Chapter 10 - Scenario Planning for Disruptive Technologies

Chapter 10 uses examples from the newpaper industry to show the importance of and the steps behind scenario planning. in the 1980s, Knight Ridder, along with other major newspaper publishers rushed to embrace videotext as the new technology of the future that would revolutionize the way business was done in their industry. By 1986 Knight-Ridder had invested over $50M in the technology and was ready to walk away. Fast-forward to 1995, once again the newspaper industry was facing a potential game changing technology, the Internet, however, this time companies were more cautious to embrace the technology. Would the Internet be the future of publishing or the next "videotext" sinkhole? Managers would need to do careful analysis to determine whether to invest or not. If they invested and the Internet didn't take off they could face more huge losses. However, if the Internet did take off, like the experts expected it to, and they weren't in front of it they could lose huge market share and revenue just as Encyclopedia Britannica did when CD-ROM technology was introduced. Therefore, the question becomes how can we plan for a future riddled with uncertainty? Schoemaker and Mavaddat argue that instead of making definitive statements about the future, experts may be better served to come up with multiple possible scenarios for the future use of emerging technologies. The goal is to roughly sketch visions of multiple futures and then develop a strategy to best prepare for the portfolio of futures and over time adjust these strategies as the future becomes clearer. When done properly, scenario planning, can help prepare managers and executives for possible futures that they are unable to picture or imagine today.

Scenario planning was designed to address complex and unceratin challenges facing companies in the face of emerging technologies. It has proved to be a powerful tool to change people's thinking, as well as that of entire organizations. There are 3 challenges, inherent in emerging technoliges, that scenarios address better than other planning or stategy methods, scenario planning:

1) Uncertainty - uses uncertainty as the central element in its process
2) Complexity - explore how diverse sets of forces combine, intermingle and influence eachother
3) Paradigm Shift - aim to challenge prevailing mindset, surface core assumptions and create intellectual turmoil to find new possibilities

There is a good analogy, the authors give, comparing scenario planning to corporate planning. If we were going to climb a mountain, corporate planning of the past would provide a detailed map, describing the predetermined and constant elements of the terrain. However, a map is two-dimensional and the earth's surface is not, nor are the elements constant, they are ever changing. Therefore, by using scenario planning we could look at the different elements, formulate multiple possible scenarios and plan our trip accordingly.

There are 10 basic steps in the scenario planning process:

1. Define the issues you wish to understand better in terms of time frame, scope and decision variables (make sure the scope if broader than the industry, product segments, customer groups and technologies that currently define your business)
2. Identify the major stakeholders (those that could be affected by it or influence it)
3. Identify and study the main forces that shape the future within the scope from step 1
4. Identify trends or predetermined elements that will affect the issues of interest from list of main forces, step 3
5. Identify key uncertainties from the list of main forces (uncertainties not trends)
6. Select the 2 most important key uncertainties and deelop a 2x2 matrix
7. Assess the internal consistency and plausibility of the initial learning scenarios. Test for internal consistancy in 3 ways: 1) Are all future trends mutually consistant with eachother? 2) Can the outcomes postulated for key uncertainties all co-exist? 3) Are the presumed actions of stakeholders compatible with their interests?
8. Assess the revised scenarios in terms of how key stakeholders might behave in them
9. After completing additional research, reexamine the internal consistencies of the learning scenarios and assess whether some of the more complex interactions should be formalized via a quantitative model
10. When initial scenarios work is done, reassess uncertainties and how each looks under different scenarios

Finally, the chapter looks at 4 traps associated with scenario planning.

• Failing to gain top management support early on - even the most innovative and accurate scenarios will be dismissed if the top management isn't on board prior
• Lack of diverse inputs - lack of diversity could lead to group think and no innovative ideas or thoughts for the scenarios
• Failure to stimulate new strategic options - using traditional methods to develop strategic options off of scenarios could leave you in the same place as not having scenarios at all; use innovative ways to come up with strategic options that will go in line with the scenarios
• Not tracking the scenarios via signposts - day to day performance indicators are needed to track the progress through the scenario and strategy

I thought this was a very useful chapter and gave the insight, explanation and assistance I thought should have been provided in chapters 8 and 9. While the steps in this chapter are not crystal clear, with some further analysis and practice, one could simplify the steps into a one page sheet that could be used as a manager when assessing the future of a company facing an emerging technology. Chapter 10 almost portrays scenario planning as a catchall to help companies hedge against emerging technologies.

Could the newspaper companies saved money and heartache had they used scenario planning before investing in videotext?

Could Polaroid and Kodak, from chapter 8, have avoided being displaced in the digital imaging space if they had used scenario planning? Would scenario planning have even shown the companies the technology that was on the horizon or would you have to know about the technology prior?

How often would a manager need to perform this exercise? Everytime a new possible technology was emerging? Or, just when the technology starts to get traction in the market place?