Scenarios Tool for Strategy

1. ScenariosTool for Strategy Stuart Henshall October 5, 2001

2. “Scenarios represent a revolutionary idea — not getting the future right, but changing the minds (thinking) of management” Pierre Wack, GBN, 1993

3. Can we predict the future? In the knowledge economy learning faster may be the only competitive advantage! How do you speed up succcessful strategy generation for your clients? • What is the emerging context for business over the next 10 years? • What skills and competencies will the future require? • How do you devise a clear innovation strategy? • Is your approach to market research failing new product - service breakthroughs? • Are you effective at thinking forward, beyond competitors - collaboratively? • What questions should you really be asking?

4. What are Scenarios? • Scenarios are devices for ordering one’s perceptions about alternative environments in which one’s decisions might be played out. Their power comes from being focused. • Effective scenarios are always “customized to context”

5. Scenarios and Strategy • Great Scenarios • Planning • Strategy • Forecasting • Portfolio • Conversation • Adaptive, no business model works forever. • Migration paths that survive and thrive • Broad applicability • Understand and analyse industry dynamics • From positioning, to value, process and design • Simple to apply

6. “When new technologies disrupt entire industries, the worst thing you can do is stay close to your customers” Clayton Christensen Not just technology but the power of: “Are you a spec-driven prototype culture or a prototype-spec driven culture?” Michael Schrage disruptive ideas

7. STEEP & outside-in thinking • Technology • Environmental • Economic • Social • Political The Business in its Environment

8. Systemic Thinking:Events - Patterns - Structure

9. Environmental analysis to robust strategies Entry point for Scenarios as a tool Safeguard the future. longer term risk assessment Cross functions / disciplines New perspectives / innovation BENEFITS: Learn new techniques Create new options Add to top line $ Explore unconventional ideas in a safe setting. Facing-up to uncertainty New avenues for learning / better questions One-day to extended programs

10. Focal issue • Key factors • Early indicators • Environmentalforces • Scenariologics • Implicationsand options • Criticaluncertainties • Scenarios Developing Scenarios

11. The Driving Forces(In original order, with number of votes in parentheses for degree of importance and uncertainty.)Top ten items shown in bold 29. New forms of protest (0)30. Markets vs. customers (2)31. Materialism and individualism vs. social concerns, communitarian values (0)32. Technology and the mobility of people (0)33. Feeling good about where you work (5)34. Selling solutions and speed (1)35. Wider range of competitors (9)36. Getting from plans and ideas to actions and results (0)37. Access to capital / equity markets (27)38. Global regulations (6)39. Getting more cash out of old businesses (7)40. "Generation Next" (26)41. Commoditization of materials (6)42. "Born to Flip" technology companies (0)43. Shorter shelf life of competitive and strategic advantages (5)44. Trend towards immediate gratification (5)45. Impact of bio-digital technologies (28)46. Financial markets re-defining criteria for "value" (4)47. Tightening cost structure (12)48. "Greening" of the environment (7) 49. What if speed isn't the issue? (0)50. AIDS in Africa (1)51. Challenges to intellectual property (0)52. Future of China / democratic or not? (19)53. What sources of competitive advantage have the longest shelf life? (5)54. Population trends: slow growth in developed world, rapid growth in developing world (0)55. Future of Russia (0)56. Future of education (6)57. Intergenerational transfer of wealth to Baby Boomers in U.S. (0)58. Haves and have-nots (7)59. Future of global religion (4)60. Integration of multiple business models at the same time (22) 61. Improvements in life sciences, medical care, longevity (11)62. Ye Olde Lemonade Stand (the "four-Ps" strategy at an early age) (0) 63. Attractiveness of enterprise for people, customers, and communities (balancing work, relationships, self, and community) (3)64. Most successful companies influence outer circles; shifting age of customers (create early loyalty) (3) 65. Everything is free on the Internet (17)66. Business model design more modular, adaptive (5)67. People learning about technology in unconventional ways (e.g., gaming) (0)68. How do we harness all of this interest in technology that is so fragmented in its use and development at the consumer level? (3)69. Individual spirituality/create your own future (0)70. Open source code / Linux movement (5)71. Online privacy protection (e.g., for kids) (0)72. War / national defense / space exploration (0)73. "Always in touch" workers (wireless technology and the disruption of leisure) (5)74. The computer that does everything (e.g., doubles as a toaster) / digital appliances (5)75. The pioneering spirit (4)76. Increasing stress (0)77. The power of the network (e.g., Napster) (11)78. How will 10-year-olds compete? (0)79. Individual marketing (1)80. Alternative medicine "natural-natural?" (1) 81. How will global warming affect the creation and use of silicons? (8)82. Rate of competitive attack, esp. e-based (9)83. Combinatorial chemistry: "Doing it nature's way" (large-scale trial-and-error) (0)84. Worldwide education trends (0)85. Large and growing Latino population, with low education levels (0)86. Online education (0)87. Global activism: "Big business is bad" (Ralph Nader for President) (15)88. "Generation Next" interest in technology (3)89. Mass customization / targeting of "micro-segments" (3) 1. Regional growth and timing (12)2. Information superhighway (20)3. Adaptive, flexible, and symbiotic organization (12)4. Isolation vs. globalization (16)5. Impact of technology on globalization (2)6. Pervasive, accessible technology (0)7. Scope and speed of change (7)8.Retention and attraction of people (32)9. Entrepreneurs within the organization (7)10. Tribalism vs. globalism (2)11. Ethics around biotech (social contract) (0)12. Company definition (dilemma between innovative materials and market opportunities) (0)13. Serving customers with others involved (9)14. New sources of value creation (12)15. The continued relevance of "the American way" (3)16. Will "best of" teams work? (13)17. Where will ideas come from? (7)18. Reconstituting old ideas (0)19. Changing demographics and attitudes (population aging and new generations) (12)20. Social/business dynamic tension (0)21. Could something like mini-mills revolutionize Me2? (4)22. Energy discontinuity (7)23. Work vs. leisure balance (8)24. Telecommuting and working from home (2)25. Relevance / dominance of silicones (11)26. General Electric model (materials, capital, services, infotech) (4)27. Changing rules for competitive advantage / One billion people in China (13)28. External threats and compliance (politics, regulations, environment, activists) (3)

