An integrated scenario-based robust planning approach for foresight and strategic management with application to energy industry

TFS-18389; No of Pages 10 Technological Forecasting & Social Change xxx (2015) xxx–xxx

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Technological Forecasting & Social Change

An integrated scenario-based robust planning approach for foresight and strategic management with application to energy industry Reza Alizadeh a,b,c,⁎, Peter D. Lund d, Ali Beynaghi a,b,c, Mahdi Abolghasemi e, Reza Maknoon a,b a

Technology Foresight Group, Department of Management, Science and Technology, Amirkabir University of Technology, Tehran, Iran Office of Sustainabilty, Amirkabir University of Technolgy, Tehran, Iran Futures Studies Research Institute, Amirkabir University of Technology, Tehran, Iran d Aalto University, School of Science, P.O. Box 14100, FI-00076 Aalto, Espoo, Finland e Escuela Técnica Superior de Ingenieros Industriales, Universidad Politecnica de Madrdid, Spain b c

a r t i c l e

i n f o

Article history: Received 26 July 2014 Received in revised form 29 November 2015 Accepted 30 November 2015 Available online xxxx Keywords: Foresight Scenario Strategy Robust planning Energy Iran

a b s t r a c t Energy industries face major future challenges related to environment, security, and economics. Here we present a scenario-building framework based on the Global Business Network (GBN) method to help energy industries to develop more resilient conservation policies when faced with unpredictable and external uncertainties. The approach combines several foresight methods such as Delphi; Political, Economical, Social, and Technological (PEST) analysis, and Cross-Impact Analysis (CIA). In addition, a strategic foresight software program (MICMAC) was applied in the scenario-building phase. The proposed integrated scenario-based robust planning approach builds on the strengths of traditional scenario planning, but overcomes its weaknesses by offering a systematic process for scenario creation and easy implementation. The outcome of this approach is a limited range of core strategies. We use Iran as the case for a more detailed application of the method. Foreign investments in the energy industry, external economic sanctions, and the domestic energy consumption growth were found as the key drivers and critical uncertainties in the Iranian energy industry. Three scenarios based on these critical uncertainties and expert information were developed: Technology-driven, Stagnation, and Self-sufficiency scenario. For these scenarios, a range of robust strategies was determined. National energy efficiency and productivity increases emerged as the key factors for robustness. The main macro-level result was that economic and political drivers will be the most important factors for Iran's energy futures followed by technological and social factors. © 2015 Published by Elsevier Inc.

1. Introduction Energy is one of the most strategic resources in our society enabling a high living standard in industrialized countries. Energy is subject to several uncertainties in the future linked to climate change, geopolitics, resource availability, technology innovations, etc. which will also affect the industries delivering the energy products and services. Moreover, political decisions may totally reshape the energy business as happened in Germany in the aftermath of the Fukushima nuclear accident in 2011 when the German government decided to abandon nuclear power after the “Energiewende” decision (Federal Ministry of Environment, 2010; Federal Ministry of Economics and Technology, 2010) forcing major utilities such as E.ON and RWE to completely change their strategies (Renewable Economy, 2014; GreenTech Media, 2015). Expanding to a global level, if a global agreement on reducing carbon emissions will be reached in a near future, most of the hydrocarbon energy sources

⁎ Corresponding author at: Technology Foresight Group, Department of Management, Science and Technology, Amirkabir University of Technology, Tehran, Iran.

would become obsolete thus causing huge stranded assets in the energy industries (Caldecott et al. 2015). Single events could also cause major changes in the energy scenery such as the breakthrough in the fracking technology in the USA, which has led to booming shale-gas and shale oil industries increasing the U.S. oil and gas reserves, but also causing shale-gas to replace coal in power production and reducing energy imports (U.S. Energy Information Administration, 2013). The energy industries increasingly face such critical uncertainties described above that are difficult to predict, but may have significant impact on the future. In practice, these could lead to major changes in their business and in the whole supply chain from producers to consumers. It is impossible to eliminate all such uncertainties, but the energy industry needs to better manage these meaning also better capabilities to identify change factors and to design sustainable strategies and operations. Ignoring the uncertainties could in worst-case lead to vanishing business or failing in grasping the new opportunities opening up during large changes or socio-technical transitions (Godet, 2000). The main idea of this paper was to develop an improved planning approach for foresight and strategic management, which can deal with these uncertainties. This is highly motivated considering the

http://dx.doi.org/10.1016/j.techfore.2015.11.030 0040-1625/© 2015 Published by Elsevier Inc.

Please cite this article as: Alizadeh, R., et al., An integrated scenario-based robust planning approach for foresight and strategic management with application to energy industry, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.11.030

