STRATEGIC PLANNING FOR FOREST RESOURCE UTILIZATION RESEARCH 1. Thomas C. Marcin 2

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1 STRATEGIC PLANNING FOR FOREST RESOURCE UTILIZATION RESEARCH 1 Thomas C. Marcin 2 ABSTRACT.--The economic value of forest resources is largely determined by their use. Forests can be viewed as a system of interacting variables that are part of a larger socio-economic system. Forest resource utilization is then a key element or subsystem for determining the value of forest resources to society. A competitive strategy is vital for the development of forest resources with the broadest benefits to society. Strategic planning involves the development of a set of goals and objectives and the means to achieve them. The forest resource system includes four major subsystems: (1) physical resources, (2) technologies for utilization of resources, (3) the institutional framework that governs resource management and use, and (4) final market and nonmarket use. Systems concepts are also useful for considering social, political, demographic, economic, technical, industrial, and ecological factors. Assessment of technology and user needs is particularly important for planning for utilization research and resource development. INTRODUCTION Forestry and forest resource development are inherently long-term businesses because of the length of time required to grow trees to maturity. Strategic thinking is needed to plan for the optimal utilization and development of these forest resources (Irland 1986). Part of this planning is the determination of the research needed to improve utilization of forest resources for maximum social welfare--the economist's term for economic and social well being of its citizens. Generally, strategic planning involves systematic processes for assessment of the future impact of present strategic decisions, how those decisions can best be made and effectively implemented, and how organizations can be structured to facilitate, rather than hinder, the 1 A paper presented et the Systems Analysis Working Group, E4, at the SAF National Convention held at Rochester, New York, on October 16-19, Thomas C. Marcin, Economist, U.S. Department of Agriculture, Forest Service, Forest Products Laboratory, One Gifford Pinchot Drive, Madison, WI The Forest Products Laboratory is maintained in cooperation with the University of Wisconsin. This article was written and prepared by U.S. Government employees on official time, and it is therefore in the public domain and not subject to copyright. process. It also involves the development of objectives and the linking of these objectives with the resources and policies needed to obtain them. Strategic planning begins with the determination of research studies to identify human needs. This considers the process as being the conversion of scientific knowledge directly into the satisfaction of human needs in the market-consumption interface; the product then becomes merely the carrier of the technology and the form is only defined after the technology and the need have been clearly matched. Similarily, available forest resources should guide technological feasibility for particular regions. The concept of the forest as a system as explained by Duerr and others (1979) is useful here. They state A major aim is to focus the work upon integrated forestry: the creation and use of all forest values from scenery to wood. We have tried to see forestry as a system of interacting variables and also a part of a larger social system that in the final analysis is the sum of human experience. Another aim is to view forestry not as a set of rules, but as a set of resource alternatives. Still another is to demonstrate how modern quantitative methods of generating information can fortify judgement in choosing among resource alternatives. (Duerr and others 1979) 300

2 Thus, the forest is viewed as a socialbiological-engineering system. The forest resource system is dynamic, that is, it changes continuously through time in many dimensions--biological, technological, economic, socio-political--that are changed through management activities. This is the major part of the timber resource system from the forester's viewpoint. However, from an overall systems analysis viewpoint other components of the forest resource system, market and nonmarket uses, and the technology for utilization, are also important as are the interactions with other subsystems through time. This paper is about strategic thinking and not formal planning. It is a conceptual or philosophical paper, and as such does not provide a prescription for actual forest resources planning. However, planning is used in a broad sense to mean those long-run goals that will help meet societies' needs arid welfare. Strategic thinking can be viewed as the conceptualization of long-run strategies for the future state of forest resources and their use. This includes applying the logic of scientific inquiry to the problems of resource development and environmental quality. In this context, the use of systems analysis concepts is useful for the integration of interdisciplinary study to determine goals and actions for forest sector management. This includes techniques and tools from management science and operations research to achieve goals and objectives. Economics and other behavioral sciences play a major role in the concepts presented here. The paper will primarily deal with the research aspects