Scenario Planning: Part IV
The path ahead is uncertain, use early indicators to guide you
Scenarios are defined, but we don’t yet have a strategy
Over the first three posts we have worked through the process to define a set of scenarios (last post here) that represent a view of the future. These scenarios are what we will build our strategy upon.
In this final post on Scenario Planning we’ll layout the following:
- Implications and Options
- Early Indicators
- Setting your strategy
Implications and Options
This step is to look at each scenario and layout the implications on your business and the options you’d consider to be best positioned.
Example from the Connected Home Scenario:
- Access to the data from home devices will be critical to get signal when their is a home service need. This has two parts, part 1 is to get the data which likely means partnering with a device manufacturer to provide services. The alternative is to buy a device company or build the company.
- Part 2, is have an easy solution where for a given issue can provide instant quote and book immediately.
- Access to APIs to unlock doors and remote surveillance systems to ensure that if a contractor does work in an unoccupied home that the home is left in a better state than where it was found.
Early Indicators — The canaries in the coal mine
There are a number of factors that will impact your business. The goal of this step is to evaluate the current news headlines to identify proof points that the scenario is likely going to occur.
For the connected home example, there were a number of stories that emerged from CES earlier in January. Google Home was a key product discussed during CES, with a number of new solutions emerging around the home assistant. Google has
Here is a quote from an article from The Verge after CES:
Alexa is arriving on headphones, smartwatches, cars, and many more TVs this year, and will even be able to directly control ovens and microwaves.
Another article from Digital Trends shows all of the various products that can integrate with Google Home.
There are also lots of lights, switches, and thermostats that you can control with your voice thanks to the speakers.
None of these articles speak to advanced improvements around notifications on product failures and providing help to homeowners to fix or service their home appliances, though the connected nature of the home is starting to take shape. This gives confidence that this scenario could become a reality and thus I will setup reminders / alerts to track progress.
Then this week there was a podcast from A16Z on the Connected Home:
In this podcast the two partners from Andreessen Horowitz shared their perspective on the Connected Home and the reality of what is likely to happen. In their vision of the future there are lots of connected devices, but not one central system. This still paints a picture of lots of connected devices, but likely means that there will be many different platforms that require integration to add on a services layer which could impact adoption rates (hence an anti-force).
Pro Tip: As you are looking into early indicators it is good to look for supporting and contrarian view points. Don’t just focus on the positive views of the future as that can skew your perspective.
Setting your strategy
The final step is to converge the various scenarios into a coherent strategy. In this step you’ll look for common options across the various scenarios.
As you go through pulling the scenarios together you should be faced with some tradeoff decisions. This to me is the heart of strategy. Tradeoffs are the crux of strategy. There are solutions like postponement that Zara implemented in the late 90’s to help mitigate obsolescence, though this also limited some of the design choices they could offer given they dyed product after it was assembled vs. starting with dyed yarn. I find it is best to be explicit on the tradeoff decision.
Here are a couple tradeoff examples from this exercise:
- Focusing on DIY vs. Hire a Pro is a key decision. In a DIY world it is all about having the best content for how-to-guides. In the hire a pro it is all about having a great network of contractors. There isn’t a good middle ground between the two. Given demographic changes and the size of the market the hire a pro is a more likely choice. This means there is a portion of the market we won’t serve. In addition, the business model for the two segments is very different. A couple examples: DIY likely ad based model or usage based pricing. Hire a pro could charge the pro or a commission model to take % of transaction.
- Referrals vs. Outcome Buying. Assuming we go the hire a pro path the tradeoff is around how consumers will engage service providers. In the “Connected Home” scenario the extreme starting point is a notification from a household device vs. the “Online Directory” model is based on the homeowner identifying an issue and reaching out. To realize the “Connected Home” vision you likely have to have some components of “Online Directory” to get started. The decision here may be to postpone development on integrated solutions with home appliances vs. parallel path the development. The driver here would be that companies will make APIs available to integrate, though risk is that you’ll miss out on future.
Track Early Indicators
To ensure that you have an adaptive strategy it is important to have a process setup to track early indicators to map how the world is evolving. I have setup a HipChat room (similar to a Slack Channel) where I post market updates. This dedicated forum allows the entire team to stay abreast and post changes that could influence our business and allows me to look back periodically to spot trends.
My blog is about Dynamic Strategies. To ensure that your scenarios aren’t static documents it is useful to revisit these materials and update them as new information comes into being. I will follow up next week with the OODA loop for decision making. This is a great framework to think about the dynamics around how you make a decision. The benefit to use this with scenario planning is that if you see an early indicator you can use the scenario maps to orient and based on the observation can decide to inact one of the strategies defined.
For example, I may observe that a startup closed a $50M round to provide ongoing maintenance support for a large air conditioning OEM (e.g. Lennox, Carrier). I can see that this is a clear attribute of the “Connected Home” scenario and the strategy I would enact would be to reach out to build partner relationships. The action I might take is to have my lead for BD reach out to some other OEM’s and engage or discuss next steps (hopefully we have already seeded these relationships).
Learning More
If you are interested in learning more about scenario planning I recommend you try it out on your own. Practice is the best way to learn and if you have questions reach out. Try the model out with your career, with your company, a big decision you have (e.g. a new job, moving to new city) or an idea that you have been thinking about.
Leave me a note on your thoughts of this series of posts. I will be playing around with different formats over the next couple posts to try out new ideas. Thanks for reading along.