12. Beginning New ways of harnessing the Internet proliferate while new forms of file-sharing change rules for users and dataminers. Middle Bio-digital technology emerges in limited applications; Open Source provides the new operating code of conduct. End Real-time community clusters begin to manage and frame programs for future; governments become powerless. Example Scenario “A Stretch Beyond”Story Map / Timeline 19. Governments no longer deemed useful 13. Developing word profits from new material banks 5. China declares free Internet access for all citizens Global 1. Untaxed Internet revenue major concern 10. Euro court says people to rule Internet 18. CyberNotes replace national currencies 14. Breakthrough to produce key materials by low-cost biological routes 4. New net privacy systems proliferate 8. Apple launches BG-15 with bio-materials casing 20. Affinity tribes cluster to dominate global trading Industry 3. 50 million people rally globally against government control of Internet access 12. HSC, DCC, Intel, IBM & Dell form “for profit” virtual community 7. Implanted smart vaccines gain acceptance 16. Computers go biological 21. The cyber-self emerges 11. Nano-monitors combine with “Digi-Docs” to solve health problems 6. Open Source movement active in solving intellectual property issue 17. Hacker invades the brain! Personal 2. Napster legal woes turn file- sharing to new tools 15. New simulations consolidate play and learning 9. Open Source bounties return intellectual property to originators 2000 2010

13. Scenario “A Stretch Beyond”Structural Underpinnings / Overview Social betterment increasingly desirable outcome Commoditization of materials sharply reduces costs Data aggregators form real-time communities interested in managing change Push technology frontiers & curiosity Tension grows between government control & personal choice Populations demand access; efficient net mobilization Summary Description The burgeoning bio-digital revolution evolves new “virtual communities” as material costs plummet and IP rules are radically changed. New forms of networking enable consumer choice to tip whole systems. They use their new-found info-power in real-time clusters that constantly redefine boundaries, access, and technology. Individual wants are invisibly mimicked and negotiated by cyber-bodies. Government becomes irrelevant. End State: 2010 Global consumers find new power and freedom in directing their choices. However, having everything is now cooperative in execution. A willingness to share your data is part of an individual’s social contract with their affinity tribes and mentors. In this world, highly complex systems integration enables real-time response to these communities of consumers, who use their information-sharing capacity and financial resources to continue pushing the frontiers of technology and knowledge. There is a whole new connotation to the word “markets.”

14. Terrorism Global television Tele-imersion Neuroscience Genetic disposition Psychoactive drugs Spiritual connectivity Business and doing good. Corporatization of the commons - water to patents China Global liquidity - long boom? Rapid climate change Global connectivity - real-time Singularity - the spike Recent Rise in Uncertainty:Challenge or opportunity over the next 10 years?