of forest resource utilization in the context of the forest resource system. STRATEGIC PLANNING A strategy is a general direction, and even if the direction cannot be explicated precisely, it is most often greatly beneficial to have even an imprecisely defined general direction rather than none at all. (Cleland and King 1975) This is so because even an imprecise, but well-understood, general direction can be translated into tactics or programs to achieve the general goals of the research direction. The research direction must, of course, be defined by the appropriate public and private organizations involved in the forestry sector. Strategic planning then involves the long term--usually 5 years or more. It is directly related to meeting goals and objectives, is future-orientated, and significantly involves uncontrollable environmental forces that affect the performance of the forest sector. Context of Strategic Planning and Thinking According to Ackoff (1970), "wisdom is the ability to see the long-run consequences of current actions, the willingness to sacrifice short-run gains for long-run benefits, and the ability to control what is controllable and not fret over what is not." Therefore, the essence of wisdom is concern with the future. Planning is the design of a desired future arid of effective ways of bringing it about. Planning is anticipatory decision-making. It requires the development of actions and decisions over a considerable amount of time. Planning is required when the future state that we desire involves a set of interdependent decisions (i.e., a system of decisions). Performance of the system depends upon the interaction of all decisions. A set of decisions requires planning if (1) planning involves a combination of sequential and/or simultaneous decisions, and (2) the set of necessary decisions cannot be subdivided into independent subsets. These two systemic properties of planning make clear why planning is not an act but a process, a process that has no natural conclusion or end point. The process has no final solution but rather constantly adjusts to changes in the system planned for and changes in the external environment in which the system is embedded. Thus, there is a need to continually update and maintain the plan relative to current circumstances. Planning is a process that is directed at producing one or more future states that are desired and not expected to occur unless something is done. Obviously, if one believes that the natural course of events will lead to a desirable conclusion, then these is no need for planning. Thus, planning is a process that involves making and evaluating each set of interrelated decisions before action is required, in a situation in which it is believed that unless action is taken a desired future state is not likely to occur, and that, if appropriate action is taken, the likelihood of a favorable outcome can be increased. Strategic planning is not clearly distinguished from tactical planning; the following factors make plans strategic. Strategic planning involves longrange planning; in general, it involves the longest period worth considering. Strategic planning is generally broad in scope; it covers a number of different areas and aspects of a problem. Strategic planning is concerned with both formulation of goals and selection of means by which to attain them. Planning should be a continuous process, and hence no plan is ever final but subject to constant revision to meet changing conditions. In this context, the development of formal quantitative systems provides a convenient way to update plans and programs. Systems Plans Systems plans can be viewed as a bundle of relationships portraying the intended future strategies of the forest sector. They include an integrated set of guidelines suggesting how organizations might enhance the goals and objectives of the forest sector. The following guidelines might be included. (1) Establish strategies and programs for promoting and achieving objectives. (2) Provide guidelines for research needs to meet goals and objectives. (3) Delineate objects for various elements of the forest sector. (4) Develop forecast of external factors that will affect strategic goals. 301

3 (5) Construct contingency strategies for alternative courses of action if intended actions are changed by new assumptions, constraints, or objectives; that is, allow for uncertainty. (6) Develop economic forecast of feasibility of strategic objectives in terms of economic and financial goals. (7) Provide for coordination of short-term, medium-term, and long-term goals and actions. (8) Establish performance standards for achieving objectives. Strategic Planning Matrix Strategic planning can be viewed as a matrix management problem (Naylor and Thomas 1984). Three dimensions of significant importance for forest resource utilization are (1) physical resources, (2) technology, and (3) economic markets. A strategy matrix can be devised to match these dimensions. The strategy matrix is based upon the assumption that a given set of goals and objectives has been agreed upon by those organizations that influence the the forest sector--both public and private. It also provides a framework that can be used for quantitative analysis and optimization techniques such as triple-layer modeling (Hafkamp 1984). These goals and objectives must be resolved by negotiation or some other form of conflict resolution. Strategic planning should not