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huge challenges that the energy industries will encounter in the coming decades. In general, to respond to uncertainties, industries often employ contrasting foresights to explore the uncertainty surrounding the future consequences of probable events (Peterson et al. 2003; Walker et al., 2013), but due to the pace and magnitude of changes, accurate prediction is unlikely (Mintzberg, 1991). Increasing rates of complexity and market turbulence make the traditional forecasting and strategic management methods less precise and applicable to cope with uncertainties (Lindgren and Bandhold, 2002). Scenario-based approaches have, however, proved to be quite effective as a strategic management tool in this context (Bood and Postma, 1998). It is a well-established foresight method for developing and planning for possible futures (Schoemaker, 1995; Amer et al. 2013; Curry and Schultz, 2009). The aim of the scenario technique is actually not to accurately predict the future, but to establish a dialog between key stakeholders and to provide a framework for communication and for the consideration of possible future developments (Barker and Smith, 1995). It is also necessary to clarify the uncertainties to better formulate and understand scenarios (Porter, 1985; Schwartz, 1996; Wack, 1985). The future is seldom deterministic, but one needs to prepare for a number of possibilities (Varum and Melo, 2010). The literature deals with the uncertainty issue in defining the concept of a scenario in different ways, e.g. “an internally consistent view of what the future might turn out to be” (Porter, 1980), “a tool for ordering one's perceptions about alternative future environments” (Schwartz, 1996),“a disciplined method for imagining possible futures” (Schoemaker, 1995), “means to represent a future reality in order to shed light on current action in view of possible and desirable futures” (Godet, 2000), “internally consistent and challenging descriptions of possible futures (external scenario); a causal line of argument, linking an action option with a goal, or one path through a person's cognitive map (internal scenario)” (Van der Heijden, 1996). In our research approach, outgoing from the underlying uncertainties with the future and how to deal with those in the scenarios as highlighted above, we laid emphasis on robustness and on overcoming the weaknesses of traditional scenario planning in energy industries. This leads us to propose an improved method integrating scenariobased and robust planning methods by combining several foresight and strategic planning methods together under the so-called Global Business Network (GBN) technique. We demonstrate the usefulness of the new method in elaborating the future paths of the Iranian energy industries. Iran is a quite challenging, but a versatile case because of its importance as a global oil and gas producer. Iran has the 4th largest oil reserves in the world (almost 10% of the world's crude oil reserves and 13% of OPEC1 reserves) and the 2nd largest natural gas reserves after Russia, with 17% of world's proven natural gas reserves and more than one-third of OPEC's reserves. Furthermore, the Strait of Hormuz, close to the southeast coast of Iran, is a significant global route for oil exports from Iran and other Persian Gulf countries. Through the Strait of Hormuz some 17 million barrels of crude oil and refined products flowed daily through it in 2013, which is roughly 30% of all seaborne traded oil and almost 20% of global oil. Over 30% of all liquefied natural gas (LNG) in 2013 was transported via the strait (EIA, 2015). Iran thus has a quite exclusive geopolitical position globally in energy, which makes the country a highly justified case. The paper starts with a presentation of the improved planning method and its elements, following by an in-depth application of the method to Iran's energy industries to demonstrate the methods, but also better understand factors affecting Iran's energy future. We end up with a discussion of the results and conclusions. 1 OPEC (Organization of the Petroleum Exporting Countries) is a permanent, intergovernmental organization, created in 1960.

2. Method For close to half a century, scholars have developed different approaches to scenario planning (Bishop et al., 2007). In this regard, the approaches by Van der Heijden and Shoemaker have obtained the most citations (Varum and Melo, 2010). However, the consulting company GBN (Schwartz, 1996) and the Royal Dutch Shell approaches are the most influential and among the most popular ones (Wulf et al., 2010; Bishop et al., 2007). Their technique, which is called the Royal Dutch Shell/Global Business Network (GBN) approach was created by Pierre Wack in the 1970s and popularized by Schwartz (1996) and Van der Heijden (1996) for scenario building. In fact, Millett (2003, p. 18) calls it the “gold standard of corporate scenario generation”. In addition, various other attempts have been made to integrate scenarios and roadmaps (Strauss and Radnor, 2004; Saritas and Oner, 2004; Saritas and Aylen, 2010). Scenarios are used to set visions for the robust planning process by considering future options. However, the robust planning exercise usually follows a prior scenario planning exercise, meaning that scenarios have not been truly embedded in the robust planning process. The methodological approach presented in this paper incorporates the use of scenarios from the beginning to the end of the robust planning exercise as part of the GBN method (Schwartz, 1996; Millett, 2003; Bishop et al., 2007). Concerning the Iranian case study in our paper, the proposed method has several merits compared to the currently used methods in Iran. The present energy scenarios issued by Iran's Parliament examine oil scenarios through three alternatives, namely optimistic, base and pessimistic (Abbaszadeh et al., 2013), which include several shortcomings. The primary drawback is the very limited number of driving forces considered in developing the scenarios, which only address amounts of energy consumption and production. Another weakness is fully neglecting the potential of alternative energy resources, in particular renewable energies, in which Iran could have a large potential, which in turn could decrease the pressure of using hydrocarbons for domestic needs (Chaharsooghi et al., 2015). An additional disadvantage of the current Iranian methodology is the lack of a standardized process to couple the scenarios to strategies, which in turn would be linked to implementation. In our approach these drawbacks are overcome. Governments globally employ integrated scenario-based planning approaches to envision future directions in important issues. For instance, in Germany a 6-phase integrated scenario-based robust planning method was used for the photovoltaic sector (Wulf et al., 2010). Recently, an integrated scenario-based planning and roadmapping approach was developed by (Saritas and Aylen, 2010) for clean manufacturing in United Kingdom, later expanded to a European scale. The Australian government utilized integrated scenario planning methods in envisioning alternative transport fuels to 2050 (Graham and Smart, 2011), though also employing traditional scenario-based planning tools (Barber and Conway, 2014). 2.1. The basic process of the GBN approach In the following, a description about how the Global Business Network approach is applied in this paper is given. The process is illustrated in Fig. 1. 2.2. Phase 1: orient The aim of the first phase of the process is to clarify the issues at stake, and to use these issues as an orienting tool and guidance throughout the remaining four phases. For this purpose, we defined a ‘Framing Checklist’, a tool that specifies the goal, the involved persons as well as other key characteristics of the process. The checklist consists of five simple questions for

