(2003), "These brief summaries highlight the key points and action steps to be found in the feature articles in this issue of Strategy & Leadership", Strategy & Leadership, Vol. 31 No. 2. https://doi.org/10.1108/sl.2003.26131bae.004
Emerald Group Publishing Limited
Copyright © 2003, MCB UP Limited
These brief summaries highlight the key points and action steps to be found in the feature articles in this issue of Strategy & Leadership
These brief summaries highlight the key points and action steps to be found in the feature articles in this issue of Strategy & Leadership.
Catherine Gorrell is president of Formac, Inc., a Dallas-based strategy consulting organization (email@example.com). She is a contributing editor of Strategy & Leadership.
Page 5How corporations learn from scenariosLiam Fahey
Given the speed of competitive and of change, analysis has shown that today's winning strategies, if not reinvented, will be the certain losers of tomorrow. But how can your firm devise an effective new strategy that will address the two most fundamental strategy challenges:
How to anticipate and interpret change in and around your marketplace?
How to leverage that change into winning strategies?
The answer comes in the use of scenarios to envision alternative futures. Scenarios are rapidly becoming the standard strategy tools in leading firms because they (1) link the strategy to the knowledge challenges and (2) give managers a forum to consider and determine what they would do were each future to materialize.
"Scenario learning" entails developing knowledge about the future (and the present) and integrating such knowledge into decision making. It thus aims to make scenario work central to developing strategy alternatives, choosing among them, and executing the preferred courses of action. In short, scenario learning aims to create knowledge about how (for example) products, markets, the industry, and the economy may change, that is part and parcel of making and carrying out decisions, not separate from them.
Scenario learning shifts the emphasis from developing and refining the scenario end-states, plots and logics, to assessing scenarios for their insights into the opportunities that may take your firm in unexpected strategic directions or the threats that may lurk around the corner that could derail your current strategy. It is critical that key strategy and knowledge uncertainties be connected. The essential feature of scenario learning is the dogged pursuit of the implications.
Key features of scenario learning are:
The opportunity to better understand the present as well as the past, from the vantage point of the scenario end-states.
An effective means to both surface and examine latent assumptions that could derail accepted strategies.
Obtaining better feel for the range of possible futures by asking the wild what-if questions about your current and future markets, competitors, customers, production, and product technology, etc. Strategy uncertainties cannot be managed by simply ignoring them or proclaiming that they cannot arise.
Frequently assessing "how your strategy would fare" by using a system to carefully track key indicators that monitor the future as it occurs. This keeps the learning induced by scenario development ongoing.
The article's exhibits - "Devising scenarios", "Scenario learning principles", "Challenge your thinking", and "Monitoring change indicators" - contain important action steps.
Page 16The future of scenarios: challenges and opportunitiesStephen M. Millett
Many corporate leaders and mid-level managers who have experimented with scenarios complain that the promise of this methodology does not give the full return on investment; the big picture scenarios fail to address competitive issue and critical decisions faced in the trenches. What goes wrong? It's time to question the utility of this methodology.
To achieve more consistently productive uses of scenarios, there are three major challenges that must be addressed for the future of the scenario method:
Resolve the confusion over the definitions and methods of scenarios.
Clarify and enlarge the appropriate application of scenarios.
Reduce the resources required to perform scenario planning.
Issue #1: know the use of the various scenario development methods and practices. (The history and various scenario types are cited.) It is time for consultants and corporate planners to embrace greater flexibility in the scenario methods they use and to use more precision in the terminology for describing those methods. Likewise, managers need to see not only the different approaches, but demand the approach that is best suited for the situation. Creative companies will prefer the intuitive scenario method, while engineering-oriented companies will likely prefer analytical scenarios. Or managers may wish to start with intuitive scenarios and progress to analytical ones as they move from a macroscopic view of the future toward assessing specific issues.
Issue #2: know when and how to apply which scenarios in the business environment. Is the need for strategic thinking, learning, team building, forecasting, or making an investment decision? Intuitive scenarios work well for team building, learning, and strategy making in the broadest context. They also provide insights for managing in highly uncertain, very long-term and particularly ambiguous environments. Analytical scenarios can be used to give thinking more vigor and precision and as input to quantitative models. It is most useful to have an increasingly focused progression of futuring tools (macro to microscopic).
