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November 2008
- Vol 3, Issue 3
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Clear thinking about the future
In the best of times we like to think that the future will look like the present, only more so. We draw the "hockey stick" charts that show product adoption and profits as a ever increasing upward line to the horizon. That thinking is reasonable for the short term. Once significant disruptions begin, such as the recent financial meltdown, it's time to recast our expectations. When significant changes occur it's valuable to assess what we believe the future may look like and begin to plan for that future. There's probably no better tool to use than Scenario Planning to create a vision of alternative futures based on our knowledge, opinions and trends in the environment. Scenario Planning
Scenario planning has been in use since the 1970s and like many planning tools comes out of the military. For years the military has used strategic simulations with a number of inputs and uncertainties and "gamed" the process to understand likely future scenarios. After the Oil Embargo in the 1970s, Shell Oil adopted an ongoing scenario planning capability. Shell is recognized as one of the leaders in the use of scenario planning, although there is some debate in the industry and within Shell about the usefulness of scenario planning. What the critics fail to discuss is whether or not Shell was able to have a first mover advantage or avoided investment decisions that other firms took given the insights of the scenario planning efforts. In its simplest form, scenario planning considers the existing market conditions and trends and forecasts likely scenarios over a given time horizon. The scenarios are built by cross-functional teams considering political, economic, technical and competitive changes in the environment. Once these future scenarios are identified, the team places probabilities on each scenario and determines the appropriate actions for the firm if any scenario were to unfold. You can see an excellent overview of Shell's process for scenario planning here. Why should we do scenario planning
now?
In the current environment there are number of reasons to consider scenario planning now. First, in the United States there is a significant political transition. We do not know exactly how the priorities will change under an Obama administration, but we can guess that there will be differences in funding and areas of investment. Second, we are entering a recession. Given that most average recessions end in approximately one year, we know that the economy will start to grow again in the not too distant future. Third, the market turmoil in the financial markets will be resolved, and this will create change and new opportunity. These are just three key drivers of change going into 2009 - financial, political, economic. In your region or industry you may be able to identify others. What we know for certain is that these factors will create change and opportunity, we just don't know yet what changes will unfold and what those opportunities will be. What does it take?
Scenario planning can be accomplished by a small, cross-functional team which is empowered to consider the drivers we've identified above and other specific environmental or industry factors. The team should be provided with a time horizon to consider and the scope of their work is confirmed. Then, the team considers the status quo and examines the trends and the impacts of the significant changes in the market. By analyzing trends, interacting with industry experts and forecasting likely outcomes, the team can create three to five significant scenarios and determine their likely outcomes. All of this work can be done with a relatively small team using information that is readily available in a three to four month timeframe. Certainly the team can do this work in less time, or in more time, depending on the depth of research and the robustness desired in the final analysis. The point here is that given all of the changes in the market, very few firms can afford not to spend some time in these kinds of efforts. Conclusion
Scenario planning is helpful now, at this point in time, given all of the changes we can see happening. It is a proven tool to help you understand the possibilities of the future, and as some people have said, going through the process can generate more insight than the ultimate outcome. Scenario Planning requires a commitment of time and resources, but that commitment will pay off in terms of the learning your team will receive through the process and the scenarios and options they uncover as part of the result. Note that scenario planning, while especially valuable now, is a tool and a method that should be used on a regular, once or twice a year basis to understand and shape the future. Don't think of it like a fireman, to be called on in the event of a significant emergency. It should be used regularly and consistently in all types of conditions. |
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One big idea
The mythology around a lot of the innovation stories we hear and tell ourselves has to do with the one really big project or idea that dramatically changed the market. When we talk about Apple's products such as the iPod or iPhone, we treat them as significant disruptions, while we ignore or forget that these products augmented existing applications already in the market. In many cases, our management teams ask us to create the next "iPod". This request is genuine but reflects little understanding of the methods, cultural change and process necessary to achieve even a modest idea, much less a disruptive idea. In addition, what's missed is the fact that some of these disruptive innovations are really compendiums of incremental innovations well marketed and well positioned. The iPod and the iPhone augment or replace existing technologies with incremental design and a more carefully considered user interface and experience. They also leveraged Apple's cool, outsider "not Microsoft" image. These innovations required more than just an idea, but broad corporate backing. In this logic lies the trap that many firms fall into when they seek one big idea rather than creating a sustainable innovation capability. Challenges with one big idea
