Describe alternative behaviour patterns
The upper-right quadrant of the matrix contains all the environmental factors that have the greatest potential impact on the business and the highest level of future uncertainty.
Ideally, two and no more than three different development paths for each of the factors in the quadrant should now be described; the paths should be as contrasting as possible while remaining realistic. Chart 5.3 on the next page shows some examples for domestic consumers.
Chart 5.2 The impact/uncertainty matrix for a typical consumer
Embedded, connected (wireless) devices in the home Identification of “killer” applications
Charges to operators for access to the local loop Prices to end customers
Demand for audio and video-on-demand Rate of adoption of new technologies and services Acceptance and growth in e-commerce The value of a single customer bill
Costs of establishing and upgrading broadband networks
LOW HIGH
Restrictions on broadcasting rights Regulation of access to the local loop
Regulation of television services provided by cable businesses Interest rates
Internet penetration Equipment costs
Volume of content in foreign languages Developments in wireless technologies Economic growth and disposable income
Home-working/tele-working Demand for interactive games Increased demand for distance learning Remote provision of financial and medical services Development of future broadband technologies Software development
Improvements in digital security Copyright laws
Competition law Inflation Exchange rates Population density Topography Leisure time
Availability of competing technologies Improvements to interactive television Advances in automatic language translation software
LOWHIGH
Business impact
Uncertainty
Scenario planning 37
Chart 5.3 Potential development paths
Select the three or four most informative scenarios
Combining different development paths can generate the basis for many potential scenarios. The goal is to identify no more than three or four of the most interesting which will form the basis of the market demand forecast and strategy formulation. During the initial scenario development phase, the scenarios are derived from combinations of just two inputs at a time and their respective development paths. An example two-by-two scenario matrix is presented in Chart 5.4.
Environmental factor Embedded, connected (wireless) devices in the home
Charges to operators for access to the local loop
Demand for audio and video-on-demand from domestic customers Identification of “killer”
applications
Prices to the end customer
Rate of adoption of new technologies and services
Path 1
Hardly any domestic appliances are capable of being connected to the internet
Incumbent monopolists continue to charge high prices for local-loop access Significant demand but from only a few minority customer segments Telecommunication businesses and service providers fail to identify compelling “killer”
applications for their customers
Prices fall rapidly making broadband access affordable for all Consumers are reluctant to commit to new
technologies, and the take-up of new services takes place over an extended period of time
Path 2
A small number of devices such as alarms, televisions and DVD players are connected
Regulation forces prices down to low, cost-based levels
Audio and video-on- demand becomes the norm for nearly all households A range of compelling applications and services are developed which are highly valued by many different customer segments
Prices remain high and fall slowly
Early adopters and high- income consumers adopt the new services rapidly, but the mass market of consumers takes considerably longer
Path 3
Virtually all electronic devices in the home, from garage doors to the oven, are connected to the internet
All consumers swiftly embrace new technologies and services from the outset
Scenario planning 39
Only scenarios that are realistic, contrasting and relevant to the business planning problem should be selected. The scenario from the bottom-right quadrant of Chart 5.4 has been selected as the example for the remainder of this chapter.
Write the scenario descriptions
Use evocative names.Each of the selected scenarios should be given an evocative name.
The name should be a vivid description that captures the essence of the scenario.
Descriptions that say something about the assumptions and the business context are much more valuable as a communications tool than the traditional “base case” and the inevitable “low” and “high” variations. The name chosen for the example scenario is
“The digital home”.
Describe the essence of the scenario. A description of how the scenarios will evolve over time should be prepared. Below is a scenario description for the digital home. Once the basis of the scenario has been determined, additional factors from the upper-right quadrant should be included. After that, additional factors from the other two quadrants can be incorporated. The interactions and development paths of the newly introduced factors should be consistent with the overall theme of the scenario. As the impact and uncertainty of the inputs diminish, less detailed descriptions are required for the development of the remaining factors.
The initial scenario description for the digital home is presented in the box on the next page.
Chart 5.4 Initial scenario matrix
Virtually all electronic devices in the home, from garage doors to the oven, are connected to the internet
Significant demand but from only a few minority customer segments
PATH 1 PATH 2
Virtually all electronic devices in the home, from garage doors to the oven, are connected to the internet
Audio and video-on-demand becomes the norm for nearly all households
Hardly any domestic appliances are capable of being connected to the internet
Significant demand but from only a few minority customer segments
Hardly any domestic appliances are capable of being connected to the internet
Audio and video-on-demand becomes the norm for nearly all households
PATH 2PATH 1
Embedded, connected (wireless) devices in the home
Demand for audio and video-on-demand