Please cite this article as: Alizadeh, R., et al., An integrated scenario-based robust planning approach for foresight and strategic management with application to energy industry, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.11.030

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We therefore followed a PEST-type of analysis procedure described below to identify what driving forces could shape the future of the Iranian energy industry: Step 1: A list of driving forces by brainstorming among our expert panel was created; Step 2: We did a comprehensive literature review on the factors affecting the future of the Iranian energy industry with an outcome shown in Table 3. 2.4. Phase 3: synthesize

Fig. 1. The basic multi-phase scenario thinking process based on the GBN approach (Scearce and Fulton, 2004).

which the answers need to be agreed upon before starting to plan the scenario. Table 1 shows a sample of the Framing Checklist. We used the Framing Checklist to prepare a scenario planning process for the Iranian energy industry to envision the possible futures that the industry may face. We decided to focus on a time horizon ending in 2025 to match with the time horizon of Iran's “20-Year Perspective” Document (Amuzegar, 2009). Academic members of top Iranian universities such as Sharif University of Technology and Amirkabir University of Technology, as well as experts from Petroleum and Energy Ministries, and the Department of Environment participated in the scenario-building phase and in the perception analysis. Altogether 12 experts participated in the exercise covering different disciplines such as technology foresight, economics and management, energy systems, environmental engineering and, science and technology policy. The background of the experts is shown in Table 2. All the aforementioned experts participated in all phases of our research in which expert judgment was required.

2.3. Phase 2: explore In this phase, we used the PEST (Political, Economic, Social, and Technological) analysis as a tool to describe a framework of macrolevel factors surrounding the business or industry, but also to explore how the “driving forces” could shape the focal issue defined in Phase 1. The external context of strategic decisions is very far-reaching and may include governments, competitors, technological and social change, and the dynamics of markets. The PEST analysis approach enables to investigate their exposure to the driving forces (McGee et al., 2005). These driving forces are actually external factors that will shape the future dynamics in unpredictable ways. These include factors within a close-in working environment, such as developments related to the stakeholders or the community, as well as shifts in the broader environment, i.e. in the political, economic, social, and technological (PEST) environment. Table 1 Framing checklist for scope definition in Phase 1. Checklist item

Contents

Goal of scenario project

Definition of the questions to be solved: What is the focus of the scenario analysis? Should the strategic planning process be conducted for the whole energy industry? Which key experts should be involved in the scenario workshop? What time horizon for the planning process should be served (5, 10, 20 years or longer)?

Strategic level of analysis Participants Time horizon

In Phase 3, we synthesized and combined the driving forces in Table 1 to create scenarios. The mutual importance of the driving forces is different for which reason the driving forces were prioritized according to two criteria: (1) the degree of uncertainty surrounding those forces (2) the degree of influence on other driving forces and the independence from them. The goal of the prioritization was to identify the two or three driving forces that are both most uncertain and most important to the focal issue. These driving forces are our “critical uncertainties” and they are the foundation for the scenario set. We then refined the driving forces by performing a two-round Delphi analysis among our expert panel. The Delphi method is one of the most used techniques for foresight (Grupp and Linstone, 1999; Armstrong, 2001; Landeta, 2006). A classical Delphi method uses four rounds (Wilenius and Tirkkonen, 1997) which has been modified to suit individual research aims, e.g. by shortening to 2 or 3 rounds (Czaplicka-Kolarz et al., 2009; Tseng et al., 2009; Postma et al., 2007). To avoid any kind of debilitating influence through face-to-face interactions, the respondents were mutually anonymous, and were re-questioned over two rounds by e-mail. In the first round, we used a simple prioritization method based on the uncertainty criteria. The results of the first round are shown in Table 4. In the second round of the Delphi, we used the Cross-Impact Analysis (CIA) method (Gordon and Hayward, 1968) for the prioritization of the driving forces based on the influence–dependence criteria. An inherent characteristic of the Delphi method is that as it is based on anonymous interaction and controlled feedback, which in turn enables to identify the likelihood of the occurrence of a singular driving force (Linstone and Turoff, 1975). Nevertheless, the Delphi method is inadequate to deal with complex forecasts when the driving forces are interrelated and not isolated. In a basic Delphi process, the contingency of a driving force does usually not affect the other driving forces. The CIA tool (Gordon and Hayward, 1968) was developed to deal with this limitation. It is a powerful strategic management tool to investigate the impacts of interrelated binary driving forces in a complex context and under critical uncertainties. We used the CIA to reveal the distinctive role of political, economic, social, or technological (PEST) driving forces in relation to each other and to identify those that play an important role in the future development (Porter and Xu, 1990; Gordon and Glenn, 2003). The CIA is also very flexible and can be combined with other techniques such as the Fuzzy (Asan et al., 2004), Multi-criteria (Cho and Kwom, 2004; Bañuls and Salmeron, 2007b) or Delphi (Enzer, 1971; Bañuls and Salmeron, 2007a) methods and thus eases to facilitate a better collaborative Table 2 Background information on participating experts in the expert panel. Category

Classification

Number

Working background

Environmental engineering Energy systems engineering Economics and management Technology foresight Science and technology policy Master-level Ph.D. Male Female

2 3 3 3 1 3 9 7 5

Educational level Sex

Please cite this article as: Alizadeh, R., et al., An integrated scenario-based robust planning approach for foresight and strategic management with application to energy industry, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.11.030

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Table 3 Driving Forces which are shaping the future. Driving Force