degenerate into an argument about basic goals and values. In addition, an assessment of the external environment of the forest sector must be made. This includes the environmental, economic, competitive, social, political, demographic, and regulatory factors. Strategic planning involves assessment of the potential of the three main dimensions of resource utilization. First, physical resources must be assessed both in terms of existing timber, and in terms of land capabilities and amenities. Second, technology must be assessed for utilization of these forest resources in terms of both present and future technologies. Third, the economic markets for the goods and services that could be produced by the physical resource must be assessed. The value of the resource is a function of the effective demand for its outputs and the technology that provides these outputs at prices that are acceptable to consumers. Strategic planning for utilization research requires the study of feasibility of the conversion process in the context of the overall resource system. The economic feasibility of resource conversion is of particular importance. Economic feasibility is related to technical and sociopolitical feasibility as well. Economic feasibility will interface with available resources systems and the market-consumption systems. There are several steps in strategic planning and economic feasibility analysis. The first step is to identify the need to be met by the project and then to define the systems goals for the project. For example, economic development may be a systems goal. Utilization of a surplus forest resource, such as northern hardwoods, may be another type of goal. The establishment of need, such as improvement of economic competitiveness or establishing community stability through resource development, can then he explicated by establishing specific goals of greater utilization of northern hardwoods in the United States. This goal then needs to be made operational. Feasibility analysis According to Clifton and Fyffe (1977), a complete study of project feasibility includes (1) market analysis, (2) technical evaluation, (3) financial analysis, and if needed, (4) a social profitability analysis. The market analysis involves the search for an analysis of data that can be used to identify, isolate, describe, and quantify the market. This study can be used to identify user needs. A market study generally should contain (1) brief description of the market, (2) analysis of past and present demand, (3) analysis of past and present supply, (4) estimates of future demand for the product, and (5) estimates of market share both domestic and foreign. Technical analysis serves to establish whether or not it is technically feasible or what research needs to be accomplished to make it so. It also provides a basis for cost estimating. The technical analysis should contain a review of techniques or processes to be applied and include: (1) description of the product, (2) description of selected or desired manufacturing process, (3) determination of plant size and schedule, (4) study of available raw materials, (5) estimate of labor requirement, (6) plant location study, environmental costs, and (7) estimates of production cost for product. Financial analysis concentrates on determining whether a project is profitable from a commercial standpoint or whether a project achieves a minimum threshold rate of return and on the amount of capital required to implement it. Information from the market and technical analysis is used to determine financial measures. A sensitivity analysis or risk analysis may also be conducted. For new projects, estimates of total project costs, capital requirements, and cash flow are desirable. An analysis of rate of return on investment and price sensitivity is also needed. A sensitivity analysis and risk analysis may be made to identify items that have a large impact on profitability. Finally, a social profitability analysis may be performed if there is public involvement or there are established national priorities. The social profitability analysis is an evaluation of the contribution of the project to the economy. This includes the evaluation of the project toward meeting goals, such as increasing employment or net foreign exchange benefits. This may include goals of increasing markets for wood products or improving national competitiveness. Generally some cost-benefit analysis is used in conjunction with the other social objectives. 302

4 n Strategic Planning for Research The goal of this paper is to ask questions of a strategic nature to help guide the planning of forest sector resource utilization. It is only intended to be thought provoking and illustrate some procedures, but in no way to represent official positions. First, what resources are present in the region and what is the biological potential for the region? This question is presumably answered by basic forest inventory survey data and forest growth projections that traditional forestry provides. The second question is, What are the needs and desires of the present society that occupies the land and what are the likely future needs and desires of these peoples and their society in relation to the forest resource? A corollary to this decision is to invest in the development of forest resources either for use within the region or for export to other regions. Third, what technologies exist or need to he developed to convert the resource