Perpetual Innovation

Category: Scenario Planning

  • Pandemic Scenario in Trump Transition Team, Days before Office

    Okay!. So the Obama administration left the incoming Trump administration several scenarios for them to think about. No evidence as to what happened to the final report. But apparently, it showed everything that we have seen since November in China, and the first outbreaks outside of China. The result was a world-wide pandemic. Overwhelming the US with supply shortages and patent overflows. What happened to the final report? The early warning signposts? The disaster (recovery) plans?

    We did a blog post about the military planning scenarios that would have realized a pandemic as an act of war… Or, even if it wasn’t caused by an act of war, the resulting story line would be similar. And, of course, if the pandemic started elsewhere, there would signals and signposts, in the jargon of Shell related to early warning signs in scenario planning.

    A major country should be doing military scenario planning for several topics. None is quite as huge and integrated as climate change. Look at this report produced by The National Security, Military, And Intelligence Panel on Climate Change (NSMIP, February 2020), A Security Threat Assessment of Global Climate Change: How Likely Warming Scenarios Indicate a Catastrophic Security Future. It doesn’t seem possible that the US would not have a plan like this for a pandemic? It also doesn’t seem possible that the US would not have multiple plans for economic recession, no matter the cause. Since we missed the boat on the pandemic, hopefully we didn’t miss planning for a recession… However, this recession is like none we have ever had before. Kind of like turning the switch off on most of the economy for a while. (How long is a “while” is a $4T question?)

    Kiaser Health News did a composite of highlights from several articles about the Trump transition team and how badly they apparently failed in the Pandemic exercise: How A Crisis Simulation Run Before Trump’s Inauguration By Obama’s Team Eerily Mirrors Current Outbreak!

    November in China. By December, the military and health official had to know that expansion into a global pandemic was was not only possible, but likely. In Florida, when we see a Hurricane coming, we dust off all of our contingency plans for the businesses and start buying toilet paper and canned goods. We make sure that we have lots of jugs to fill with water if needed (no need to buy water, by the way).

    Did the military and health officials simply forget to mention these things up the chain of command, or — apparently more likely — did the higher-up-the-chain-of-command not listen? What the hell happened to the results of the simulation? Did it take the path of anything and everything that Obama did/mentioned/signed/said, flushed down the toilet?

  • Scenario Planning when the Official View of the Future is Uncertain

    Scenario Planning when the Official View of the Future is Uncertain

    Scenario planning should be back in focus. We go a few years – 10 years now since the Great Recession – and we think that the current trajectory, or the “Official View”, should be consistent this time. But the corona virus brings that all back into focus, even though people are probably not taking it as seriously as they probably should. You have to look at the entire supply chain forward and backward. China plays a major role in many of the world’s supply chains. End consumers on the one hand; production supply chain on the sourcing side. If factories are closed, if people can’t go to work, if people don’t go out and buy the consumption and the supply chain get continually interrupted. China is initiating all kinds of stimulus. Telling banks to be forgiving on impacted factories seems like a good idea; no one wants the factories to go out of business because of such an exogenous event such as the virus. But other stimulus will be rather useless.
    Probably no one knows, yet, how this epidemic will play out. There’s no reason to believe that this won’t be rather long and protracted for China. The consequences for China will ripple throughout the world. With a world that is densely (over) populated, there is no reason to believe that such outbreaks will not happen other places, and more frequently.
    So, this brings us back to scenario planning. The advantage of scenario planning is that you can build Contingency or Disaster Recovery Plans based on various scenarios. Serious and protracted supply chain disruptions, no matter the cause, seem like logical scenarios.

    Right now might be a good time to dust off the Contingency Plans and see if anything needs to be updated, or executed, because of the recent events.
    In the 2018 Guide by Hall and Hinkelman, the scenario chapter discusses Y2K as the greatest scenario planning exercise in history. Read about the Y2K Scenario from that chapter (pp. 161-163). Remember that right now many companies are executing their contingency plans related to current events, many others are trying to develop them on the fly – kind of a fly-by-night approach to scenario planning.