Type

Reference

Rate of energy consumption growth Energy consumption per capita

Economic Economic

Dependence to energy carriers import Level of energy technologies Final energy use variety

Political Technological Technological

Empty capacity of the energy production Total oil reservoir Foreign investment in energy industry Energy intensity

Technological Technological Political Economic

Foreign policy in relation to other countries Geopolitical trends in international markets Environmental regulations on energy consumption Energy exports Changes in global energy prices Changes in energy consumption patterns Risks of investment in energy industry

Political Political Social

Increase in use of renewable energies Street riots

Technological Social

Replacing countries competing in energy markets Increase in military power Membership in WTO Facilitating privatization

Political

Stability of monetary policies

Economic

Economic sanctions

Economic

Rules of attract foreign investment Liberalization of energy prices Energy consumption growth

Economic Economic Economic

Gross Domestic Product Political stability Oil price

Economic Political Economic

GHG emissions

Social

Bert (2009) Joint Research Center (2010) Bert (2009) Bert (2009) Joint Research Center (2010) Bert (2009) Bert (2009) Torabi (2011) Joint Research Center (2010) Torabi (2011) Torabi (2011) Behboodi and Barghi (2008) Ahmadpour (2011) Shahbazfar (2006) Ahmadpour (2011) (Mahmoudi, 2010; Torabi, 2011) Olmos (2012) Dolatshahi and Ashtiani (2010) Ezzati and Nanva (2011) Shahbazfar (2006) Shahabi (2007) Hajiheidari and Hajihashemi (2011) (Bert, 2009; Shahabi, 2007) Joint Research Center (2010) Torabi (2011) Torabi (2011) Pourahmadi and Zolfaghari (2009) Hasani (2007) Bert (2009) (Bert, 2009; Shahbazfar, 2006) Bert (2009))

Economic Economic Social Economic

Political Economic Economic

practice for scenario creation by groups. The final CIA analysis outcome is shown in Table 5. For visualizing the results from the CIA, we used the MICMAC foresight software (Godet, 2001). As shown in Fig. 2, foreign investment in the energy industry, economic sanctions, and energy consumption growth were identified as the three critical uncertainties for the Iranian energy industry. As shown in Fig. 2, the three key factors that have the most influence and the least dependence of them has been identified: “foreign investment in energy industry”, “energy consumption growth”, and

Table 4 The resulting driving forces after the 1st round of Delphi. Driving force

Type

Level of energy technologies Final energy use variety Foreign investment in energy industry Foreign policy in relation to other countries Geopolitical trends in international markets Environmental regulations on energy consumption Energy consumption per capita Changes in global energy prices Economic sanctions Energy consumption growth

Technological Technological Political Political Political Social Economic Economic Economic Economic

“economic sanctions”. These are critical uncertainties also reflecting the importance of Iran's geopolitical situation. The external economic sanctions have been valid since Dec. 2006 and have adversely influenced country's economic development. The experts clearly gave a stronger priority to factors connected to geopolitics as these have a major effect on the economic situation of the country. Indirectly, these have also a link to social factors, e.g. people's living standard, and domestic consumption, but these were considered rather as a consequence than a cause for which reason social factors per se were not classified as primary drivers. 3. Scenario building A common and reliable way to create scenarios is to picture the critical uncertainties defined above on axes that frame the poles of what seems possible in the timeframe considered. These “axes of uncertainty” represent a continuum of possibilities ranging between two extremes. This results in a framework, which can then be used to explore possible scenarios for the future (Fig. 3). Using the critical uncertainties and the information from the expert panel, three scenarios were developed: technology-driven, stagnation, and self-sufficiency. 3.1. Technology-driven scenario In this scenario, we assume that sustainable and long-term energy security as well as political and social stability in the region will be achieved including membership of Iran in the World Trade Organization (WTO). Consequently, through salient growth of global trading, the energy supply sector will expand. As a result, new investments in the energy supply chain will be needed. Since political and economic stability affects energy supply security, the risks in investments will now be lower which in turn attracts domestic and foreign capital. The WTO membership will protect the private industry, which attracts foreign investments, increases competitiveness, and improves productivity. Consequently, this will free sources, which the government has previously devoted to energy issues. This will enable the public sector to better address economic, cultural, and political issues. Some economists claim that Iran could experience a 7–8% growth in the GDP after re-joining the global economy and market (Dizaji, 2014; Farzanegan, 2011). Moreover, economic and educational infrastructures for optimal energy management and environmental reforms should emerge. Fossil fuel trade will remain an important income for the state as Iran has 9% of the world's oil reserves and 17% of all natural gas reserves (80% of which have not been developed) (Mostafaeipour and Mostafaeipour, 2009). This abundancy of resources will encourage the government to produce and sell more oil in the future. On the other hand, some factors such as intangible competition with other OPEC countries as well as increasing reliance on the oil revenues will exacerbate this trend. With the advancement of technology and increased participation of domestic and foreign companies, the volume of oil production will reach 215 million tons per year. Fig. 4 represents three trends for crude oil production in 2025. In the “technology-driven” scenario, most of country's investment plans move forward to increasing the oil production adding 190,000 barrels per day. In this case, based on the goals set in the perspective document for oil industry, Iran could cover 7% of world oil production in 2025 if it succeeds to attract foreign capital. Absorbing enough foreign investment along with maintaining of authority are possible issues, which can be achieved through redoubled and targeted efforts. Increased economic growth would also lead to rising domestic energy needs, which would mainly be based on fossil fuels. As Iran's energy intensity is high, this could lead to conflicts with the growing energy exports. Therefore, major efforts in developing energy efficiency and local

