TRENDS E-MAGAZINE MAY 2013 PAGE
As one of the thousands of business professionals who subscribe
to Trends, you receive vital intelligence every month. It not only provides
useful forecasts and insights, but it tees up questions that will undoubtedly
motivate you to probe more deeply with an eye on the relevant implications for your business.
A persistent question that we’ve attempted to answer in the new
book Ride the Wave is, “How do we translate general trends and forecasts
into actionable business decisions?”1
Our focus here is on the fundamental mechanics of the process.
How does this process work?
It all starts by assembling a cross-functional team aimed at
creating an open dialogue around key trends and forecasts regardless of the source. The team’s
mission is to review each trend that comes to its attention, identifying the
implications for your industry, and developing or validating forecasts leading
to clear, specific actions. If nothing else, the team’s objective is to ensure
that you’re never blindsided by a disruptive business threat.
Typically, team members listen to the Trends audio early in the month as part of their commutes.
They also keep their eyes and ears open as they talk with
customers, suppliers, and industry experts. These basic sources should be supplemented with other
media.
Then each month, the first step involves identifying trends and related forecasts. As a starting point, the Trends editors
provide a series of forecasts related to each trend. Our forecasts have proven to be uncannily accurate over the 20+ years we’ve been
doing this; but like all forecasters, we sometimes miss the mark. Rather than asking you
to accept our forecasts “as is,” we present you with a reasonable starting point that you should refute or validate.
Unless you have a very small team and a very limited budget, the
team should have a moderator charged with making this run smoothly. It’s the moderator’s job
to bring forward relevant forecasts from various sources.
Once a forecast is brought forward, each member of the team
should try to answer two primary questions:
·
First, “If this forecast is
correct, what are the possible implications for our customers and
our industry?”
·
Second, “Given the available
evidence, what alternative forecasts are plausible and what are the
implications of each of those?”
For each forecast, consider how it could impact your business
model, business processes, resource allocations, and marketing mix (i.e.,
pricing, promotions, distribution, and products).
At this point the objective is not to falsify the forecast; that comes later. Too often, the company relies on
the industry-centered conventional wisdom about the company and the industry.
The
tendency is to extrapolate the present into the future. But, by
starting with plausible forecasts
and asking “what-if” questions, the team can consider a much
broader range of scenarios.
The team can then work backwards from the imagined future to the
present, outlining the steps that will need to be taken to profit from the
trend.
Rather than compressing this work into a hectic once-a-month
meeting, the second step involves contributing forecasts, assessments, and
validations to a secure, online, moderated forum.
The objective is to tee up the what-ifs so everyone can think
about them, ask questions, and do additional research. This is where industry,
professional, and technical experience makes a big difference.
To minimize the influence of a few individuals, it’s smart to
use what we call a “Modified Delphi Technique.” Participants log into the forum
anonymously, identifying trends and related forecasts for discussion. The
moderator collects the forecasts and organizes the content for the group so
that the opinions are not identifiable.
Next, everyone is asked to critique the first round of
forecasts, which are then presented back to the group in summarized anonymous
form.
The participants are then asked to make new forecasts taking
into account the various critiques. The moderator presents the company-specific
forecasts derived from the iterative dialogs in a concise and actionable form.
Based on this, the group discusses the possibilities, typically going through
six or seven trends and perhaps 20 forecasts.
The third and final step takes place at the end of the month.
Based on the urgency and magnitude of the forecasts, the team chooses a few forecasts that will be evaluated as
part of an evidence-based strategic planning approach.”
In most companies, ongoing monthly discussions will produce
crucial insights and serve to educate managers about threats and opportunities.
However, these ideas may never influence the formal strategic planning process
in a meaningful way. Noting this gap between imagination and execution, former CEO
A.G. Lafley and a team of world-class experts developed a seven-step process to
improve the strategic planning process at Procter & Gamble. This process is
a particularly pragmatic way to bridge the gap between the company-specific
forecasts we’ve been discussing and genuine bottom-line results.2
To understand how, let’s examine a modified version of P&G’s
approach.
Step 1: Frame a choice by converting each crucial forecast
into at least two mutually exclusive approaches that might capitalize on it. If they’ve done their jobs properly, the team has
transformed a generic forecast into a company-specific forecast. Now the
challenge is to narrow down the multitude of potential possibilities for
responding to the forecast to just two very different “what if?” scenarios. In
this way, the team can begin to bring some focus to the range of possible futures. This is a task that the
team may want to assign to the moderator, especially while the team members are
getting used to the process.
Step 2: Generate possibilities by broadening your
list of options. Having narrowed down the solutions to two, now it is time to expand those two ideas by
considering different versions of each one. Each of these should meet Lafley’s
definition of a possibility: “A possibility is a happy story that describes how a firm might
succeed. Each story lays out where the company plays in its market and how it
wins there. It should have internally consistent logic, but it need not be proved at this point. As long as you can imagine that it
could be valid, it makes the cut.”
Characterizing possibilities as stories that do not require proof
helps people discuss what might be viable, but does not yet exist. It is much
easier to tell a story about why a possibility could make sense than to provide data that proves it will succeed.
§§§§§§§§§§
Start by asking each person to spend 30 to 45 minutes sketching
out three to five stories; that’s 6 to 15 minutes per story. The stories do not
need to be detailed; they should truly be sketches. After this exercise, the group
fleshes out the initial possibilities.
The moderator should objectively present these stories to the
entire group with any needed clarification. Three kinds of probing questions
are especially useful in discovering possibilities.
Inside-out questions start
with the company’s assets and capabilities, and then reason outward. For example, “What does this company do especially well that
parts of the market might value and that might produce a superior wedge between
buyer value and costs?”
Outside-in questions look for
openings in the market. For example, “What are the underserved needs, what are the needs that customers find hard to express,
and what gaps have competitors left?”
Far-outside-in questions use
analogical reasoning. For example, “What would it take to be the Google, the
Apple, or the Walmart of this market?”
According to the P&G team, you will know that you have a
good set of possibilities if two things prove to be true.
First, the status quo doesn’t
look like a brilliant idea: At least one other possibility intrigues
the group enough to make it really question the existing order.
Second, at least one
possibility makes most of the group uncomfortable: That is, it’s sufficiently far
from the status quo that the group questions whether it would be at all doable
or
safe.
§§§§§§§§§§
The status quo should also be among the possibilities considered.
This forces the team in later stages to specify what must be true for the
status quo to be viable, thereby eliminating the common implicit assumption, “Worst
case, we can just keep doing what we’re already doing.”
Step 3: Specify conditions for each possibility by
describing what must be true for it to be strategically sound. It’s worth noting that the prior steps
intentionally encouraged anonymity because the free flow of ideas was more
important than accountability. Beginning at this point, however, accountability
becomes paramount and decisions require quantifiable evidence. Therefore, while
team members and other decision-makers don’t need to know who formulated the
specific stories, they do need to know who and why people are seeking specific
validation for each possible course of action.
The purpose is to specify what must be true for each possibility to be a terrific choice. Note that this is not
intended for arguing about what is true.
The importance of this distinction cannot be overstated. When
the discussion of a possibility centers on what is true, the person
most skeptical about the possibility attacks it vigorously, hoping to knock it out
of contention.
If, instead, the dialogue is about what would have to be true, then the skeptic can say, “For me to be confident
in this possibility, I would have to know that consumers will embrace this sort
of offering.” That is a very different sort of statement from “That will never
work!” It helps the proponent understand the skeptic’s reservations and develop
the proof to overcome them.
The objective is to answer one question about every option under
consideration: “In order to pursue this option successfully, what conditions
would we have to believe existed or could be created?”
§§§§§§§§§§
In the first stage of discussion, the aim is to name all the
conditions that need to hold true for everyone in the room to be able to
honestly say, “I feel confident enough to make this possibility a reality.” An
example is “Channel partners will support us.”
When each member of the group has had a chance to add conditions
to the list, the moderator should read the list aloud and ask the group, “If
all these conditions were true, would you advocate for and support this
choice?”
If everyone says yes, it’s time to move to the next step. If any
members say no, they must be asked, “What additional condition would enable you
to answer yes?” This line of questioning should continue until every member
replies affirmatively.
After finishing the list of conditions, review the items,
asking, “If every condition but this one held true, would you eliminate the
possibility or still view it as viable?” If the answer is the former, the
condition is a must-have and should be maintained. If it is the latter, it is a
nice-to-have and should be removed.
§§§§§§§§§§
After arriving at a full set of possibilities and ensuring that
all must-have conditions are attached to each, the group needs to bring its
options to the executives whose approval will be required to ratify the final
choice and to anyone else who might stand in the way. The goal is to make sure
that the conditions for each possibility are well-specified in the eyes of
everyone with a say in the choice.
Step 4: Identify barriers by determining which conditions
are least likely to hold true. Now it’s time to cast a critical eye on the conditions to assess
which ones you believe are least likely to hold true. Begin by asking group
members to imagine that they could buy a guarantee that any particular
condition will hold true. To which condition would they apply it?
The condition they choose is the biggest barrier to choosing the
possibility under consideration. The next condition to which they would apply a
guarantee is the next-biggest barrier, and so on. The ideal output is an
ordered list of barriers to each possibility, two or three of which really
worry the group.
Step 5: Design tests for each key barrier
condition.
Once you’ve identified and ordered the key barrier conditions,
test each one to see whether it holds true. The test might involve surveying a thousand customers
or speaking to a single supplier. It might entail crunching thousands of
numbers or avoid any quantifiers at all.
§§§§§§§§§§
The only requirement is that the entire group believes that the
test is valid and can form the basis for rejecting the possibility in question
or generating commitment to it.
The member who is most skeptical about a given condition should
take the lead in designing and applying the test for it. This person will
typically have the highest standard of proof; if he or she is satisfied that
the condition has passed the test, everyone else will be satisfied.
§§§§§§§§§§
Step 6: Conduct the tests, starting with the tests
for the barrier conditions in which you have the least confidence. It’s easiest to structure this step by testing
conditions in the reverse order of the group’s confidence. That is, the
condition the group feels is least likely to hold up is tested first.
If the group’s suspicion is right, the possibility can be eliminated
without any further testing. If that condition passes the test, the condition
with the next-lowest likelihood of confirmation is tested, and so on. Because
testing is often the most expensive and time-consuming part of the process,
this approach can save enormous resources.
Step 7: Make your choice by reviewing your key
conditions in light of your test results to reach a decision. In traditional strategic planning, finally choosing
a strategy can be difficult and acrimonious. With the stakes high and the logic
for each option never clearly articulated, such meetings often end up as
negotiations between powerful executives with strong preconceptions. Once the
meetings are concluded, those who are skeptical of the decision begin to
undermine it.
With the evidenced-based approach, the choicemaking step becomes
simple, even anticlimactic.The group needs only to review the analytical test results and
choose the possibility that faces the fewest serious barriers.
The Delphi Method was developed many years
ago by Herman Kahn of the RAND Corporation. A tailored version of this technique can prove very
useful in getting the planners from “raw trends” to a set of testable, company-specific choices. In this
application, the“question” typically asks, “Is forecast X true? And, if forecast X is true, in what ways could our
company respond?” A well-trained moderator will help the group iteratively reformulate the choices to create
a finite set of “happy stories” for serious testing.
1. RIDE THE WAVE: HOW 12 TECHNOLOGIES WILL CHANGE THE WORLD AND MAKE YOU RICH by Fred Rogers and
Richard Lalich is published by Crucial Trends Press.
2013 by Crucial Trends Press. All rights reserved.
http://www.amazon.com/Ride-Wave-Technologies-Changeebook/dp/B0
0C1POLH0 / r e f=s r _ 1 _ 1 ? s=di g i t a l -text&ie=UTF8&qid=1367340903&sr=1-1&keywords=ride+the+wave
2. HARVARD BUSINESS REVIEW, September 2012, "Bringing Science to the Art of
Strategy," by A.G. Lafley, Roger L. Martin, Jan W. Rivkin, and Nicolaj
Siggelkow. 2012 by Harvard Business
School Publishing. All rights reserved.
http://hbr.org/2012/09/bringing-science-to-the-art-ofstrategy/
ar/1
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