3.10 SCENARIO PLANNING AS A TOOL T O PLAN FOR A PROFITABLE FUTURE
3.13.3 The processual school of thought
The processual school believes that managers are able to intervene as environments unfold and can improve the chances of a businesses success in the future. This school ac- cepts that the is uncertainty in the future, but unlike the evolutionary school they do not believe that the is nothing that can be done by the organization to navigate through this uncertainty and create an organisation that combines both action and thinking to come up with a number of environments in which the business is likely to operate in, and direct the business towards the more favourable environments where they have a better chance of survival.
While uncertainty cannot be done away with, by applying resources and thinking long and hard, it can be narrowed to a point where the most important uncertainties are the ones that the business focuses on, and where action needs to be taken.
This last "school of thought" is the most appealing. The belief that "Gurus" can use some sort of mathematical forecasting tool to predict suitable strategies for different busi- nesses without having an inherent understanding of the particular business environments,
its uncertainties and predetermined elements is flawed. All businesses differ, and the likeli- hood of a business succeeding in the future is its ability to come up with an innovative and unique solution to tomorrows challenges sooner that any of its competitors.
The processual "school of thought" is the underlying rational for scenario planning as a tool to plan for a profitable future and it is the "school of thought" that is most ap- propriate to this study based on the emphasis it places on factors driving change in this in- dustry, predetermined elements and critical uncertainties inherent in the business environ- ment.
3.14 THE IMPORTANCE O F DRIVING FACTORS, PREDETERMINED ELEMENTS AND CRITICAL UNCERTAINTIES T O SCENARIO PLANNING
An essential belief that Wack (1985) had was that some elements of the future were preordained, and that they would be the consequential outcomes of events that had already taken place. These were predetermined elements. In other words aspects of the future can be determined with a high degree of certainty simply by looking at the world as it is now and using the detail accrued to create a level of knowledge that allows you to project for- ward.
This is exactly what this research is intended to do. To determine the future of cin- ema exhibition in South Africa by using events that have already taken place and are cur- rendy persistent (driving factors), those that have not taken place, but can with a level of accuracy be predetermined as well as those that remain uncertainties, but could have a sig- nificant influence on the industry should they become a reality.
"The idea of strategising implies that there is both uncertainty as well as predictabil- ity in the business environment". Without these two ingredients, there would be no point in strategising. What is important is to determine what will make the biggest difference in the cinema exhibition industry. Not all uncertainties can be looked at, but rather those that will have the biggest barring on the industry. The art of scenario planning is combining these uncertainties with predetermined elements and coming up with different futures that reflect various different structures of cause and effect, depending on how these uncertain- ties play out.
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3.15 UNCERTAINTY
Uncertainties have to b e taken into consideration before decisions can b e taken. T h e period within which a business should plan is a balance between the force and instability in the business environment. This point further illustrates the importance of conducting an industry analysis, as well as determining the industries stage in its business life cycle.
According to V a n D e r Heijden (2005), "the degree of predictability gradually goes d o w n the further we look, and uncertainty goes up. In the very short term predictability is high and (frequent) forecasting is the preferred planning m o d e . In the very long term eve- rything is uncertain and planning demonstrates diniinishing returns. In the middle zone where there is a level of predictability (there is ability to predict what the driving factors are) b u t also considerable uncertainty and scenarios are m o r e suitable.
Uncertainty is a significant challenge facing the cinema exhibition industry. Tradi- tional planning m e t h o d s such as industry foresight and forecasting place very little empha- sis on uncertainty and are therefore n o t suitable to b e used for strategic future planning purposes. Scenario Planning, which places a lot of emphasis o n uncertainty, is m o r e suit- able.
3.16 PREDICTABILITY
Acceptance of the fact that some things are predictable is one of the bases which strategising becomes relevant. If nothing was predictable, why even strategise, as there is n o way of predicting what the future holds.
If w e look back a n u m b e r of years very few people would have predicted that ani- mated movies would b e such a big and important part of studio revenues. Today, movies such as Shrek 2 gross m o r e than 35 Million rand in box office returns in South Africa alone (www.uip.co.za). W h a t will b e the animated equivalent five t o ten years from now?
With scenario planning, some of the events are considered predetermined and are perceived as similar within all different scenarios and some are uncertain and will differ for the different scenarios. It is through analyses that w e are able to differentiate one from the other.
A n analysis starts with perception through observation of events. While observing driving factors w e start seeing trends and patterns. O n c e w e see a pattern w e then ask
where this pattern comes from "causal thinking". This leads to an underlying cause/effect structure behind the events we are observing. This then becomes our process the- ory/mental map of reality. Using the above approach, we can determine a better response to the challenges presented by the observed events/driving forces.
An example of this is the observation that ice cream/frozen yoghurt retailers do par- ticularly better when their operation is in close proximity to a cinema operation. Sales of the above peak around the same time as those of cinema exhibitors. There is therefore a cause and effect relationship between cinema exhibition and ice cream sales. Cinema ex- hibitors could look at offering ice cream as part of their confectionery range, as consumers who watch movies seem to enjoy ice cream as part of their outing.
There are a number of these trends and patterns that can be observed. These trends should form part of the basis for which decisions about the future are made.
The assumption is that events do not happen at random, but are related to each other through a structure where causes drive effects and one event leads to another. It is important to look for a correlation between the multiple trends, and ideas to get an under- lying structure (the relationship between two variables). If every time the price of movies is reduced, there is an increase in attendances, then there could be a relationship between these two variables (price and attendances). This could help answer the question of why things happen.
Scenario planning is however not the only strategic planning tool. Its appropriateness is however validated when being compared to other planning tools such as industry fore- sight and forecasting.
3.17 SCENARIO PLANNING IN OPERATION
Section 3.17 deals with the theoretical review of scenario planning in operation.