Issue #3: Scenarios are quite expensive, requiring a team effort and professional facilitation. Too much time and effort frequently go into generating the scenarios and not enough time is spent in deriving business foresights from them. Scenario practitioners need to streamline their process and reduce their prices. For example, low cost casual scenarios may be entirely appropriate; but they have their limits and consultants must be truthful about how they market them.
Page 25Tailoring scenario planning to the company cultureDavid Mason
At some point, every organization will have a need to use scenarios as a framework for logically discussing internal and external issues, such as economics, global politics, technology breakthroughs, and competitive shifts. When the need does arise, be aware of the two predominant causes of failure of scenario projects:
A lack of agreement on the purpose of the effort.
A lack of understanding about how scenarios might help different organizational cultures and styles.
To avoid these pitfalls, leaders need to first assess the potential usefulness of scenarios using the culture of their organization and the goals of the effort as context. Why? Because each "culture type" has a different managerial mindset, therefore the needs and expectations regarding the outputs from a scenario project are completely different and require different approaches to using scenarios. This article discusses three organizational cultures and illustrates how each uses scenario planning for three different purposes (directional strategy, contingency planning, and learning and team building).
Leader-driven organizations. Examples are Intel, Sun, and Microsoft; they are revolutionaries. If the purpose of scenario planning is for setting direction, then scenarios are used to structure debate; however, in the end, the leader decides the direction and everyone follows, leaving the debate behind. If the purpose of the scenario work is for contingency planning, then scenarios would primarily be used to sensitize the leadership group to possible changes, not decision making on a specific topic. If the purpose is leaning and team-building, then the leader driven culture would use scenarios to open up the idea space in search of the out-of-the-box ideas. Ideally, leaders make scenarios a way for people to work new ideas into the planning and decision-making system.
Plan-driven cultures. Plan-driven companies are found in more stable business environments, such as banks and public utilities. They are built to deliver a very reliable offering and hence value stability. If the scenario work is for setting direction, then the outcome will only be valued if the events leading to an endstate are treated as critical path lists.
Evidence-driven cultures. Evidence driven organizations develop in highly capital intensive industries that have long time horizons. Examples are oil companies and the military. Because long-term commitments can not be changed quickly, real evidence is of paramount value to these cultures. Scenarios provide a framework of expectations to match up with the real world as it develops.
A 3×3 matrix (an article exhibit) offers a summary of these points and is a quick reference guide.
Page 29The art and strategy of scenario writingBetty S. Flowers
From the point of view of a successful scenario writer for Royal Dutch Shell, there are several elements that must be incorporated into crafting and presenting business scenarios. The first is art of keeping it short. This means that a successful scenario process should produce two different products based on two distinct mental disciplines:
Thorough research leading to rich, fully articulated stories (the long book).
The distillation of these stories into essential concepts and images (the little book). The "distillation" process is not only a form of summarizing, but also a way to highlight key moving forces in the stories: what is left after the detail is taken away.
The second key is to recognize that the most effective scenario work is not what happens in the scenario story; it is what happens in the mind of the managers. Therefore, model the scenario as if it were a play, or more precisely, a stage set created by words. Using this model, the future is imagined as if it were a stage-set description, where every element contributes to the effect of the whole. The managers are the actors who will animate it by their participation in each alternative scenario world. This then is the design goal for any scenario writing: engage the managers to step into the play and make it their own.
A third key for a successful scenario builder is to incorporate the managers into the scenario process while making the best use of their limited time. Scenario teamwork can be achieved in several ways including initial interviews, "learning journeys", and gathering their responses into short presentations. The key is to stimulate the development of scenarios in their minds to the point that they are just not hearing a memorable story but they are experimenting with it and imagining alternatives.
A fourth key is the use of "sticky" labels. These are slogans or names, such as "Jazz", that will stay in the minds of the scenario participants, helping them to bond related ideas together.
The fifth key to successful scenario writing is to make each aspect of the scenario a facet that reflects the whole. For example, one seed image for the future of biotechnology might be Aesop's hare and tortoise race. Wherever possible, the race analogy can be used so that the overarching theme is not lost even when the focus is on specific details of the scenario.
