Marginal Column

Prof. Karl Rose

teaches corporate management at Karl Franzen University in Graz, Austria. In his role as a consultant, he supports companies in developing long-term strategies for their products and services.

Photo: Prof. Karl Rose

“What does the future hold in store?”

Content

November 2014

 

No one knows what tomorrow will bring. But companies should certainly have a plan for the future – as the basis for strategic decisions. Prof. Karl Rose develops scenarios that help to assess the opportunities for future products and services.

 

The future is your discipline. What will the world look like in twenty years?

Nobody can say that with any certainty. Whenever you consider the future, it quickly becomes clear that volatility and complexity are growing as a result of perpetual networking. This means that we can only look at a number of alternatives or potential paths for future developments. That is exactly what we do in scenario-based planning for governments and for companies. This is by no means an inconsequential game of thought. One question we very expressly do not ask is: What will the world look like in 2035?” Our query is: “What decisions do I have to take now?” Scenarios are a decision-making basis for the questions of the present. They are not predictions.

What kind of questions are you dealing with?

We examine larger strategic investments which cannot easily be reversed, the so-called “inflexible cash flows”. By way of example: Which development departments will we establish? Will we set up the technology center in Europe or in China? Which products are we going to discontinue? Which products do we have to offer in the future?

How does scenario planning work? How do you proceed?

We identify the fundamental groups of subjects that are important for the future development of our inquiries. We first draw on the knowledge on hand in the company. Then we discuss matters with outside experts who contribute facts that were previously unknown. We then distill this into a list of driving forces that are already evolving at the present time. We take each of these forces separately and project a number of potential ultimate points in the future. Based on this, we construct coherent and consistent scenarios for the future – two to four of them, as a rule. We then present the scenarios in narratives that have been written out in full detail.

Can you give us examples of such driving forces?

The question presented by a manufacturer of appliances was: “What will the kitchen of the future look like?” In order to identify the driving forces, we look at the political situation, for example. Will legislation influence the future of the kitchen? Yes, there will probably be more regulations on safety and energy efficiency. What are the social factors involved? This question is often neglected by the company. Let me name some examples. How do young people use their kitchens? We found that six days a week they want a kitchen that is perfectly equipped to quickly prepare convenience foods. On the seventh day of the week, the culinary arts become a social event. Friends cook together and in this case the kitchen has to satisfy entirely different needs. As far as the appliances go, the manufacturer must satisfy both demands equally, in terms of function and design. Based on such driving forces – originating in the fields of government and politics, business, social changes, and technology development – we construct the scenarios.

What do companies do with these scenarios?

The companies ask themselves: What will be the impact on our business model if scenario one occurs? What products and services mesh with such a future? Are there things that we aren’t yet doing but that we ought to be doing? The same questions are posed in regard to scenarios two and three. In this way it is possible to determine whether the company is following a future-proof strategy, one that would function in all three potential futures. The board of directors, executive board and project team can always fall back on these scenarios and can validate their own ideas of what the future holds in store. The simple fact that people are thinking about the future means that they are already changing the future. Because after this, they will respond differently.

How far into the future should companies plan?

This depends on the particular situation. Energy suppliers for whom the energy mix plays a major role should plan for the coming 15 years, at least. For companies involved in the industrial and services markets, I think that five to ten years would make good sense.