    <*This section below is reproduced here with permission of the authors.*>
    The Great Scenario Planning Exercise, Y2K!
    There were several major advantages to corporations’ planning – scenario planning really – that came out of the Year 2000 (Y2K) preparation process. Planners were forced to consider at least two views of the future: the official view where Y2K caused no interruptions, and the view of chaos where it caused massive interruptions (mainly because of sustained interrupts to the power grid). One of the interesting parts of this process is the spillover implication – legally, morally and brand-image-wise – of doing nothing in preparation and being wrong. The scenario planning processes associated with Y2K resulted in stronger business planning and improved disaster recovery plans (DRPs). It also helped with business continuity plans by building stronger relationships with critical business partners.
    Many people would say that this is a bad example because Y2K was a bust. Actually, the major push to organize IT and transition from legacy systems has substantially contributed to increased productivity for several years after the turn of the century. Business productivity has been surprisingly low since about 2005. Two examples where the Y2K efforts proved to be well justified are Burger King and FPL.
    Burger King Corporation, then a division of DIAGEO, worked very closely with franchisees and its most critical suppliers (beef, buns, fries and Coke) to make sure that there would be no interruption and that contingency plans would be in place for likely situation related to Y2K. By far the biggest risk, and the most attention to contingency planning, went to AmeriServe. AmeriServe was the number one supplier to the Burger King system that had bought out the number two supplier and now represented three-fourths of the global supply chain. Three weeks into the new Millennium, AmeriServe declared bankruptcy! The contingency plans related to distribution had fortunately been dramatically improved during 1999 and continuity actions were immediately executed. Although it had nothing to do with Y2K, per say, much if not the entire contingency plan could be used for any distributor outage.
    An adjunct to the Y2K story relates to power. Once organizations got past addressing their critical IT systems, the biggest wild card was power outages. No assurances came from the power companies until just months before the turn of the millennium, and even then, not much was given in the way of formal assurances. Of course, that was too late for a big organization with brand and food safety issues to have avoided the major contingency planning efforts.
    Most people did not realize how fragile and antiquated the entire power grid was until the huge Ohio, New England and Canadian black out August 14, 2003 (CNN). A cascading blackout disabled the Niagara-Mohawk power grid leaving the Ottawa, Cleveland, Detroit and New York City region without power. There was a shutdown of 21 power plants within a three-minute period because, with the grid down, there was no place to send the power. Because of a lack of adequate time-stamp information, for several days Canada was believed to be the initiator of the outage, not Iowa.
    There have been similar blackouts in Europe. That Y2K could have resulted in massive outages may not have been so far-fetched after all. Ask someone who was stuck in an elevator for eight hours if the preparations for long-term power outages could have been better.
    Hall (2009) developed a survival planning approach that would help an organization survive during times of extreme uncertainty, like the Great Recession. Of course, the process is far ahead if the organization already has a good strategic plan (StratPlan) that includes contingency and scenario planning.

    References

    Hall, E. (2009). Strategic planning in times of extreme uncertainty. In C. A. Lentz (Ed.), The refractive thinker: Vol. 1. An anthology of higher learning (1st ed., pp. 41-58). Las Vegas, NV: The Lentz Leadership Institute. (www.RefractiveThinker.com)
    Hall, E. B. & Hinkelman, R. M. (2018). Perpetual Innovation™: A guide to strategic planning, patent commercialization and enduring competitive advantage, Version 4.0. Morrisville, NC: LuLu Press. ISBN: 978-1-387-31010-4 Retrieved from: http://www.lulu.com/spotlight/SBPlan

  • Out of Control Healthcare Costs, Delinkage may help?

    We have a new blog post in IPZine about trying to control healthcare costs by taking a new twist on the linkage in BIG phara to patent protection. Check that out this article on delinkage of intellectual property protection.

    In 2017 we talked about scenarios that jump out at you.

    Scenarios that Jump Out At You
    Scenarios that really stand out, including compounding effects.

    One that always is front-and-center is the out-of-control escalation of healthcare costs in the US, now up to 18% of GDP. In an Nov 20 2019 blog over at IPZine there’s discussion of “delinkage” related to pharma patents that has some potential for taming the out-of-control healthcare costs.  Included in that blog post is a discussion of how long it will take before healthcare costs escalate from 18% of GDP (approx. $3.6T of the $20T GDP) to 50% of GDP, and even 100% of GDP?

    Here is some of the math. You can do your own figures. Assume that Healthcare costs increase by 10% per year as they have for decades (even though that rate is lower currently). Say that GDP growth is 2.5% and inflation is 2% (real GDP growth is =+0.5%). How many years before all healthcare costs in the US reach 25%, 50%, 75% and even 100% of the US GDP!???

    Year Description (+10%) Targe%GDP # of Years
    2025 Years til % of GDP 25% 4.5
    2034 Years til % of GDP 50% 14.1
    2040 Years til % of GDP 75% 19.7
    2044 Years til % of GDP 100% 23.7

    That’s right, with 4 or 5 years, the total healthcare costs of the US could be 25% of GDP. In 14 years it could be 50%, and in 20 years it could represent 75% of GDP. If this doesn’t scare you into taking some actions, then you obviously don’t understand the magnitude of the problem! This was the problem that we faced for decades when Healthcare costs were increasing at 10% or more each year.

