A Dialogical Way to Use Scenarios for Strategy Development and Innovation

1. A Dialogical Way to Use Scenarios for Strategy Development and Innovation Viewpoints and Stakeholders in Scenario Analysis By Gerald Harris March, 2012 Email: gerald@artofquantumplanning.com

2. Overview The ideas presented here build on the concepts presented in chapter 5 of my book related to intentions, actions and reality. The central point of this chapter is that one’s point of view impacts what one sees as reality (directly impacts what is and what appears to be possible). I suggest in the chapter that it is preferable to consciously and deliberately be open to multiple points of view with a learning-oriented approach to making decisions and creating strategies. This presentation shows how two sets of scenarios focused on a common area can be used to create a dialogue between parties with different viewpoints. I call this “scenarios in dialogue” because the core of the approach is to create a strategic dialogue between two groups as they compare and contrast their scenarios. I came upon this idea while working with a colleague thinking about the future of cloud computing. We could not determine from which key stakeholder (service providers or customer/users) point of view to look at the evolving world of cloud computing. We ended up using both. Cloud computing and the two sets of scenarios will be presented and I will end with suggested steps for the strategic dialogue that can seed strategy development and innovation.

3. The Cloud Industrial Complex The Uncertain Future Cloud computing has emerged from a confluence of technological developments and market/economic opportunities. Cloud computing is a phenomena of key elements of information technology including the web, portable information devices, broad band accessibility, cheap storage, and powerful processing capabilities. The core economic value of cloud computing are associated with its ability to offer an almost limitless way for information service users (consumers, businesses, governments, etc.) to access and store unlimited data, process that data into needed information and services, modernize the applications associated with that data processing. Just as importantly all of this can done at reasonable and likely declining costs. Early concerns have focused on security of the data in the cloud, the quality of data and reliable access. Emerging concerns are related to the impact that cloud-applications are having on the evolution of some industries (i.e., competitiveness, changing barriers to entry, and stripping of business models) and impacts on society and culture as cloud-based applications change lifestyles).

4. Future of Cloud ComputingEnd User/Customer Perspective A way to think about the future is to isolate powerful, yet uncertain forces which will influence the course of events. Two are suggested below with their range of uncertainties. Cloud Computing Technological Advancement Stagnant Limited Unreliable Innovative Robust Highly Integrated Information Intensity of Lifestyles and Society Plateaued Niche Applications Silos Pervasive Widely Accepted Seem as infrastructure The point of view for these scenarios is that of customers and users. The organizing question for this set of scenarios is: “What is the future of cloud computing and how will it shape lifestyles and the way everyday life will be experienced in society?

5. Pervasive Widely Accepted Seem as infrastructure The two structural forces can be used to create this scenario matrix with defines the high level direction of developments that might shape alternative futures. Information Intensity of Lifestyles and Society Cloud Computing Technological Advancement Stagnant Limited Unreliable Innovative Robust Highly Integrated Plateaued Niche Applications Silos

6. Pervasive Widely Accepted Seem as infrastructure Several other key factors can be used in support of these two major factors to create potential worlds that can play out over time (three to ten years for example). Other factor which might influence the future could include regulations, economic issues and financial market concerns. Information Intensity of Lifestyles and Society Cloud Computing Technological Advancement Stagnant Limited Unreliable Innovative Robust Highly Integrated Plateaued Niche Applications Silos

7. Pervasive Widely Accepted Seem as infrastructure The distinct potential stories that can emerge in each quadrant as well as movement through all four can be used to think strategically. Different places in the world can also exist simultaneously in different scenarios (India may be in the SW quadrant where as South Korea may be in the NW quadrant). Information Intensity of Lifestyles and Society Cloud Computing Technological Advancement Stagnant Limited Unreliable Innovative Robust Highly Integrated Plateaued Niche Applications Silos

8. High Level Scenario Descriptions Pervasive Widely Accepted Seem as infrastructure The Clash of the Titans This is a world in which cloud-based applications are limited by the large companies in the field who use barriers such as IP, brand identity, and technical barriers to limit the fluidity and openness of customer applications. Consumers can do a lot with cloud base applications within market segments and under the control of key service providers. (Facebook, versus Google versus Apple versus Microsoft). Head in the Clouds This is a world where pervasive, interconnected, wide-ranging cloud-based services restructure everyday life into an “ information-mediated” existence. Everybody and everything has an information envelope which is continually accessible and sharable. What is shared with whom, and human imagination are the limits on cloud-based living. Information Intensity of Lifestyles and Society Cloud Computing Technological Advancement Innovative Robust Highly Integrated Stagnant Limited Unreliable Revenge of the Real World This is a world in which cloud-based services offer marvelous technological options, but find limited markets based on spotty value-added perceptions by consumers. Issues related to privacy and use of personal time lead to successful niche applications but limited cultural a lifestyle shifts. Win Some, Lose Some This is a world in which cloud-based service and applications are limited by government regulations and restrictions, and limits in cloud computing technology in the areas of reliability and security. Cloud-based services are vibrant in some consumer markets, but absent in some others where policies demand more controls. Plateaued Niche Applications Silos