Please cite this article as: Alizadeh, R., et al., An integrated scenario-based robust planning approach for foresight and strategic management with application to energy industry, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.11.030

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Table 5 Final cross impact matrix extracted from the expert panel (2nd Delphi round). Driving forces

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

Level of energy technologies(1) Final energy use variety(2) Foreign investment in energy industry (3) Foreign policy in relation to other countries (4) Geopolitical trends in international markets(5) Environmental regulations on energy consumption(6) Energy consumption per capita(7) Changes in global energy prices (8) Economic sanctions(9) Energy consumption growth (10)

0 1 3 1 1 2 0 1 3 3

3 0 3 1 1 3 1 3 3 3

1 1 0 3 3 0 1 0 3 3

2 1 2 0 2 1 2 2 1 2

1 2 2 2 0 0 1 2 2 2

1 2 3 2 3 0 1 0 0 0

3 2 3 2 1 3 0 2 2 3

3 1 2 2 3 1 2 0 3 3

1 1 2 2 1 0 1 1 0 1

1 1 2 3 1 0 1 1 2 0

Digits depict the cross impact of the driving forces (0 = null, 1 = weak, 2 = average, 3 = strong).

renewable energy sources in parallel may be necessary. At present, Iran is only modestly using renewables.

3.2. Stagnation scenario Tense political relations and economic sanctions adversely affect financial and technological assets and will jeopardize energy supply security both in middle and long-term. As a result Iran may not reach the global market and its energy demand security may decline. In this scenario, due to economic challenges and lack of energy security, there will be less changes in the present regulation for environmental protection. Also, clean energy development will be modest. The “stagnation” forecast of oil production in Fig. 4 assumes that the necessary investments in exploration, drilling, and production oil fields will not be made, resulting in a declining production rate of the present reservoirs. Actually Iran's oil production has been decreasing since 2006 due to reduced pressure in the oil reservoirs. In the last 3 years this decline has averaged about 0.5 million barrels per day (BP, 2015). Other important factors that have affected foreign investments (in oil) in Iran, include the international disputes around Iran's nuclear program which has led to international economic sanctions (BloombergBusiness, 2015). In addition, Iran underperforms in terms of economic performance. Most of the power plants have low efficiency and there is negligible attention to renewable energies. All in all, this will increase the consumption of oil in Iran to 2.7 million barrels per day in 2025 (Arnold, 2015).

Table 6 Iranian governmental strategies for managing the energy industry by 2025. Strategy Description S1 S2 S3 S4 S5 S6 S7 S8 S9 S10 S11 S12 S13 S14 S15

Support the energy market development and Increase the share of non-governmental industry Renewable energy use development Energy trading facilitating by non-governmental industry Enhancing the competitiveness in power generation and oil products Concentration on national policy making and planning Targeting the energy subsidies Input-product exchange between energy producer and distributer firms based on regional values of energy carriers Segregating the energy industry governance issues from governmental companies and devolve them to relative ministries Energy management and productivity knowledge enrichment Clarifying the price of the energy carriers and financial relations between the firm Modifying the energy carriers pricing system Financial and technical support by government from energy consumption optimization projects Enhancing the share of the renewable and clean energy sources in total primary energy supply and mitigating the environmental pollutions Enhancing the energy security and improving the energy carriers quality Considering the national and firm economy viewpoints in the energy economy policies

3.3. Self-sufficiency scenario In this scenario, which is called “self-sufficiency”, continuing economic sanctions and strained international political relations make investments in Iran highly risky. As a result, no increase in production capacity will take place, which have negative effects on the energy supply causing a significant stagnation in the oil industry. Due to lack of foreign investment in the oil industry, the required capital for developing this industry need to be provided from domestic resources only. Therefore it will be necessary to consider new legislation and incentives to support the domestic investors. Due to absence of foreign contractors in the oil industry and international economic sanctions, there will be significant emphasis on national competencies, and developing domestic production of required facilities. Energy efficiency, renewable energy and environmental control may also get more attention. This scenario addresses socially recurring effects such as empowering self-reliance in the target country. For example, economic sanctions will impose extra costs on domestic companies in acquiring technological knowledge, but they will also stimulate policy-makers to favor a self-reliance doctrine. Based on the selfsufficiency scenario, indigenous technological development could be driven and motivated by sanctions regimes. In fact, gradually increasing economic sanctions have progressively empowered this concept among Iranian industrial policy-makers. In the oil and gas industry, industrial managers have prioritized indigenous development of technologies and have tried to activate domestic companies to produce vital technologies (Majidpour, 2013). Literature recognizes the role of a crisis in a technological catch-up process. Kim (1998) argues in the context of the Korean automotive industry that the technological catch-up process of Hyundai company was significantly influenced by crisis circumstances. In 2011, Iran's oil and gas industry unveiled its first GTL (gas to liquid) plant based on indigenous technology development. Another example relates to gas turbines

Fig. 2. Identifying the critical uncertainties through CIA analysis: influence/dependence for the Iran's energy industry (exported from the MICMAC software program).

Please cite this article as: Alizadeh, R., et al., An integrated scenario-based robust planning approach for foresight and strategic management with application to energy industry, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.11.030

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approach is a limited range of core strategies which is complemented by several strategic options that are derived from the different scenarios. Moreover, scenario planning has generally been performed as part of corporate planning and is rarely packaged to be readily applied with the detailed strategies, steps and directions. Linking scenarios to the integrative and operational capabilities of robust planning could address this weakness. Although scenarios are helpful to create a complete picture for the society to understand the future scene without too many technical details and the necessity to participate in the scenario exercise, robust planning can be used to capture, manipulate and manage information to decrease complexity in the foresight by providing robust strategies (Saritas and Oner, 2004). Fig. 3. Scenario building framework.

