The Analysis of Scenarios

Analysts typically assess the future of a firm by projecting a future state of the industry (i.e., a single scenario).45 Then, they examine various cases within the scenario (e.g., most likely, worst-case, and best-case pro forma financial statements). Sometimes, however, the planning environment is more complex and less predictable, and analysts must examine multiple independent scenarios with different policy prescriptions (e.g., DoD expenditures under a Democratic- versus a Republican-controlled presidency and/or Senate). Historically, when Republicans controlled the presidency and/or the Senate, DoD expenditures usually increased. When the Democrats controlled the presidency and/or the Senate, DoD expenditures usually decreased.46 In each scenario, analysts examine the opportunities and threats NGC uses in both planning processes. As Wes Bush explained:

We face a shifting security environment shaped to a significant extent by unpredictable external events and the political responses that they motivate. . . . We look for . . . changes in global macroeconomics; the military actions and investments of America's peer competitors; patterns of terrorist events; events associated with key resources such as food and energy; and weather-related disasters or pandemics. Any of these could be indicators of a new, relevant reality. Understanding these early indicators and being able and willing to react to them is what turns risk into opportunity and competitive advantage.47

This powerful quote captures the reality of strategic planning at NGC. Strategic planning at NGC is driven by a multitude of complex, high stakes, relatively unpredictable events. NGC scans the external environment for "indicators of a new, relevant reality" and plans accordingly. The next step in developing a SWOT analysis is the analysis of stakeholder forces that are shaping the firm's opportunities and threats in its external environment.

The Analysis of Stakeholder Forces

Stakeholders create opportunities and threats in the external environment of the firm. A stakeholder is a person(s) or organization(s) that affects or is affected by the actions or inactions of another person(s) or organization(s). NGC has many stakeholder relationships whose enhancement and maintenance are critical to its success (e.g., stakeholder relations with the DoD and members of the F-35 Joint Strike Fighter program). More specifically, to accelerate its research and feed its never-ending search for talent, NGC announced plans in December 2009 to invest millions to fund graduate fellowships and other research for at least five years at Carnegie Mellon's CyLab, MIT's Computer Science and Artificial Intelligence Lab, and Purdue's Center for Education and Research in Information Assurance and Security.48

Edward Freeman initiated the seminal research in stakeholder analysis. In his 1984 book, his approach to strategic management focused on "creating mutually beneficial stakeholder relations" (i.e., win/win situations).

He asked:49

1. Who are our stakeholders?

2. How do stakeholders affect each division, business and function, and its plans?

3. What are our assumptions about critical stakeholders?

4. Have we allocated resources to deal with our stakeholders?

In 1994, Freeman developed the principle of who or what really counts. To whom (or what) do the managers of the organization have to pay attention?50 This principle moved away from Freeman's 1984 proposition and created the possibility of win/lose situations. Thus, it was not only a question of who the stakeholders were, but also which stakeholders controlled management's attention, to what degree, and why? In 1997, Mitchell, Agle, and Wood used Freeman's principle of who or what really counts to argue, "Stakeholders with powerful, legitimate, urgent claims gained preferential access to management."51

In 1996, Hinthorne proposed a "predatory view" of stakeholder relations in an analysis of deregulation in the U.S. airline industry.52 The use of the predatory/prey analogy suggests a strategic management style oriented to acquiring assets and removing obstacles with little or no regard for the human element in stakeholder relations. Hinthorne argued that in complex, high-stakes situations, the leaders of some organizations developed predatory management styles to achieve their organizations' goals. These leaders used power and force relations (e.g. stakeholder coalitions), and legitimacy to secure their goals. For example, they used institutional structures of power (i.e., executive, judicial, legislative, and regulatory) at the federal, state, and local levels to secure organizational goals. They preferred win-win strategies, but they also had some power to select, exploit, and destroy stakeholders—also exclude or silence stakeholders—to secure organizational goals, albeit while giving the appearance of pursuing legitimate goals.

Obviously, stakeholder relations are not always amicable. In stakeholder disputes, there are essentially two options for resolving the disputes—collaboration or litigation. There may be appeal processes (e.g., in working with government agencies), and arbitration and mediation are used. Litigation tends to be the preferred process of dispute resolution in the United States, and it is costly and time consuming.

If the disputants are sincerely interested in avoiding litigation and resolving their dispute on amicable terms, they may find that collaboration is the preferred process. However, there is a caveat: the disputants must share some critically important superordinate goals. Muzafer Sherif (1958) defined "superordinate" (i.e., common) goals as goals that are "compelling and highly appealing to members of two or more groups in conflict but which cannot be attained by the resources and energies of the groups separately. In effect they are goals attained only when groups pull to-gether."53 Sherif's research validated two hypotheses: (1) in conflict situations, groups will tend to cooperate to achieve superordinate goals, and (2) the more frequently the groups cooperate successfully to secure superordinate goals, the lower the conflict will be.

Collaboration is widely used in stakeholder disputes over natural resources (e.g., forest restoration and the protection of endangered species). It is typically less costly and more flexible than litigation. It is time consuming but no less so than litigation. Wondolleck and Yaffee studied over 200 collaborative situations, and their book is a good reference.54 Collaboration usually faces significant threats. First, there is competition (e.g., egos, turf wars, self-interests, and win/lose and us/them mentalities). Second, there are conflicting interests (e.g., different core values, objectives, and strategies). Third, there is mistrust. Fourth, there is the compliance with U.S. laws and regulations that create unnecessary project delays and paperwork. Fifth, there is ineffective management of the collaborative process (e.g., lack of process skills and resources). Sixth, there are comfort zones (e.g., fears of change, collaboration, public interaction, lawsuits, and taking risks). Seventh, there is the need to secure the input of all likely stakeholders.55

The SWOT analysis is not just about the analysis of societal forces, competitive forces, and scenarios. It is also about the analysis of stakeholder forces. Stakeholder forces have the power to change the direction and economic viability of the firm. Therefore, good stakeholder relations are important. Collaboration is usually preferable to litigation when the disputants have superordinate goals and can collaborate successfully. However, litigation may be the only option when the disputants do not have superordinate goals. It may also be necessary to protect the firm's assets (e.g., intellectual property or reputation). Next, the SWOT analysis turns to an assessment of the firm's external environment and its strengths and weaknesses.

 
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