Killer Innovations

In 1973, the US was caught in the grip of a crisis – the oil embargo. Gas prices jumped +300% overnight. Economic and political turmoil was the norm. During this time, many firms, including the oil companies, were on the verge of failing. Yet during this time, one company – Royal Dutch/Shell – thrived and grew. While others panicked, they executed a plan that had previously been rehearsed should such a crisis emerge. A plan that was based on one of many possible futures Shell considered during its regular planning process. Through this planning process, Royal Dutch/Shell had foreseen the possible formation of OPEC and the resulting shift of control for the world oil supply.

In today’s terms, we are dealing with our own set of crisis: the dot com bomb, the telecom meltdown and the stock market correction.

Is your company “thriving” or “panicking”??

Executives are being caught by surprise. Strategies and plans are being undone by unexpected changes – changes in the economy, technology and regulations that define the “playing field”. While being blindsided, executives (and their investors) often make sudden and reactionary changes, which in the end exacerbate the original problem. “If we had only known what was going on,” they eventually say, “we could have avoided this crisis.”

To avoid the turmoil, businesses need a better way to predict the future.

What does the future hold? It is the age-old question that businesses attempt to answer during the annual strategic planning process. Most strategies are severely constrained by the unpredictability of events – not to mention the unconscious process of aligning (more like aiming) the strategy to a single future. The resulting strategy has built in blind spots – the product of taking for granted that some things can’t or won’t happen. We don’t need to look far for never-before-contemplated events such as the bankruptcy of Worldcom or the massive drop in the stock market. Not having foreseen these surprise events, management teams are at a loss for ways to act when the turmoil continues.

The majority of management teams base their view of the future on an extrapolation of past results projected toward some future date. The reality is the future cannot be predicted with any certainty. Just as an old Arab proverb says, “He who predicts the future lies even if he tells the truth.”

To be better prepared to respond to the market chaos, businesses need to question their assumptions about everything and to realize they need to plan for multiple futures. The point is not to find the most probable future and “bet the company” on it. Instead, businesses need to identify a range of possible futures (scenarios) that, once understood, help it make better strategic decisions.

No matter what future takes place, the business will be better able to respond – and ultimately influence the future – if it has thought seriously about its perfect, nightmare and most likely scenarios.

For some reason, even when a business looks at multiple futures, there is an almost irresistible temptation to choose one scenario over the others. Unfortunately, reality does not follow even the best predictions. The purpose of a business going through the scenario planning exercise is help management suspend their disbelief thereby allowing them to truly believe that almost anything might take place. Then and only then can management prepare for what they don’t think is going to happen.

Just think . . . . . . . what could have been the result for the telecom market had alternative futures (evaporation of capital, the over building of capacity, the rapid decline in telecom stocks, etc.) been identified, rehearsed and prepared for?

Question To Ponder

1) What is the “perfect” future for your business? (e.g. the market recovers to levels beyond the highs experienced in late 1999 and early 2000)

2) What are the 5 challenges you will face if the “perfect” future comes to pass? (e.g. difficulty in hiring because potential employees were “burned” in the first wave of rapid growth and layoffs)

3) What would be the indicators that predict your “perfect” future is about to emerge? (e.g. consumer spending grows, new IPOs are brought to market)

4) What is the “nightmare” future for your business? (e.g. the stock market drops with no likelihood of recovery for quite some time)

5) What are the 5 challenges you will face if the “nightmare” future came to pass? (e.g. industry wide purchasing freeze resulting in a significant decline in your revenue)

6) What would be the indicators that predict your “nightmare” future is about to emerge? (e.g. housing values drop, unemployment begins to rise, interest rates increase)

7) What strategies would you implement that would better prepare you for both futures?