In many firms, innovation takes on too much importance, as if we'll "bet the farm" on the team to create one big idea. See my review of Inside Project Red Stripe below for a team that went looking for a whale and the issues and challenges that presents. While it's not unexpected or even wrong to set such a high goal, the visibility, expectations and pressure impact the team, and often these teams don't have much training, inherent process or cultural buy-in to help them achieve their goals. It's akin to asking an average hiker to scale Everest on national television with no prior training or access to mountaineering techniques or tools. When the innovation team become too focused on the "one big idea" they place too much pressure on themselves and ignore good ideas that would have a reasonable impact if implemented, often to eliminate all of the ideas they consider and end up implementing nothing. Getting "out of the gate"
While every firm wants those headline grabbing innovations, few firms have existing corporate culture, tools, techniques and teams in place to start such a significant project. In fact, most organizations have little internal capability for innovation at all, so a careful building block approach to innovation is probably more in order. Yet to many executives, the training, tool development and process definition seems like a lot of investment when the management team is convinced that good ideas already exist within the company. The investment in building the capability and infrastructure is rarely considered necessary or valuable, and it seems to waste valuable time that could be spent creating and researching ideas. Yet without this discipline and capability, little will actually get accomplished, and even if the expansive team identifies ideas, they'll still require these processes and methods to evaluate ideas and make their selections. What's the "right" answer?
We all know that most management teams have very short attention spans, and want results quickly. Where innovation is concerned, the bigger and faster the result, the better. However, many firms are guilty of putting the cart before the horse. Trying to innovate without processes, training and some cultural change, especially on a very visible and high stakes project can be difficult. What may be advisable is to kick off a large, disruptive project and in parallel work on tactical innovation projects or initiatives throughout the organization, while also focusing on cultural change, compensation and training. In that manner, your team addresses the big disruptive strategic change that everyone believes is important, and also delivers tactical, short term wins and builds skills that will be necessary when the big ideas matures. |
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A blog or a book?
I was contacted recently and asked to review a book about innovation. That's not unusual, I generally write about one review a month on books about innovation. What was interesting about this particular book was its format, subject and purpose. The book, Inside Project Red Stripe, is a book about an innovation project that was conducted within The Economist (my favorite magazine). The book is really a collection of insights and blog posts by the author, who was allowed very close, real time observation of the team. 360 Degree perspective
Unlike a lot of management books, Inside Project Red Stripe is not a triumphant recording of a successful innovation project, nor is it a dry, step by step account of "how" to do innovation. Rather, it is a thoughtful dissection of the work necessary to build an innovation team, determine and agree on a goal, and the struggles to define exactly what "innovation" is. The book couldn't be more accurate in it's description of some of the conversations and the depiction of the challenges an innovation team can face. Andrew Carey, the author and the fly on the wall of the project, uses a somewhat disconcerting approach to compile the book. Rather than use a chronological sequence, he ordered his chapters around key issues or topics the team faced. Additionally, since he was involved during the project and observing the team members like an anthropologist, the book takes on an almost Rashomon like quality, told from a number of different perspectives. Why you should read this book
You may not like this book. You may find it difficult to read in one sitting. You may not agree with the conclusions of the author and you may shake your head at some of the decisions the team makes along the way. But, with all of that said, no book comes closer to uncovering the challenges and complexities of building an innovation team and managing an innovation project. This is not an indictment of the Red Stripe team - they did some things well and made some poor decisions - but we can learn from this dissection of their work since many of the challenges and issues they faced will be faced by other innovation teams. If you are running an innovation project or initiative, or considering starting one, I'd highly advise you to read this book and consider the successes, failures and learning of the Red Stripe team. |
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If you'd like to discuss how OVO can work
with you
to improve your innovation strategies, ideation
sessions, innovation processes or software,
contact us today at our website
or
(919) 844-5644 x789.
Sincerely,
Jeffrey Phillips
OVO
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