Wharton Chapter 10 - Scenario Planning for Disruptive Technologies

The chapter asked a few interesting questions to determine how a company can best prepare for emerging technologies by using scenario planning. The future is unknown but companies should ask. "which set of multiple futures" might be likely and how should a company prepare for them. Companies should consider multiple different scenarios and create or adjust their strategies to define the best path. Scenario planning also helps define the best opportunities and risks associated with the emergent technology and how a company should go about handling them. This can be done by watching for weak signals in the industry and amplifying them. These signals can have dramatic changes on a market or industry.

Scenario planning address three challenges that are inherent in emerging technologies:

• Uncertainty - scenario planning is based around this attribute and can be qualified using objective probabilities
• Complexity - scenarios that are based around a diverse set of factors (political, economic, social, technological) and explores how they mingle with one another in a system
• Paradigm Shift - scenarios that change and "shift the entire mindset and rules" and focus "amplifying the weak signals"

Scenario planning takes the various inputs, uncertainties, and data and puts them into usable scenarios with differing assumptions to be further analyzed. The results are patterns among all the outcomes that can help a company make decisions on an emerging technology and shape the future.

There are a number of steps used in constructing scenario planning. These steps include:

1. Define the issue - determine the scope and use past experiences to help define time frame
2. Identify key stakeholders - who are the parties affected by the change and who are the parties that can influence them
3. Study the driving forces that shape the future of the technology - these forces include Political, Economic, Social, Technological. Gather information that pertains to these forces
4. Identify trends that will affect the interest - based on the data, try to understand how and why these trends will expert influence on the future
5. Identify key uncertainties - outcomes from events (i.e. political race) and these uncertainies can be used to project possible outcomes from the scenarios. It's important to understand the level of importance of each of these uncertains and to weight them accordingly
6. Select the 2 most important key uncertainties - go through list of uncertainties and vote on the top two based on findings from steps 2 - 5.
7. Assess te plausability of the scenarious - determine the likelyhood of these scenarios occuring by analzying trends, the number of uncertainties, and the actions of the stakeholders.
8. Assess the revised scenarios - determine how the stakeholders would react in the scenarios to develop more conversation with the organization and strengthen/weaken the scenarios.
9. Complete more research - put the scenarios into models and diagrams to further explain the nature of the scenario and it's complexities.
10. Reassess the uncertainty ranges - examine the variables under each of the scenarios to see how things might change. Go through the details and examine steps 1-9 to see if any of the data should be changed.

The scenario planning is important because it can be used to "calibrate the nature and extent of comittment a firm to should take in pursuing a set of technologies.. ". The chapter applies the concepts from scenario planning to the newpaper industries.

There are four key traps to avoid when scenario planning:

1. Failing to gain top mgmt support early on - getting buy in from the top early on in the project will help ensure success for the project. Top mgmt are most of the key decision makers in scenario planning (Step 2) and without them, steps 3 -10 may not be completed
2. Lack of Diverse Inputs - get outsiders opinions to scenarios as they may see things differently from those internal participants and these people may help identify other complexities or possible scenarios that should be considered
3. Failure to stimulate new strategic options - the options may not be as groundbreaking or as convincing to leaders in the company.
4. Not tracking the scenarios via signposts - the scenarios may not always have all the grainular data and scenarios need to look at both the big picture and the details to fully understand the scope and impact.

A good example that has followed scenario planning has been the change from oil/fossil fuel cars to electric/hybrid vehicles. The issue at hand is that gas has become very expensive and the consumers (the stakeholders) are looking for personal transportation to alleviate the issue of rising fuel prices.

Car manufactures have looked at a variety of technologies (scenarios) regarding how to combat the issue of rising fossil fuel costs. The manufactures have analyzed the driving forces (political issues, economic issues, social issues) of the rising costs and are creating new ways to deliver low-cost, high effecient vehicles to consumers. These new vehicles have come in the forms of hybrid, electric, and biodiesel giving us four scenarios as stated from the energy scenarios website:

• Peak of Oil is in the distance, Reactive Response - resume business as usual; no change
• Peak of Oil is in the distance, Proactive Respone - transition towards other sources & options
• Peak of Oil is soon, Reactive Response - limited local supply of oil and import will be very expensive, pay higher prices or switch to alternative vehicle
• Peak of Oil is soon, Proactive Response - known that the supply of oil will be limited, disperse fuel where most needed and import only when necessary.

The next step is to look at the uncertainties (price of the dollar falls in world market, new oil supply is discovered in the US, etc) and evaluate the plausability and the level of impact and determine feasibility. Car manufactures are continuing research to look into other methods of energy (battery powered and solar powered that allow for greater distance) and reassess their markets and findings. They then make the decision of whether to move forward.

(http://info.energyscenariosireland.com/Scenario_Planning)