Scenario development labs help innovators make the case for investment.
Like the center of the earth, the core of any business exerts a powerful gravitational pull. Those trying to reinvent a company often struggle against its forces. That is why asking those at the core to heed the future is crucial. Often, such prompting requires startling and symbolic action.
I worked with the head of strategic innovation for a global firm in an industry undergoing a fundamental transformation. Everybody knows that the firm’s core business will eventually evaporate. Everybody also knows that to survive, the firm must transform to a new underlying technology with a new ecosystem of partners.
Everybody knows it. But the transformation still isn’t happening. Why not? There are no immediate pressures on the existing business. The shareholders are quite happy to continue to invest. And, for now, it is more profitable than it has ever been. Mature businesses are often like this – absent the need to make investments, they merrily generate substantial amounts of cash.
For an innovation leader, this can be devastating. Innovators have it tough. Their innovations are uncertain compared to the seeming certainty and safety of investing in the business of today. Innovators’ projects are often developed by small teams, so they lack buy-in from their companies’ rank-and-file. The ecosystems that surround them are immature. Their recipe for success is found in the future, not the present.
Given these manifold disadvantages, how can innovators command decision-makers’ attention? How can they persuade firms to make the necessary investments when they seem unnecessary?
The answer comes in creating a scenario development ‘lab’. Unlike the heavy-handed scenario planning exercises undertaken by some firms, labs outline potential futures quickly. They make them real through storytelling, and by inviting people to imagine what they wished they had done once they see how the scenarios unfold.
The way I begin this exercise is by imagining two uncertainties that represent different expressions of some future state. In the case of the firm I worked with, I suggested that one such uncertainty could be whether the firm would continue to be a dominant player in its sector. The other uncertainty was whether the underlying technology behind its core business would continue to be relevant. I picked a five-year time frame to set up this potential future. Laying it out this way gives us a classic two-by-two matrix. The first row is where underlying technology remains core to solutions; the second row is where it is largely replaced by alternatives. The first column is where the firm remains dominant; the second column is where it loses relevance.
The next step is to assess the extent to which the current strategy – to emphasize the core business and not invest in innovation – is suitable for the future.
The scenario where the firm remains dominant but the technology is replaced by alternatives offers some hope. However, there is only one case in which the existing strategy will lead to desirable results – the case where the underlying technology remains relevant, and the firm continues to be a dominant player. Yet the company’s own management and investors have already admitted they believe there will be a substantial transformation in the underlying technologies. Their present success is propelling them towards future failure.
Firms can and will change if you pose the right questions. Ask: “If this were to be the case five years from now, what would we wish we had done today?” The answer will often be clear: invest in innovation.