4.2. Robust strategies which are key technologies for oil and gas industries. Here local manufacturing is emerging as a response to economic sanction (Majidpour, 2012). 4. Robust planning Robust planning linked to scenario building involves an ongoing search for options that are more robust across the scenarios. Most optional strategies tend to show rather different perceived performances depending on the scenario in which they are being tested. Here robust strategy is the outcome of the robust planning exercise which performs well over the full range of scenarios considered. It leads to an inherently conservative response to unpredictable environments (Van der Heijden, 1997). Robust planning is an reiterative planning framework used for identifying strategies which are potentially robust and for characterizing the vulnerabilities of such strategies and evaluating the tradeoffs among them (Lempert et al., 2003). 4.1. Robust planning methods In order to address decision challenges with profound uncertainties, various concepts, methods, and tools have been developed. Rosenhead (1989) proposed a systematic decision framework for robust decisions. For scenario planning, similar themes have emerged from the literature (Van der Heijden, 1997) including robust design (Ullman, 2001), imprecise probabilities (Walley, 1991), and info-gap methods (Ben-Haim, 2006). Robust planning approaches have been used for different types of decision problems, e.g. for mitigating greenhouse gas emissions (Lempert et al., 1996). Other applications include water management challenges (Dessai and Hulme, 2007; Groves et al., 2008), policies on the science and technology in South Korea (Seong et al., 2005), and the U.S. national security (Terrorism Risk Insurance Act, TRIA) (Dixon et al., 2007). The proposed integrated approach on scenarios and robust planning builds on the strengths of the traditional scenario planning, i.e. its open and creative considering multiple strategy options and perspectives. Simultaneously, it overcomes the weaknesses of traditional scenario planning by offering a systematic process to scenario creation based on specific management tools and thus easy to implement. The outcome of this

Fig. 4. Iran's oil production in the past (BP, 2015) and scenarios for the future.

The search to make options less dependent on scenarios involves the question of flexibility and feasibility. Schnaars (1986) has suggested a robust strategy that can be adopted when designing strategy with multiple scenarios. It takes positions on both sides of the range of possible developments. It protects against losses but provides only modest, albeit stable, returns. It seeks to maintain a viable position rather than to gamble heavily on achieving spectacular results (Van der Heijden, 1997). One of the most hampering factors for successful design and use of scenarios includes a too strong focus on the scenario itself and less attention paid to communicating the decision context in which it is developed. For successful application of this tool, it is critical that the scenarios are appropriately chosen. Scenario planning often lacks details for implementation. Therefore working out step-by-step strategies and contingency plans to fit the scenarios, capacities and weaknesses would be beneficial enabling a company to anticipate all possible developments (Strauss and Radnor, 2004). The integration of scenarios and roadmapping is beneficial in a policy and strategy making process. Both methods have desirable properties and are complementary. In this respect, using scenarios in the roadmapping process helps overcome some of the criticisms directed against roadmapping as a foresight method (Saritas and Aylen, 2010). Finally, scenarios help present internally consistent narratives of possible, plausible, and desirable futures, which can be understood easily not only by experts, but also by wider constituents of the society. Scenarios can be used before, during or after the roadmapping exercise. Scenarios have been suggested to be used in the preparatory activities for roadmapping (Lizaso and Reger, 2004). Here the ‘baseline’ scenarios may help to cover the certainties and uncertainties relating to the issues in question. ‘Before’ scenarios help identify presumptive anomalies (Constant, 1980) where science indicates that a conventional approach may fail badly in the future, or a radically different approach will do a much better job (Saritas and Aylen, 2010; Amer et al., 2011). The detailed strategies and the framework for the implementation of proposed projects emerging from the process need to consider the political, economic, technical, social, cultural, and environmental conditions and limitations of the country. Moreover, a roadmap also offers guidelines for decision makers to formulate policies and strategies for exploiting new technologies. For example, the oil and gas industries in Iran require multiple scenarios and appropriate strategies to develop and promote these industries consistent with the global changes. We illustrate the benefits of this management innovation on the basis of experiences collected from the Iranian energy industry. Iranian governmental Management and Planning Organization has published a special document for managing the energy industry with fifteen main strategies, which are listed in Table 6 (Iranian Management and planning Organization (IMPO), 2010). The participants of the second Delphi panel were asked to assess the robustness of the above-mentioned strategies in each scenario according to the assumptions used in these.

Please cite this article as: Alizadeh, R., et al., An integrated scenario-based robust planning approach for foresight and strategic management with application to energy industry, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.11.030

R. Alizadeh et al. / Technological Forecasting & Social Change xxx (2015) xxx–xxx

Fig. 5 illustrates the process of achieving a robust strategy among different strategies based on expert opinions on their robustness in the scenario set. The radar chart shows the results of determining the robustness of different strategies in each scenario by expert judgment. As shown in Fig. 5, S5, S6, S9, S11 and S12 have the highest average scores of the robustness among all the strategies. These five strategies are the most robust strategies. Each expert score each strategy based on the robustness criteria (feasibility and flexibility) in the context of each scenario. Average of marks which experts gave to each strategy in the context of all three scenarios has been the robustness score of that strategy. The robustness criteria were taken from (Gupta and Rosenhead, 1968). Therefore, these strategies are more feasible and viable in all the plausible futures according to expert's opinion. High energy intensity or very low energy efficiency is the biggest barrier to tackle with the energy consumption growth and strategies such as S9, S11, and S12 aim at overcoming this barrier by empowering energy efficiency. On the other hand, technology transfer strategies besides indigenous capability building and technology development which are required in both Technology-driven and Stagnation scenarios should be taken into account in the national strategic plans. S5 and S6 are the strategies which facilitate achieving these requirements. 5. Discussion Many oil and gas exporting countries are facing great challenges for different reasons, often linked to geopolitical factors. These countries include Iran, which was used as a case here. Based on our analysis, alternative concepts have been then formulated for Iran's future energy

