Scenario Planning as a Tool for Thinking Differently about Innovation

Robert Cooper, in his book Winning at New Products: Accelerating the Process from Idea to Launch, described what he saw as “the greatest business mistake in history”:

In 1980, IBM developed its view of the future of the PC. IBM studied the potential market and predicted that 275,000 PCs would be in use by 1990. As a result, very generous contracts were signed with Intel and Microsoft to build and design key components for PCs. By 1990, the installed base had reached 60 million PCs . . . causing IBM to transfer an enormous amount of wealth to two new companies that quickly became formidable competitors.

The problem? The way that IBM thought about the market. IBM envisioned only one future, the “official future” for the planning process which only envisaged a limited take-up of PCs, and failed to envisage and account for alternative scenarios in its planning process – such as a future that saw PCs in every home. If IBM had considered and allowed for the possibility of such alternative scenarios, then

IBM would have altered its decisions to protect its interests. And as PCs increased in popularity in the early 1980s, IBM Management would have been tipped off that the alternative future, and not the official future, was indeed coming true, and would have been better prepared for it.

The basic problem of course was the underlying mindset. IBM had developed a mindset that entrenched a certain view of the world, and that view had worked very well for IBM. But the world was changing, and a change in mindset – the ability to think differently – was required. The IBM mindset of the 1980s failed to think flexibly about possible future scenarios early in the product planning process, and accordingly failed to make commercial decisions that would have protected the companies interests in the case that alternative scenarios eventuated – as it turns out that they did.

Cooper gives a second example: AT&T. According to Cooper:

AT&T had a mental map of the future – a scenario or picture of the future – in which their centrally switched technology would remain dominant. The notion of a packet-switched technology (what the internet uses) was discarded. The technical experts at AT&T concluded that the Internet was insignificant for telephony and had no commercial significance in any other context.

Many other examples could be given. Microsoft, for example, famously missed in 1995 that the Internet would be a significant change in the way people worked – and subsequently spent Billions on retrofitting Office 1997 for Internet compatibility features to align with the changes in the working environment that they missed.

As Cooper argues, in order to avoid mistakes like IBM’s commercial arrangements with Intel and Microsoft in the 1980s, or AT&T’s or Microsoft’s responses to the rise of the Internet, it is important early in the New Product Development process to develop alternative scenarios to inform the strategic planning and the commercial decisions from an early stage.

Scenario Planning should be a core tool during innovation – to free product planning from existing limitations of previous mindset that the company may be currently operating under.

Sorry, comments are closed for this post.

Scenario Planning as a Tool for Thinking Differently about Innovation

Robert Cooper, in his book Winning at New Products: Accelerating the Process from Idea to Launch, described what he saw as “the greatest business mistake in history”:

In 1980, IBM developed its view of the future of the PC. IBM studied the potential market and predicted that 275,000 PCs would be in use by 1990. As a result, very generous contracts were signed with Intel and Microsoft to build and design key components for PCs. By 1990, the installed base had reached 60 million PCs . . . causing IBM to transfer an enormous amount of wealth to two new companies that quickly became formidable competitors.

The problem? The way that IBM thought about the market. IBM envisioned only one future, the “official future” for the planning process which only envisaged a limited take-up of PCs, and failed to envisage and account for alternative scenarios in its planning process – such as a future that saw PCs in every home. If IBM had considered and allowed for the possibility of such alternative scenarios, then

IBM would have altered its decisions to protect its interests. And as PCs increased in popularity in the early 1980s, IBM Management would have been tipped off that the alternative future, and not the official future, was indeed coming true, and would have been better prepared for it.

The basic problem of course was the underlying mindset. IBM had developed a mindset that entrenched a certain view of the world, and that view had worked very well for IBM. But the world was changing, and a change in mindset – the ability to think differently – was required. The IBM mindset of the 1980s failed to think flexibly about possible future scenarios early in the product planning process, and accordingly failed to make commercial decisions that would have protected the companies interests in the case that alternative scenarios eventuated – as it turns out that they did.

Cooper gives a second example: AT&T. According to Cooper:

AT&T had a mental map of the future – a scenario or picture of the future – in which their centrally switched technology would remain dominant. The notion of a packet-switched technology (what the internet uses) was discarded. The technical experts at AT&T concluded that the Internet was insignificant for telephony and had no commercial significance in any other context.

Many other examples could be given. Microsoft, for example, famously missed in 1995 that the Internet would be a significant change in the way people worked – and subsequently spent Billions on retrofitting Office 1997 for Internet compatibility features to align with the changes in the working environment that they missed.

As Cooper argues, in order to avoid mistakes like IBM’s commercial arrangements with Intel and Microsoft in the 1980s, or AT&T’s or Microsoft’s responses to the rise of the Internet, it is important early in the New Product Development process to develop alternative scenarios to inform the strategic planning and the commercial decisions from an early stage.

Scenario Planning should be a core tool during innovation – to free product planning from existing limitations of previous mindset that the company may be currently operating under.

Sorry, comments are closed for this post.