part of the future. Also, there is also a cultural assumption that the future is in divine hands, and from the human perspective, “fixed” and a given. These would need to be adjusted to/overcome when dealing with shorter-term business decisions, as with this investment company.


Power distance and a bit of humor

Arab countries have a greater “power distance” relationship between followers and leaders. In this case, the co-chairman of the holding company was a well-recognize figure, both in business and based on his family’s history. As a result, Board members were often reluctant to disagree with him. In an attempt to narrow this distance a bit, I tried to encourage the co-chairman’s sense of humor. He and I were the only ones in the room with fully grey beards, a sign of status in Arabi countries. I remarked about this at a Board meeting, and he looked at me with a twinkle in his eye, and said with mock seriousness, “It’s not grey- it’s silver.” Participants laughed, and some of the ice was broken.


Assumptions about Board membership

As is common in the Middle East, the Board of Directors consisted of family members, friends, and few subject-matter experts. As this was a publicly-traded company without major shareholders, stock holders were not represented.

This became a problem for the new business. No one on the Board had any expertise in manufacturing, industry, or process industry-specific knowledge at all. They thought they could just hire experts or consulting firms to tell them what they needed to know. Because of their lack of expertise, they could not even be informed consumers of information. There was no way they could tell if a subject-matter expert knew anything at all. This caused them to make some poor decisions regarding their initial investment.

Our recommendation would be add at least two members to the Board with manufacturing expertise. This was met with considerable resistance, as this was uncommon in the country. Initially, they rejected our recommendation. However, when I arrived on my next trip, I found out they had chosen two new Board members, both with over 25 years of experience in manufacturing.