    Okay, so healthcare costs are lower now since the Great Recession; let’s say they may have dropped to 5% to 7.5 increase per year (2 to 3 times CPI inflation).

    At 5% healthcare inflation:

    Year Description (+5%) Targe%GDP # of Years
    2033 Years til % of GDP 25% 13.3
    2061 Years til % of GDP 50% 41.4
    2078 Years til % of GDP 75% 57.8
    2089 Years til % of GDP 100% 69.4

    Note that it is no longer 4 or 5 years to reach 25% of US GDP, it takes more like 13 years. It takes 40 years to reach about 50% of GDP.

    When you consider that the US spends 4 times what the rest of the world spends on healthcare (about $10k) and more than twice what the typical developed country spends… For outcomes that are no better… Some place in here we need to rethink.

    Hall and Knab (2012) outlined 10 other items besides healthcare costs that were non-sustainable trends/practices that appeared to have compounding and accelerating forces at play. The (US) Federal deficit is one. Each of those scenarios loom as large or larger today than back in 2012.

    #scenario #healthcare #gdp #compounding #ipzine #patents #intellectualproperty

    References

    Hall, E., & Knab, E.F. (2012, July). Social irresponsibility provides opportunity for the win-win-win of Sustainable Leadership. In C. A. Lentz (Ed.), The Refractive Thinker: Vol. 7. Social responsibility (pp. 197-220). Las Vegas, NV: The Lentz Leadership Institute. (Available from www.RefractiveThinker.com, ISBN: 978-0-9840054-2-0)

  • Democratization of Power

    SustainZine (SustainZine.com) blogged about a rather cool idea on the decentralization of power (here). The idea in Nature Communications is to have buildings everywhere use their renewable power sources to generate a biofuel of some type. And the authors had the Heating Ventilation and Air Conditioning (HVAC) unit extract CO2 from the atmosphere to generate the fuel. Some of the technologies they pointed to were new-er technologies that are now (hopefully) making their way into main-stream. (Read the nice summary article in Scientific American by Richard Conniff.)

    Basically, everyone everywhere can now produce their own power at rates that are a fraction of lifelong utility power. Storage is now the big bottle neck to completely avoiding the grid. The distributed power should only be a big plus to the overall power grid; however, the existing power monopolies are still resisting and blocking. So complete self-containment is not only a necessity for remote (isolated) power needs, but a requirement in order to break away from the power monopolies.

    In the US, there is the 30% Renewable Investment Tax Credit which makes an already good investment even better for homeowners and businesses. Plus, businesses can get accelerated depreciation making the investment crazy profitable after accounting for the tax shield (tax rate times the basis of the investment). Many of the states also sweeten the deal even more. But the 30% tax credit starts to reduce after 2019, so the move to renewable starts to drop off precipitously at the end of 2019.

    You would think that the power companies would join in the solutions, and not spend so much time (and massive amounts of money) on obstructing progress. All those tall buildings that are prime candidates for wind. Think of all the rooftops, roads and parking lots worldwide that are prime candidates for solar. Distributed power. As needed, where needed. No need for new nuclear, coal or nat-gas power plants. Little need for taking up green fields with solar farms.

    Of course, the oil, coal and gas companies need the perpetual dependence on the existing infrastructure. When we all stop the traditional fossil fuel train — and all indications from the IPCC show that we must stop that train sooner, not later — then all the oil and gas in the world will need to stay in the ground. Call me an optimist, or a pessimist, but I would not buy oil or gas for almost any price. I definitely wouldn’t buy into the Saudi-owned oil company spinoff.

    It is probably a mistake to think that technology to take CO2 out of the atmosphere after the fact can repair past sins. Avoiding putting pollution into the air, water and land — the negawatt and the negagallon, in this case — are by far the best approach.

    In Sustainzine, BizMan concluded with this thought about the here-and-now scenario, not in the future at all:

    “Hidden in this whole discussion is that scenario that is here and now, not futuristic. Renewable energy is cheaper and massively cleaner than conventional energy, and it can be located anywhere. Storage, in some form, is really the bottleneck; and storage in the form of synthetic fuels is a really, really cool (partial) solution.

    References

    Dittmeyer, R., Klumpp, M., Kant, P., & Ozin, G. (2019, April 30). Crowd oil not crude oil. Nature Communications. DOI: 10.1038/s41467-019-09685-x

  • More prisoners in US than any other country: Criminal (In)Justice Scenarios

    Here are Scenarios and sources of the injustice in the Criminal Justice system in the USA.

