Scenario planning – Industry scenarios
Before embarking on the discussion, there is one question or so we need to ask ourselves. What is a scenario? What is scenario planning all about? What constitutes industry scenario planning? Straight away, a scenario is a story or a descriptive narrative about the future which aims at sketching the boundaries of the probable and it is assembled on a methodical scrutiny of various factors bearing in mind those alternatives which are credible and somewhat measurable. These factors are: – social, political, economic, environmental and technological.
Future environment of a given business, region or policy area could be shaped by these very factors. According to the World Economic Forum, the scenarios explore three or four dissimilar eventualities of how the world might look if the most uncertain and important drivers unfold in different ways. The same source elaborates further that good scenarios are not just dry, analytical descriptions of possible future outcomes. No matter how meticulous they are constructed, they should also be well inspired and highly compelling enough to engage the imagination.
They challenge postulations wile at the same time raising awareness of fundamental factors and inspire participants into fresh thinking about what could happen and what it would mean for them. They offer both a new perspective on events and a scaffold for positive deliberations. Scenario planning on the other hand can be used by distributors as a tool of management to predict and benefit from change. In this article, we shall briefly introduce scenario planning, its relevance in connection to distributors and we shall also look at its application as a valuable tool in the industrial sense.
As we have said above, that when we think of scenario planning, one great point that has to cross our minds is that a range of alternative futures has to be put into consideration, each of which is considerably diverse and varied from the present operating atmosphere. It would be better to compare and contrast alternative views on how the industry may evolve rather than pinning ourselves on a single forecast which we have assumed to be most probable. Scenario planning is externally oriented and therefore very effective at identifying growth strategies for the company as well as impending threats to its market positions.
Scenarios can also help us identify the specific external industry changes that might be causing the company to lose market share or margins. In his article, Scenario Planning Basics for Distributors, Fein Adam presents ways in which distributors are using scenario planning to the betterment of the company. Distributors, he says, should make sure that the management of their company does not erroneously presuppose that changes will not place in the future. In other words, they should explore all the possibilities the company can face and, not only that but, come up with viable alternatives.
In connection to this point, they should also assist the management to identify and understand possible threats comprehensively. They should point out growth strategies for the company and test the success of its current strategy in various possible futures. Lastly, they should understand and appropriately react to new customer buying behavior since the customer is the basic unit of the industry and the satisfaction of the customer should be the prime objective of any decision made by the company. Facing the Forces of Change has suggestions of four possible scenarios for distributors to consider.
The first scenario is that which stretches into the future and here distributors have entirely incorporated technology into their companies. Given the high level of information development, customers expect distributors to work with them impeccably across numerous communication interfaces. Distributors have effectively achieved this due to rapid rates of developments. These distributors still remain the prime route to market for manufacturers. Coordinated Channels is another scenario where customers seek more information directly from manufacturers.
Here, manufacturer Web sites give existing product specifications, comprehensive technical data and also appropriate product feature are selected by the customers who want such information. This information can be accessed by the customers both directly and indirectly. Directly they get connected to the manufacturer Web site and indirectly through an allied distributor’s Web site. Product collaboration between manufacturers and distributors is undertaken on the internet with marketing and inventory management also being done in the channel.
However, it still remains the role of the distributors to provide information back to the manufacturer and ensure new performance qualifications are met The third scenario is the one describing a world where consumers and producers pay for the specific conduit activities they may be in need of. This Unbundled Supply Chain has distributors competing directly with supply chain organizations and intermediaries in this scenario are rewarded according to their rate of activity performance. That is, what they have done on behalf of their customers and producers.
In the fourth scenario, there is a world with a cluster of consumers forming open and non-profit online exchanges. These common platforms handle the data among supply chain partners. Scenario planning requires a few guidelines to be followed. One must establish a core planning team because analysis of the strategic implications is best in groups. Secondly, a cross section of expertise should be availed, and this includes the heads of the all functional areas of the company. Bringing the ideas of the thinkers the company is endowed with is such a feat worth the take.
It is worthwhile to include the outside people by incorporating information gathered from them into the whole system. The focus here should be on infusing appealing and challenging perspectives into the discussion. Outsiders include customers, suppliers, consultants and competitors who hold a vital position in the success of the company. There should be great care in selecting the person to facilitate the scenario planning strategy. An employee of the company should not be part of the choice, neither the senior executive officers.
This is because the facilitator should be someone who is focused on planning processes and the two do not appear in this category. Implications scenario planning, just as other forms of business planning, needs an extensive spending of resources from all the individuals of the company. Therefore, the support of top management is a very important determinant of success the company’s planning capability. What this implies is that there should be readiness from every corner of the company in order for this planning strategy to work in the success and goodwill of the company.
An honest assessment must be carried out to ascertain as to whether the senior decision makers in the company are not only involved but also dedicated to the scenario planning process. Should the company be unready to work with the process, then even the most sophisticated techniques of a manual or outside consultant are destined to fail. In addition, if the company is faced with a threat of financial insolvency, then it must suspend the identification of long-term threats and other prospects until business stabilizes because this kind of planning is not suited with survival planning.
Disruptive innovation is one of the revolutionary theories of technological change used to describe the impact of new technologies on firm’s existence. (Nauosa Hirotta). Combining scenario planning with disruptive innovation is unavoidable in this era of high level of technological embrace. It is sure and straight that a company which does not embrace technology in its strategic plan is left behind. Disruptive technology which initiates the advent of disruptive innovations for example e-marketing is a vital tool but has to be fused with industry scenario so that the company does not lose its clients for the companies.
Summary There must be clear repercussions for the company and its strategy if at all scenarios planning is intended to be meaningful. Each scenario can be viewed as a playing ground in which the company finds itself competing in the future and this allows us to apply all of the apparatus of competitive analysis within a given industry setting. The same tools can then be applied in a totally different future. For us to have the best out of scenario planning, a scrutiny of the company’s position must be known.
The company may be one which can manipulate how the future evolves by virtue of actions and investments of its members. On the other hand, if it is too small or insufficiently influential, it becomes a scenario taker and in this case its must carefully examine its line of trade and customers so that it is prepared to react and adjust quickly to changes. Such scenario takers will find it wise to rapidly imitate and adopt to survive; they must do what good companies do.
Olaisen J, A Johannessen, B Olsen, – International Journal of Information Management, 1999 – Elsevier Page 15
Fein Adam. “Scenario Planning Basics for Distributors” Accessed last on February 27, 2008 from URL: Accessed last on February 27, 2008 from URL: <http://www.mdm.com/stories/fein3206.html>
International Journal of Information Management, Volume 19, Issue 4, August 1999, Pages 263-275
Jon-arild Johannessen, Johan Olaisen and Bjørn Olsen
Disruptive Technology May 3, 2007, Accessed on February 28, 2008 from URL: <http://www.changemakers.net/competition/disruptive/definition>