into useful products in an economically efficient manner? Finally, there is the need to consider the institutional framework, economic-environmental restrictions and sociopolitical constraints on the use of forest resources. An example of this are the needs of social forestry programs. Two ingredients common to successful social forestry programs are (1) widespread local participation backed by higher level political support and (2) sustainable, productivityincreasing technologies that are adaptable to local conditions and acceptable to local populations (Gregersen 1988). Similarly industrial forestry must also meet the needs of the local economy and use productivity increasing technology. This includes both the technology for tree growing and harvesting and the technology for conversion of resources to useful purposes by society. CONCLUSION Most analysis and planning systems are resource driven. They usually produce results that are acceptable to the current resource situation and policies. The viewpoint of this paper is that they should be driven by market-consumption systems and the technology-conversion systems that may be a constraining factor that can be changed by research or technical development. The resource system is also modified by cultural activities, environmental change, and other biological factors. Capital investment and prospective future investment also are important factors. Existing establishments tend to want to prolong the status quo and maintain vested interests. What is needed is an outside look that utilizes whatever resources and ideas that are available (Drucker 1988). Strategic thinking must deal with problems of uncertainty, variables, goals, long periods of Lime, and changing social, demographic, and economic conditions (Marcin and Skog 1984). Characteristics of strategic thinking according to Irland (1986) are as follows: 1. It deals with uncertainty in all forms; uncertainty about product demand, production possibilities, and relative prices. A key strategic task is to make sense out of this by adopting coherent operating assumptions about the future. 2. It deals with the long-time run of the future of the enterprise. 3. It deals with situations in which goals are not fixed but variable. The first strategic task is defining goals. 4. It deals with the overall social purpose of the enterprise, not its momentary operational needs. 5. The line between strategic and operational matters is never clear; it must be defined by management to fit the purpose at hand.. (Irland 1986) Business-driven resource decision strategies are viewed as generally preferred to those based only on timber-output systems. Better yet are strategies in which the biological-resources system interfaces with a market-consumption system and a conversion-technology system. A good example of business-driven strategy is the development of the wafer-board industry in the Lake States. The development of waferboard technology dates back to the 1950s, when there were severe economic and institutional barriers to the development and spread of this technology. It was not until building codes permitted this product and builders accepted it that the technology could be commercially transferred to the forest sector. Composite panel products like waferboard utilized aspen, which was a surplus resource and inexpensive to grow in the Lake States. Utilizing aspen presented an economically efficient alternative to high-cost plantations of red pine that might have been the conventional resource manager's alternative for forest development in the 1950s. Systems analysis provides a way to look at forest resource management and development that provides a strategic perspective of resource utilization research decision making and planning by looking at the resource base in the context of broader social, economic, and technological variables. LITERATURE CITED Ackoff, Russell, L A concept of corporate planning. John Eiley and Sons. New York, NY. 158 p. Cleland, David I., and William R. King Systems analysis and project management. McGraw-Hill Book Co., New York, NY. 398 p. Clifton, David S. Jr, and David E. Fyffe Project feasibility analysis. John Wiley & Sons. New York, NY. 334 p. 303

5 Duerr, William A., Dennis E. Teeguardin, Niels B. Christiansen, and Sam Guttenberg Forest management. W.B. Saunders Co. Philadephia, PA. 612 p. Drucker, Peter Best R & D is businessdriven. Wall Street Journal. Feb 10, p. 27. Gregersen, Hans M People, trees, and rural development: The role of social forestry. Journal of Forestry Vol. 86 (10). pp Hafkamp, Wilhelmus A Economic-Environmental modeling in a national-regional system. North-Holland, Elsevier Publishing Co., New York, NY. 235 p. Irland, Lloyd C Strategic thinking--a critical gap in American forestry planning and management. Renewable Resources Journal. 4(1): Marcin, Thomas C. and Kenneth E. Skog Demographic factors influencing future forest resources demands and pol icy. In: Proceedings for Society of American Foresters/International Forestry Congress Aug. 5-7, 1984, Quebec City, Quebec, Canada. Society of American Foresters, Bethesda, MD. pp Naylor, Thomas H., and Celia Thomas, eds Optimization models for strategic planning. North-Holland, Elsevier Pubishing Co., New York, NY. 184 p In: Healthy forests, healthy world: Proceedings of the 1988 Society of American Foresters national convention; 1988 October 16-19; Rochester, NY. Bethesda, MD: Society of American Foresters: