Introduction
The unit 3 IP task requires a comprehensive discussion on the importance of scenario-type planning and innovation; and why businesses without proper scenario-type planning tend to experience failure when they rely on standard forecasting. Is scenario planning important to an organization? Scenario planning brings agility to an organization and helps organizations to be proactive and adapt to multiple developments and eventualities. It helps to understand the outcome of key business opportunities and key variable advantages; including the ability to handle internal and external sudden changes, an example is the recent supply chain issues, raw material cost increases that may cause a company to restructure or respond to sudden forces in a rapid and calculated manner.
Scenario-type
planning, scenario analysis, and scenario prediction
An organization must also include scenario thinking, and scenario-use methods, to form strategic planning that will be flexible for business long-term planning. What factors contribute to good strategic planning in an uncertain and ambiguous business environment? It is not the amount of money spent on traditional research and development; scenario planning plays a major and appropriate role. In today’s business applications, less emphasis is placed on understanding the behavior of your competition, more attention or emphasis is spent in understanding the natural environment you play in. For example, the Royal Dutch Shell organization describes scenario planning as changing the mindsets of the extrinsic behavior in the part of the world they are exploring before formulating some specific strategies. Scenario planning involves systems thinking and recognizing as many factors as possible in analyzing the complex ways and alternatives with non-linear function parameters. Another example, farmers may use scenario planning for the prediction of weather factors and to determine future harvests, sales forecast, and to determine what drives future farm investments.
Discuss
an organization that
used standard forecasting without the application of appropriate scenario-type
planning
I explored a few articles on newspaper companies for this research but decided to explore the Sony Walkman story; it was fascinating, as I witnessed the evolution and factors that contributed to the fizzling of the Walkman evolution from Sony. According to (Hernandez, 2018), Sony organization did not perform proper or acceptable Scenario-type planning but counted on their experience to carry out standard forecasting; this was one of the major reasons their market share fell behind Apple, and they never recovered. Major Key requirement of scenario planning is apprehension and appreciation of future trends and how difficult to understand due to market forces and other environmental factors, including the desire to learn what the future holds (Wade, 2014). It becomes essential to understand that predictions and scenario-type are not the same; the scenario has a contrasting way of peeking into the future (Wade, 2014) but predictions forecast the future. Looking back to Sony Corporation, they had a good product and they should have conducted several braining storming sessions to understand the trends and other driving forces that may have affected Sony Walkman, like indirect and direct ways that could have affected the product in any magnitude (Wade, 2014).
How does scenario-type planning support innovation changes
Before Sony Walkman came into existence, cassette player was in existence, and music customers had a preference for vinyl records (Haire, 2009). The Walkman device emerged and was introduced in 1979 and sold in the market for about $150 each and sold out in three months and demand skyrocketed (Adner, 2012 & Franzen, 2014). They designed the device with two jack features that allowed two individuals to listen to the same song at the same time, this feature was very popular when this feature was introduced; the market grew in the 1980s and market share grew to 50% and Sony sold over 200 million, over a 30-year period in U.S. and Japan markets. Apple came out with iPod between 2001 and 2009 and the iPod device sold about 160 million devices in 8 years (Haire, 2009). In the 1990s, CDs and music files such as mp3s were introduced with better quality sound and the cassettes market started dwindling down to zero (Adner, 2012). Sony Corporation pivoted to new formats, including the introduction of the CD version of the Walkman to mp3s but they could not get the mp3 version to dominate the market and the growth they saw the Walkman (Adner, 2012). However, the iPod was ahead of its time, even with 50 different mp3 type devices in the market. Apple realized that iPod would soon be less useful with the speed of the mp3 player. With broadband technology emerging, Apple leveraged broadband speed and provided a downloadable device with 5 GB storage space at the cost of $399 (Adner, 2012, Apple, n.d.). iPod became very successful and popularity grew, they took advantage of the challenging forces based on their analysis and environmental factors, incorporated mp3 feature and introduced iTunes music software, it became more popular, they introduced iTunes retail store in 2003 (Adner, 2012). By the early part of 2008, Apple had already claimed about 48% market share of mp3 devices; and the cassette version of the mp3 Walkman version abruptly ended in 2010 (Franzen, 2014). Sony tried to rebound with the Walkman device called ZX2 with better quality audio features at the cost of $1200 but it also fizzled because it lacked smartphone-like features at the time (Franzen, 2014; Miller, 2015).
Comparing Scenario-type planning with traditional business-continuity operations and planning
Challenging issues/forces and impacts of moving from
Walkman to mp3 -
Scenario-type planning and traditional business-continuity planning are clearly in conflict with each other. In comparison, both use structured based design processes that help organizations to navigate the future; scenario-type planning looks at revenue generation over time. Business continuity planning is designed in a way of how a business will react to any form of disaster, including warehouse fire, accidents hitting a building, earthquakes, or other natural disasters. By bringing business leaders together to discuss the future of the organization, and how to grow the business, chances are, you may avoid some potential risks. Take an illustration of Sony Walkman, cassette players, and mp3 products; and how they came into existence; and the effect of Scenario-type planning and business-continuity planning on the survival of the products. Disruptive media is up and traditional media is down.
Actions required - ensuring scenario planning is successful
- - Ensure that you secure some commitments from responsible managers or your management for scenario-type planning, then, select your implementation team and define or organize key issues around the scenarios and evaluate
- - Ensure that your assumptions are clearly defined, then,
establish relationships between the number of scenarios created and all the
known driving forces
- - Ensure that each scenario will present a clear and
cogent future view
- - Focus on significant differences with all scenarios
- - Update all assumptions on the scenarios on regular
basis.
Actions to avoid in scenario planning
- - Avoid all issues to be defined and considered upfront
before developing the scenarios
- - Avoid too many scenarios; the recommendation is to start
with three scenarios. A key recommended assumption is to start with a 50% best
guess, and with the general assumption that 25% will get better and 25% will get
worse
- - Avoid trying to develop one perfect scenario, there
is no perfect scenario
- - Avoid fixating on your favorite scenario
- - If a scenario ceases to be relevant, do not continue
to hold onto the scenario.
Disadvantages of scenario planning include a lengthy process of collecting data with applicable driving factors; for larger enterprises or organizations, planning may take months to complete, understand that factors impacting planning positively or negatively can change very quickly.
There are three steps for a better
and complete Scenario Planning application
1.
In
the means of uncertainty, ensure that you identify all the critical
triggers: Crises will come from time to time, when you face any type of crisis, organization and financial
leaders of the organization should immediately establish some guidelines for response
to the strategic plan, on how to develop different scenarios. The scenarios must be
set with certain assumptions surrounding events, the survival of the organization may
be on the line, and the scenarios chosen should trigger a series of action items.
In times of crises, organizations must use existing historical data with credible
and persuasive outcomes, to regulate expected tasks and results for all responsible
divisions. Scenario-type planning will give managers and upper-level leadership
some breathing space to minimize crises, to assess the economic situation, and all
considerations must be an essential part of scenario-type planning
2.
Develop
and include multiple and simplified scenarios: When you plan and build your scenarios, your finance team(s)
might feel overwhelmed based on the potential prediction of the outcomes, and based
on all possible outcomes; this is why you are encouraged to simplify the
scenario. Plan to pivot on a few possible outcomes, and build simple scenarios and
expand from there.
3. Develop and build an agile response and strategic plan: Ensure that each scenario has complete details to access all pointers, including the likelihood of success or failure for each strategic option. Then, financial leaders can create the framework needed to execute the plan and make decisions; every decision made has financial implications, and is monitored in real-time and agile response should follow in support of the response team.