9. Cloud Computing Future Industry Providers Perspective* A way to think about the future is to isolate powerful, yet uncertain forces which will influence the course of events. Two are suggested below with their range of uncertainties. Evolution of Cloud Computing Industry Business Models -Niche Players/Target Service Providers -Disjointed Building of Cloud Infrastructure -Whole Systems Cloud Service Providers -Fast Expanding Build Out of Cloud Infrastructure The Evolution of Cloud Computing Technology Out of Synch Software and Hardware Advances In Synch and co-evolving Software and Hardware Advances *This scenario matrix is created from the perspective of the uncertainty around how the cloud computing industry may evolve. The focus questions of the scenarios are what business models, what services might emerge, using what combinations of evolving cloud computing capabilities? The stakeholders for this set of scenarios would be executives and investors in the industry.

10. Hardware/Software In Synch The two structural forces create the potential high level alternative futures. A key question might be how market offerings may evolve in each of the quadrants. Evolution of Cloud Computing Technology Evolution of Cloud Computing Business Models Whole Systems Strong Niches Hardware/Software Out of Synch

11. -Hardware/Software In Synch -Software Evolution Leading Given these uncertain developments in technology development and the economics of expanding cloud infrastructure what kinds of services will be offered? How will the power of cloud computing be used in various forms of final applications? What business models will be used to offer those services in a profitable manner? Evolution of Cloud Computing Technology Evolution of Cloud Computing Business Models -Whole Systems -Dominant Oligopoly -Strong Niches -Emergent Companies Will Whole Systems companies buy niche players after they demonstrate market viability or compete directly with them from their larger base? -Hardware/Software Out of Synch -Hardware Quantum Jumps

12. High Level Scenario Descriptions Hardware/Software In Synch A Big Boys Game This is a world in which participation in the cloud computing business is dominated by companies with large balance sheets, lot of R&D capability and large market presence. Those companies (Apple, Google, Amazon) dominate the applications in the cloud space and get the majority of revenues. They set standards for middle sized companies and acquire them as needed. Perfect Competition This is a world in which small, medium and large companies all compete and innovate offering a wide range of services and products. Cloud computing invades and reshapes a wide range of industries with applications fit for their customers and products. Evolution of Cloud Computing Technology Evolution of Cloud Computing Business Models Whole Systems Strong Niches Let a Thousand Flowers Bloom This is a world very similar to the early years of the internet boom of the 1990s where applications looked like businesses. Lots of start-ups, lots of failures and plenty of successful companies. In the long term firms merge and a consolidated industry emerges. Fractured Markets This is a world of competing standards and chunky markets as big players compete with different suites of incompatible technologies. Consumers are hived off into different products and offerings. Large companies struggle to get to scale for large profits. Hardware/Software Out of Synch

13. Cloud Computing Scenario Dialogue As an example, I will suggest that the two sets of cloud computing scenarios match well quadrant for quadrant (they can be placed directly on top of each other). For instance the Northeast scenarios of “Perfect Competition” and “Head in the Clouds” are the same world viewed from the different stakeholder perspectives (industry services providers and consumer/users respectively). Both key stakeholders might be experience this as a world rich with opportunities. Industry service providers might be constantly trying to create the next new great application and business while consumers might be constantly looking for the next application that will make their lives better and different. The scenarios in the Southwest quadrants may also be very similar worlds viewed from different stakeholder perspectives. The “Fractured Markets” and “Win Some, Lose Some” scenarios would lead to a tough business environment for investors and a inconsistent and piecemeal market for consumers. Movement from place to place or nation to nation would be challenging due to differences in availability of services and product and inconsistent standards.

14. Scenarios in Dialogue Process Steps The core of the dialogical process with scenarios is to match and contrast different scenario spaces (or even scenarios developed as pathways through a set of quadrants). The steps are as follows: Both scenario teams live in their scenarios and suggest key implications and potential strategies. Both teams view each others scenarios and pinpoint similarities and differences. Find the most useful parallels and match points. Where scenarios from different teams are similar or match very closely, compare the different key implications and strategies. Dialogue about the similarities and differences. Share and contrast potential strategies. Capture new ideas and innovative perspectives. Each group may have specific questions that arise from their perspective that they would also ask the other group to respond to. Capture the results from steps 3 and 4 above to create a learning-forward agenda. Key questions in the learning-forward agenda can be organized around contingent strategies (contingent upon certain conditions arising) and early indicators (of positive, negative and surprising developments).

15. Fast Turnaround Scenario Dialogue With good facilitation this process can be easily performed with five intensive days of work spread over any chosen period of time. The two stakeholder teams have to be formed and guided. Each team would use a day to develop their scenarios (with the proper preparation) and a day to develop their implications and strategies. Facilitators can take the results from both teams and prepare for a final day of sharing and comparing. Key outputs will include both sets of scenarios, both sets of key implications and strategies, the contrasted results, and the learning-forward agenda resulting from the combined work. Please contact Gerald at gerald@artofquantumplanning.com for a working proposal and price for services.