    The US has the most people incarcerated of any country in the world… Even though we only have 4.3% of the world’s population, we have more inmates — 2.2 million — than China (1.5m) and India (0.3m), combined (36.4% of world population)! We have 23% of China’s population but 40% more incarcerated. We have almost 1% of our population (0.737%) incarcerated! We have 6 times higher incarceration rate than China, 12 times higher that Japan, and 24 times the rates in India and Nigeria. That’s right, an American has a 1,200% greater chance of being incarcerated than a Japanese citizen. We have even a 20% higher incarceration rate than Russia with 0.615% of their population in (Siberian) prisons and jails.

    I know what you’re thinking, Americans must be more criminally inclined than any other country in the universe. And, no, it is not those *bleeping* Mexicans. The evidence shows that the Mexicans (legal or otherwise) cause less crimes than the typical “American”, plus crimes involving illegal Mexicans are far more likely to go unreported.

    So now, I’m at a loss. Where did the criminal genes come from? You can’t really blame the American Indians.

    Some of the ugly mechanisms and profits in the prison system are summarized nicely here in ATTN by Ashley Nicole Black, Who Profits from Prisons (Feb, 2015).

    “There are currently [2.2 million] American in prisons. This number has grown by 500 percent in the past 30 years. While the United States has only [4.3] percent of the world’s population, it holds 25 percent of the world’s total prisoners. In 2012, one in every 108 adults was in prison or in jail, and one in 28 children in the U.S. had a parent behind bars.”

    For years I heard stats that half of the people in prison in the USA were for non-violent (no weapon) drug offenses. That’s insane. It seems like the wrong people are institutionalized here. With the legalization of marijuana in many states these incarceration rates should be reducing (improving). July 2018 shows 46% of US inmates are for drug offenses: https://www.bop.gov/about/statistics/statistics_inmate_offenses.jsp

    Okay, so what does that have to do with scenarios and scenario planning? What would be some of the scenarios that might lead to something more sane in terms of our incarceration rates. One approach would be to focus on those deflection points that might result in a lower level of criminals (criminal activity). Just one would be a new approach related to the prohibition of marijuana. As we learned from alcohol, prohibition doesn’t work. But there are several other ways to provide a mechanism for less criminal activity and/or less people incarcerated and/or less people incarcerated for so long. We’ll talk about two of our favorites at a later time: education and community engagement/involvement. (The Broken Window concept of fixing up the community and more local engagement is very intriguing. See article by Eric Klinenberg here.)

    The big thing that escalated US incarceration rates was a get-tough-on-crime movement that began during the Nixon “I’m-not-a-crook” era. Part of this was obviously to have some tools to go after the hippies and the protesters. Tough on crime with mandatory sentences, lots of drug laws, and 3-strike laws came into being. Not to be outdone, as the toughest on crime, the 3-strikes moved to 2-strikes to, essentially 1-stike. As we filled up the prisons, we had to build more.

    One current trend that should increase incarceration is the current epidemic of opioid-ish drug overdoses. Most forces, however, seem to be pushing toward reductions in incarceration.

    Various scenarios should lead to a significant reduction in incarceration rates. The resulting scenario of low incarceration should have several ramifications. If you are in the business of incarceration, then business should – ideally – get worse and worse. Geo and Corrections Corp of America (now CoreCivic) should expect their business to drop off precipitously. Plus, there seem to be several movements away from private (or publicly traded) companies back toward government run prisons because private has been shown to be less effective — even if cheaper on the inmate-year bases.

    Here’s a discussion of the business of incarceration. Note that the “costs” of incarceration are far, far more than the $50,000+/- it costs per year per inmate. Plus, having more people as productive members of society has them working (income and GDP) and paying taxes, not a dead weight on society.

    Do you think that the relaxation of marijuana laws might be a “Sign Post” (in scenario terms) that indicates a rapid drop in prison population? Also, super full employment, might be a solution all by itself. People, especially kids, who can get jobs and do something more productive, may be less inclined to get into drugs and mischief? There’s no reason why the Sign Post need to be only one, or even two signs. In fact, the crime system is just a sub-system of an economy. Multiple reinforcing systems can be really powerful.

    If we do take other approaches to the incarceration system, what would those approaches be? And who (what businesses/industries) would benefit most?

    What do you think? Is it time to get out of the criminal (in)justice system?

    Resources

    Half of the world’s incarcerated are in the US, China and Russia: http://news.bbc.co.uk/2/shared/spl/hi/uk/06/prisons/html/nn2page1.stm

    Incarceration Rates: https://www.prisonpolicy.org/global/2018.html

    US Against the world: https://www.statista.com/statistics/300986/incarceration-rates-in-oecd-countries/

    New Yorker Article in Sept 2016 by Eric Markowitz, Making Profits on the Captive Prison Market.

    How for-profit prisons have become the biggest lobby no one is talking about, by Michael Cohen in 2015.

    Follow the money, in 2017, with a great infographic as to where all the prison moneys go.