Planning Noranda's Future

Robert Frost's famous poem, "The Road Not Taken," muses about having to choose between two different futures. The poet recalls pausing where "two roads diverged in a yellow wood . . . long I stood/ And looked down one as far as I could...." It is a common human question: How will our lives be different if we choose between alternatives? For the modern corporation, with millions of dollars in assets and the careers of thousands of employees on the line, deciding between alternatives is risky, particularly in an era of rapid, unpredictable change. A relatively new management tool-scenario planning-empowers corporations to consider different futures consistently and intelligently, to reduce the risk of sudden unexpected events threatening assets. On the proactive side, it enables corporations to maximize their strengths. Searching for a Strategy At the beginning of 1996, Noranda Inc. was searching for a new strategy. With revenues of $9.7 billion (Canadian) and operating assets of $14.9 billion, Noranda was a diversified natural resources giant. It ranked 18th in RD which generate adequate shareholder return and allow creation of competitive advantage? Which geographic regions offer the strongest platforms for growth? How can we achieve competitive advantage and what are the capabilities we would need for that? How could the corporate center contribute to creating competitive advantage? I had been interested in scenario planning since reading The Art of the Long View: Planning For The Future In An Uncertain World (Doubleday Currency, 1991) by Peter Schwartz, a leading thinker on scenario planning. In his book, Schwartz discussed how Royal Dutch/Shell had used scenario planning in the 1970s to examine alternative futures and how they could impact the company. One theoretical event they explored was an extreme increase in oil prices. The exercise enabled Shell to prepare a workable strategy for such a possibility. It was a prescient move. Before the oil crisis, Shell was ranked the last of seven major oil companies operating in the United States. Within ten years it had climbed to second place by having reacted quickly to the oil-price shocks. At the time when Noranda began to consider using scenario planning, few industrial companies had worked with the discipline. Why would we turn to a relatively new tool? For a company with billions of dollars in assets, billions in shareholder equity and thousands of employees, relying on a traditional single view of the future is perilous-too much is at stake. Much of the future is unpredictable, just as the oil shocks of the 1970s had been. In the early 1990s, when Far Eastern economies were galloping ahead, few observers noted the gathering over-supply of goods, developed real estate and service, or the accompanying crisis in bad bank loans. Yet it is now having far-reaching effects on the economic activity of the entire globe. Could the Asian crisis spark social turmoil? Could that result in growing trade barriers and protectionism as countries seek self-interest over common benefit? …