A sixth key is use of various "points of view" on the "stage set" of the scenarios. This is a good way to bring to the participant manager's mind issues that are relevant to the scenario but not spelled out.
Page 34High-tech 2005: the horizontal, hypercompetitive futureVivek Kapur, John Peters and Saul Berman
Profound and lasting changes are afoot in the high-tech industry. The challenge for the CEO of high-tech companies today is not just to manage through the recession in their industry, but to also develop the right model for the future of their business. Analysis has shown that the usual responses to an economic slowdown - optimizing their existing business model, rightsizing, and realigning - will not do. Only those high-tech companies that align their business models for the new horizontal and hypercompetitive future will succeed.
By 2005, technology layers will be unbundled, and competition within each layer will be intense. The very face of competition will be different, with new Web-enabled value propositions expanding the competitive space and radically raising the stakes.
There are seven deadly signs of the new competitive environment. They are:
Growing downward pressure on price with an ever-increasing demand for greater performance.
Greater complexity for customers as they face the unbundling of hardware options, integration choices, and multi-company business coordination.
A new distribution of value: greater value to innovative component makers and solution integrators; less value for product design and assembly.
Branding and customer relationships will differentiate commodity products.
Collaborative networks will emerge.
Global supply and global customers will mean global organizations.
Competitors will encroach horizontally.
High-tech is being unbundled. The transformation from a vertical to a horizontal model is a radical one. The convergence of two forces has the potential to wreck havoc on the vertically integrated models of proprietary vendors:
The shift in consumer preferences to price-performance.
The emergence of industry standards.
The new emerging horizontal companies will need to be single-minded focus to deliver best-of-class products or services within a narrow area of the value chain. In this new world, the collaborative network of multiple partners will replace the tightly controlled "four walls" model of the vertical industry.
Recommendation: proceed with a five-step approach to develop a new winning strategy.
Pick a horizontal space.
Redefine and web-enable your value propositions.
Assemble your collaborative networks.
Integrate your internal operations globally.
Realign your organization and technology.
Holding off investment at this time and hoping that your current business model will still be viable when the recession lifts will lead to disappointment. Studies demonstrate that during downturns, advantage shifts to companies that continue to invest strategically. The forces of change are not waiting for the recession to pass. Neither can you.
Page 48Knowledge is today's capital: Strategy & Leadership interviews Thomas A. StewartSamuel M. Felton and William C. Finnie
Thomas Stewart, the new editor of Harvard Business Review, has written several recent books demonstrating that knowledge is the most important factor of production in the modern economy and a key to achieving competitive advantage. In this interview, he responds to numerous questions; a few are cited here.
Current state of knowledge management practices - the high level of dissatisfaction with knowledge management (KM) is due to the way it was marketed and used. It was bought and sold as a software problem, not a management problem. People undertook it because it was a fad rather than for business reasons. Avoiding the pitfall: if you do not know why you are doing KM, you should not be doing it. More specifically, you should not undertake KM until you have identified your company's knowledge business (which is the role of knowledge in making money in your business). Recognize that knowledge management is hard to implement. Currently few companies are doing a good job of measuring the gains from KM. Most that do, link money flows to the project rather than to KM or intellectual capital per se. A balanced scorecard approach is a good way to measure the non-financial value of knowledge.
Surviving in today's economy - one way to survive these economic doldrums is to create new businesses from knowledge assets that you already have. What gold can be extracted from your information dross? Can it be packaged and sold? In the course of business, companies are always creating intangible assets. In tough times, look at key assets you already have, such as a list of customers, and ask "what are the businesses you can pull out of your knowledge assets?". One of the attributes of knowledge is that it can be packaged and repackaged. Like electricity, knowledge can be used for multiple purposes. Good examples are cited.
The future of knowledge management - we will see an explicit recognition that deploying and redeploying people and knowledge leads to the fastest growth. Another element is continued emphasis on speed, resulting in more companies operating in real time. This is going to change the art of management, including increasing the importance of knowledge and information.
"Do's" and "don'ts" for effective knowledge management - ten are cited in the article. Stewart urges companies to deal fully with the obstacles to sharing knowledge inside the organization. Even before managers react to the reality that knowledge is power, there are a whole lot of very human questions that come up in any knowledge sharing. It is important for companies to recognize and address them.