15. Energy revolution Global epidemic Water scarcity Nanotechnology Artifical intelligence ET contact scale of potentially transformative events is greater than ever explore, assess, novel approaches - solutions remarkable people Wild Cards:global, disruptive, beyond control and rapid

16. Prosperity Values Axis Socially Oriented Individualistic Hard Times Economic Axis The Scenario Matrix Continuation of a strong Long Boom Economy Success of biotechnology and gene mapping lead customization to individual extremes Biotech-provoked biological disasters stimulate consumer responsibility promoting environmental care • The scenario matrix was generated after discussion from a long list of uncertainties. • Reviewed in the context of the focal issue “revolutionary meal products” • Determined the Key Factors and Environmental forces • The critical forces; most important, most uncertain determined our matrix. • Boom capitalism • Demand side bio-tech • Technology prevails • “My way” • Interchange Standards • Sustainable economy • Biotech backlash • Natural Alternatives • Spiritual Advocacy • Co-creation with consumer Silicon SuperMeals Napa Cuisine Welfare of Society Government Tolerance Sustainable Development Suspicion of Science European Massification Individual Liberty Self Expression Entrepreneuralism Less Regulation American Attitudes Individualization Freeway Fuel • Long recession • Income stratification • Community economy • Relationships / trust • Regulatory / Reactive • Deflationary Environment • Price driven • Internet auctions • Faster-is-better • Food is fuel Federal Food Events shape new government involvement and protectionism leading to new community networks Food is seen as fuel in a deflationary economy as a result of faster-is-better and a lowest cost mentality Economic collapse bust of some sort Recession or Deflation?

17. Values Axis Individualistic • Deflationary Environment • Price driven • Internet auctions • Faster-is-better • Food is fuel Hard Times Economic Axis In a Freeway Fuel worldwe consume to keep going, lowest price is king. Food is Fuel “Smart” Consumers Rule Trad. Retail Disappears Industry Structure • Fragments • Networks • Convenience & price rule • Lowest cost networks rule • Functional food benefits keep you going Biotech • Economic efficiencies pursued • Biotech supply driven Forces at Work Brands • Personal Agents • Price Brands • meta-mediaries This is a world in …. Meal times • Fuel stop • Skipped • Performance Implications E-Commerce / Internet • Auctions • Priceline • e-bay.com • Networks Health and Nutrition • Keep you going / moving • Functional Health

18. N S G F Summary Forces at Work Freeway Fuel Federal Foods Napa Cuisine Silicon SuperMeals Industry Structure • Fragments • Networks • Fragments • Decentralizes • Consolidates • Networks • Fragments • Networks Biotech • Economic efficiencies pursued • Biotech supply driven • Regulations and standards control biotech • Necessity Driven • No Ag Biotech • Consumers block developments Bio-ethics slows implementation • Genomic driven • Prevention and Life Extension drive biotech's grand plan Brands • Personal Agents • Price Brands • meta-mediaries • Local / trusted • Info Brands • Corporate Brands • Policy Brands • Personal Brands • One to One Meal times • Fuel stop • Skipped • Performance • Safe Nutrition • Simple Foods • Natural Solutions • Wellness spiritual • Personalized • Individual • Once a day E-Commerce / Internet • meta-mediators • auctions • priceline.com • e-bay.com • Fragmented Portal driven • ISP • Yahoo etc. • Trusted • amazon.com • drugstore.com • peapod.com • Co-creation • accumins.com • geocities.com • tripod.com Health and Nutrition • Keep you going / moving • Functional Health • Functional health • Minimum Daily requirements • Natural in-tune with nature • Balanced Nutrition • Personalized • maintain me • repair me • enhancement me

19. Lessons for shaping the future What elements will the customer control Consumers determine technical agenda • Policies • Ingredient Supplies • Public Voice • Associations • Nutrition & Goodness • Individual Relationships • Size of Database • Share of Consumer Intelligence • Genomic property • Regulations Standards • Locally and Direct • Capability to own and distribute information • Cost Efficiency • Price Transparency • Share of Network • Product Efficacy Produce without inventory? Profit from someone else's standards

20. Virtuous Circle - Robust Strategies What elements will the customer control Consumers determine technical agenda • Policies • Ingredient Supplies • Public Voice • Associations • Nutrition & Goodness • Individual Relationships • Size of Database • Share of Consumer Intelligence • Genomic property • Regulations Standards • Locally and Direct • Capability to own and distribute information • Cost Efficiency • Price Transparency • Share of Network • Product Efficacy Produce without inventory? Profit from someone else's standards