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policy. Concentration on national policy making and planning is one of the robust strategies chosen by experts in this study. According to the results of the robust planning exercise which is shown in Fig. 5, recent public measures, such as the Targeted Energy Subsidies Act; energy management and productivity knowledge enrichment; modifying the energy carriers pricing system; financial and technical support by government from energy consumption optimization projects, are all robust strategies in the self-sufficiency and technology-driven scenarios as these measures try to reverse the increasing trend of oil consumption. For example, the implementation of the Targeted Energy Subsidies Act has dropped the oil consumption by 9%, gasoline 26%, gas 6%, and electricity 11%. In total, the country's primary energy consumption has reduced (Guillaume et al., 2011; Massarrat, 2004). Iran's future oil resources will depend on foreign investments, proper reservoir management, production technologies and end-use energy technologies. Oil production has actually decreased while domestic consumption has increased during the last years. The five selected strategies (S5, S6, S9, S11, and S12) show the greatest robustness in the Stagnation scenario as the energy consumption rate would remain almost stable while the energy production rate would decline. In addition to the five strategies that are robust in all scenarios, we suggest some new directions for the Iran's energy policy framework based on the analysis done. 5.1. Policies on environmental issues and economic reforms The cost of non-renewable energy resources will increase due to environmental concerns and climate change mitigation measures. The

Fig. 5. Visualization of the robust planning approach (Panel #2) (0 = lowest robustness, 10 = highest robustness).

Please cite this article as: Alizadeh, R., et al., An integrated scenario-based robust planning approach for foresight and strategic management with application to energy industry, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.11.030

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share of fossil fuels in the world energy supply is currently 80% but more than half of the global energy demands would need to be met by clean energy (IEA, 2014). The lifetime of Iranian oil reservoirs is around a century (Kamran Azadi and Yarmohammad, 2011) and most of the present buyers of oil may shift to clean energy within the next 30–40 years (Beynaghi et al., 2015). This means that there is not much time to convert the Iranian oil asset to a sustainable energy asset. Therefore, a higher production rate of oil, exporting more oil and utilizing oil revenues for developing the non-oil economy seems to be a robust strategy. It could be done in both Technology-driven and the Self-sufficiency scenarios, e.g. by investing in industry and technology transfer in the similar way as Norway has done in the past. Exporting oil products instead of crude oil is another strategy that generates more value added from the national oil resources. The domestic economy and its structure need also to be reformed to attract capital from the private sector for the implementation of large energy projects. 5.2. Strengthening regional alliances and convergence Establishing partnership investments with other countries on oil, gas and nuclear energy could develop regional, trans-regional, and international support. Moreover, it could encompass the first steps for developing an energy strategy and consolidating Iran's presence in international cooperation. In addition, Iran could strengthen regional convergences, especially in economic and cultural areas with countries such as Afghanistan, Turkmenistan, Tajikistan, Turkey, Azerbaijan, India, and Pakistan through deepening of cultural factors. Considering the size of the country, if economic security is achieved, Iran could also gain through the Muslim world's geo-economic facilities and its own geopolitical position a forerunner role that spreads sustainability and development of excellence in the region. 5.3. Strategy development regarding to geopolitical goals The development of energy industries in Iran, especially oil and gas, will depend on the overall geopolitics in the region and worldwide. To capture on Iran's geopolitical potential the following issues need careful consideration: 1) To restore and strengthen the geopolitical, geo-economic and geo-cultural position of Iran in international context will depend on the identity elements of the Iranian foreign policy. 2) Since each country's geopolitical importance varies based on the “atmosphere” of regional and global relationships and trends in international politics, this condition for Iran, given its dynamics of internal and external political components, may benefit from formulation of a comprehensive geopolitical strategy, which strives for turning threats to opportunities.

a step-by-step tool-based process. In addition, the new method proposed better links strategy to implementation and communication, factors which are often overlooked in traditional scenario work. Our approach produces a limited number of core strategies complemented by strategic options thus reducing the complexity and time requirement typical to traditional scenario planning often attributed to the lack of standardization (Bradfield, 2008). The proposed method could therefore also be considered as a new contribution to management research and strategic planning (Birkinshaw et al., 2008; Whittington and Cailluet, 2008). Though we used the Iranian energy industry as the case for a more detailed application of the method, there are broader implications to corporate practice as well in that it could serve as a valuable tool for strategy creation under main uncertainties and volatile environments. Because of its toolbox-based design, integrating Delphi, PEST, CIA, Scenarios and Robust Planning in one model, our approach can be quickly and flexibly initiated which significantly eases its translation to practice. The results from applying our approach to foresight and strategic planning of the Iranian energy industry includes several interesting new findings. As a consequence of a comprehensive literature review and brainstorming conducted among our expert panel, a plethora of driving forces, actually more than 30, were identified which could be highly valuable for future research. From this wide-ranging collection of driving forces, which were categorized through political, economical, social, and technological dimensions, we found that foreign investments in the energy industry, external economic sanctions, and the domestic energy consumption growth were the most important driving factors and critical uncertainties for the Iranian energy industry. Three scenarios based on these critical uncertainties and expert information were developed: Technology-driven, Stagnation, and Self-sufficiency scenario. For these scenarios, a range of robust strategies was determined. National energy efficiency and productivity increases emerged as the key factors for robustness. The main macro-level result was that the economic and political drivers will be the most important factors for Iran's energy futures followed by technological and social factors. Strengthening of regional alliances, economic reforms, strategy development linked to geopolitical goals, short-term yields in fossil fuel resources, and international collaboration on environmental issues are examples of policies that can be derived from the most robust strategies. Summarizing, the new approach proposed could provide a helpful tool to managers and policy makers for strategic planning to cope more effectively with the various uncertainties on different time scales. As the next step in our research, we foresee a more profound application of the method on a corporate scale in order to identify and quantify the benefits of the new approach.

