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In 2006, Nokia commenced production of its mobile phones in India with a lot of fanfare. They brought in the best manufacturing expertise, implemented lean manufacturing, had an excellent supply chain process.
Very soon Motorola would set up a factory very close to them as well. It was indeed a moment of pride for Tamil Nadu and Chennai.
However, Apple, a company with no record in the mobile phone business, was set about disrupting the industry. In 2007, they launched the iPhone and initiated the decline of both Motorola and Nokia. Apple incidentally, chose not to manufacture the phone themselves, but outsource manufacturing to Taiwan. This was to become the norm subsequently.
Nokia and Motorola are not the first to do the wrong things but execute with excellence. Many organizations practise excellence in their operations but seemingly miss the emerging disruptions.
In his book on Wardley Maps, Simon Wardley explains in-depth that every industry landscape and structure is constantly evolving. While there are organizations that are focused on excellence to create massive scale and industrialization, yet others are engaged in creating new business models. A few though, are bent upon creating innovation using both existing and emerging ideas/technologies in new ways.
Can organizations foresee the disruptions that are likely to happen in their industry? Shell showed the world it’s possible when it pioneered the scenario thinking process 5 decades ago. It helped them prepare for the oil shocks and they have been using the process continuously to look at future energy scenario’s.
We live in a world facing many disruptive forces, nimble innovators as well as climate crisis-induced effects. Despite current business being profitable and robust, the future has plenty of uncertainties ahead. Planning for growth in the future requires an ability to look at the future and prepare for future scenarios.
Pierre Wack, the unconventional oil executive at Shell, while writing his 1985 paper on Scenario Planning in HBR, states that scenario planning is about shifting mindsets of leaders
The most important purpose of the scenario building process is to shift the thinking of the leadership inside the organization about what might happen, in the future, in the external environment.
Scenario planning enables the organization to learn about and take a position on specific assumptions on which strategy is based. It also helps to provide an umbrella focus, for engagement conversation and alignment, within the organization and strategic support for organization development.
Scenario planning steps are well researched and documented. It involves 6 steps
Step 1: Analyse drivers of change
Step 2: Create a viable framework linking drivers
Step 3: Identify a small number of plausible scenarios from the critical forces
Step 4: Prioritize to two or three scenarios
Step 5: Draft the Scenarios
Step 6: Identify issues that require strategizing
Scenario planning probably is the most effective way for developing an innovation strategy built on future requirements.
I find the approach of Innovation360, utilizing the power of their SaaS platform and the PESTLED & Scenario Planning toolkits as a powerful way of strategy development. (you can read more here)
Here is an extract from a scenario developed by Innovation360 Group
Scenario: World of Limited Resources
In this scenario, climate change is spiraling out of control, which has forced policy makers worldwide to take drastic measures to reduce the climate footprint of the global economy. Unsustainable energy sources are ruled out as their environmental impact can no longer be ignored.
The rush to renewable energy is straining the global economy because the overall supply of energy has reduced, increasing the demands on new energy producers. National governments try to support research and innovation into alternative energy sources and into new technology that could reduce energy costs.
Consumers have become more aware of the cost of energy, so consumer behavior is changing. People favor products and services with low energy requirements and a reduced climate footprint much more than before.
Globally, policy makers and legislators start making dirty energy, such as coal and other fossil fuels, illegal. Many countries phase out dirty energy in favor of clean energy sources, such as wind and solar.
The increased need for renewable energy sources to replace dirty energy sources increases the demand for the raw materials needed to create wind turbines, solar panels etc. Although the demand is increasing, the supply of these materials (i.e., the capacity to mine, refine, and transport them) is reduced since there is an ongoing energy crisis.
This supply vs demand gap results in material prices skyrocketing, impacting industries across the globe. Difficulties in securing the materials needed in the production of their goods are forcing companies to adapt their products to be as material efficient as possible. The lack of energy across the globe also forces production processes to slim down and become as energy efficient as possible.
Local energy networks start popping up as a result of the lack of reliability in the larger power grids. Power outages are common, and local governments and businesses secure their own power needs by localizing the production of power.
As materials become more difficult to purchase, the drive to recycle or reuse existing products becomes a growing movement. Companies that learn to reuse materials from broken appliances or waste thrive, as they can find ways to supply the market with products, while those producing only from raw materials are struggling to keep up with both the increasing demand and rising prices.
What happens if China doesn’t agree to reduce its emissions? The EU and US may decide to reduce their own footprints to compensate as much as possible while negotiating. China could start to hoard materials since its investments in Africa have given it access to many natural resources. The Chinese economy will grow while the rest of the world economy will shrink.
What would happen if new legislation banned all non-renewable fuels? Fossil fuel cars would disappear from the roads? Would there be reduced traffic around the globe? The internet may suffer, as it has high energy consumption?
Hope this scenario is thought provoking. Do reach out to me if you would like to discuss scenario planning as a strategy development tool.
Krishnan Naganathan
Krishnan is a leading innovation consultant and focuses on helping people and organizations innovate and build capabilities for innovation. He brings over 25 years of experience in the industry and consulting. You can reach him by phone / WhatsApp: +919791033967 or email: krishnan@thinkhorizonconsulting.com