21. Leverage IC and Info resources What elements will the customer control Consumers determine technical agenda • Policies • Ingredient Supplies • Public Voice • Associations • Nutrition & Goodness • Individual Relationships • Size of Database • Share of Consumer Intelligence • Genomic property Food Safety • Regulations Standards • Locally and Direct • Capability to own and distribute information • Cost Efficiency • Price Transparency • Share of Network • Product Efficacy Profit from someone else's standards Networks

22. Build Consumer Trust What elements will the customer control Consumers determine technical agenda • Policies • Ingredient Supplies • Public Voice • Associations • Nutrition & Goodness • Individual Relationships • Size of Database • Share of Consumer Intelligence • Genomic property Superfood Food Safety • Regulations Standards • Locally and Direct • Capability to own and distribute information • Cost Efficiency • Price Transparency • Share of Network • Product Efficacy Networks

23. Proliferate Personal Networks What elements will the customer control • Policies • Ingredient Supplies • Public Voice • Associations • Nutrition & Goodness • Individual Relationships • Size of Database • Share of Consumer Intelligence • Genomic property Superfood Customization Food Safety • Regulations Standards • Locally and Direct • Capability to own and distribute information • Cost Efficiency • Price Transparency • Share of Network • Product Efficacy Networks

24. Scanning from the future! • Little signs of big changes • Think upstream • Parking lots, subscriptions, events • Vectors of change

25. NEW BELIEF Speed of Changeplus complexity of inter-relationshipsof factors takingplace in environment PEOPLE BEHAVIOR & CULTURE MAIN DRIVER SEVERAL FUTURES ARE POSSIBLE AND PIECES CAN HAPPEN SIMULTANEOUSLY THERE IS NO “BAD” AND IT ISA LOT MORE COMPLICATED THAN WE THOUGHT MUST BE MORE THOUGHTFUL ABOUT THE “UNDEVELOPED WORLD” SEVERAL “REAL” POSSIBLITIES SOLUTIONS- PROBABLY A MIXTURE OF ALL OF THEM • NEW • Business Potentialof “Markets of 1” • Generation Next’sbroad implications • Heightened appreciationof geo-politicaltrends Future ismultiple vectorsoff past road,several of whichwe may wantto take quickly GEO-POLITICAL MONITORING NEEDS TO INCREASE BE PRO-ACTIVE VS. REACTIVE • Monitor • Green W.R.T. chemicals all materials • Global trade openness • Internet impact on “Have-Have Not” • Materials trends/disruptive technologies Monitor China & Eastern Europeas proxies forgeo-expansion Research Mini Basic vs. E.O.S. Basic Bio - W.R.T. si Learning loop Old Assumptions THE GREEN MOVEMENT IS A THREAT Implications of the Scenarios for the Focal Issue INTERNET MAIN DRIVER OLD Future will befaster tripdownsimilar road. PRETTY SIMPLE AND EXTENSION OF THE PAST ONE RECIPE FOR SUCCESS • Implications • Sufficiently addressinggeo/political impact? • Will business modelsufficiently incorporatesocial impacts/scenariothinking? Must beflexible enoughto succeed in multiple/changingenvironment We cannotbet on anyone businessmodel • OLD • Markets definedby SIC codes • Less pressing need& importance ofgeopoliticalterms Future(with boundaries)is Predictable Need robustbusiness model &strategy—mostlikely future is ablend of the3 scenarios.Need to be ableto respond There are nobad scenarios, justopportunities toadjust & moveahead. NEED TO GET OUT OF OUR HISTORICAL PARAGDIGMS Look for keyinflections points: “Internet China” “Biotech/Digital” “Leaders of the Green Movement” SOCIETAL REACTION TO TECHNOLOGICAL STRESSES REGULATIONS & TECHNOLOGY BACKLASH- TECKNOLOGY SOLUTIONS VS. TECHNOLOGY THREAT New Beliefs Research/Monitoring • “FUEL CELLS” • “Ethics of the • Bio Revolution” • “Government & • Political Trends” • Open/Close • Green/Black • Tech/No Tech • Monitor • Recurring Scenarios • Planning for predicting trends • Internet penetration • Strategic monitoring ofgeo-political trends • (especially Asia) Understandmore about Bio & Digital Markets Research The Convergenceof Bio-tech & Digital-tech

26. Prototyping: Speed, Intuition & Community

27. What scenarios opportunities may exist for you? Benefits?

28. What can we offer? • One-day collaborative program • Executive development programs 3 to 5 days. • Templated facilitation tools • Scenario - Innovation development programs • Large-scale corporate change workshops • Learning journey design • Ideas connecting networks

29. ScenariosTool for Strategy Stuart Henshall October 5, 2001