References 5.4. Short-term gains in fossil fuel resources Given the size of Iran's gas reserves, clearly one of the first priorities of the country's energy sector could be the exploitation of South Pars gas fields. In addition, gas transmission from Iran to India, Iran to Europe via Iraq and Syria, and selling to the southern Persian Gulf emirates including the Crescent contract would be worthy to be considered (Najibi et al., 2009). 6. Conclusions We have developed an improved scenario-based robust planning approach for better foresight and strategic management, in particular in the energy industries, which face major future challenges. The proposed integrated planning method makes use of the strengths of traditional scenario planning, but overcomes its weaknesses by offering a systematic approach for scenario creation and easy implementation by

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Peter D. Lund is a professor in advanced energy systems at the Aalto University (Helsinki) where he chairs the multidisciplinary Energy Science Initiative. He is also a Chutian chair professor in Wuhan, China. His primary interest is on different aspects of sustainable energy ranging from innovations, systems to sustainable energy policy. Dr. Lund chaired the Advisory Group Energy of the European Commission 2002–2006 and has co-chaired several European Commission Call evaluations since 2008. He chairs the Energy Steering Panel of European Academies Science Advisory Council (EASAC) and is steering committee member of the European Platform of Universities in Energy Research (EPUE) and EuroCASE energy platform. He has also served in senior advisory role in energy programs in Austria, Finland, Norway, Saudi-Arabia, Spain, Sweden, International Energy Agency (IEA), EIT, Baltic and Russia cooperation. He received the Finnish Nature Conservation Society's Prize in 2004 and Fortum Prize in 2008. Dr. Lund is editor-in-chief for Interdisciplinary Reviews: Energy and Environment, Editor-Europe of Energy Research and coeditor-in-chief for Global Challenges. He has published some 500 research papers and tutored 30 PhDs. Ali Beynaghi earned his M.Sc. degree with honors on Technology Foresight from Amirkabir University of Technology (Tehran Polytechnic), 2013. Since 2011, he has been working at the Futures Studies Research Institute and Office of Sustainability as a researcher and coordinator of "futures studies and sustainability" group, respectively. His research interests include sustainability science with respect to energy, environment, futures studies and also (higher) education for sustainable development. He has over 10 peerreviewed publications as chapter books, conference and journal papers. Ali is a member of Iranian National Elite Foundation and he is currently a research associate at Ministry of Science, Research and Technology (MSRT), Tehran, Iran. Mahdi Abolghasemi has graduated from M.Sc. of industrial engineering from Bu-Ali Sina University. He is working at Hyundai Company and also is a lecturer at Science and Culture College. He is interested in supply chain management, Bayesian networks and its applications and presented several conferences in these fields. Reza Maknoon is a professor of science and technology foresight and environmental engineering in the Faculty of Management, Science and Technology at Tehran Polytechnic Tehran, Iran. He received his BSc and MSc degrees from the Tehran Polytechnic and University of Illinois, Urbana, ILL, U.S.A. on 1973 and 1977 respectively. In subsequent, he received his PhD degree in water resource management from University of Washington, Seattle, WA. U.S.A on 1977. Hi is a member of supreme council of UNESCO, National Committee on Hydrology (and past president), Research Council, Supreme Council for Environmental Protection, National Committee for Sustainable Development-CSD (Deputy to the Chairperson), Asia Pacific Forum for Environment & Development (APFED), National Society of Environmentalists (vice-president), National Society of Civil Engineering (vice-president), National Water Resources Association (president), National Society for Science Development, Board of Trustees for Research Institutes resides in Tehran, National Committee on Large Dams (and past president), and Futures studies institute of Tehran Polytechnic. He is also the head of Office of Sustainability of Tehran Polytechnic. He has also served as Deputy and coordinator for the Iranian Delegate to the Word Summit on Sustainable Development (WSSD) Johannesburg, 2002. He is also a member of editorial board of Iranian Journal of Environmental Studies and Managing Director of RahyaftScience Policy Quarterly Journal. His research areas of interest are Sustainable Development, Green technologies, Water Resource Developments, Environmental Impact Assessments (EIA), Research Policies, Human Development and Higher Education, National Contributions. He has published more than 130 papers in different journals of repute and conferences and tutored 45 PhDs.

Please cite this article as: Alizadeh, R., et al., An integrated scenario-based robust planning approach for foresight and strategic management with application to energy industry, Technol. Forecast. Soc. Change (2015), http://dx.doi.org/10.1016/j.techfore.2015.11.030