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Kth scenarios, strategy & innovation 2016 doc
- 1. Scenarios, strategy and innovation KTH Royal Institute of Technology Ulf Mannervik Founding Partner, NormannPartners Associate Fellow, Saïd Business School, University of Oxford
- 2. Scenarios, strategy and innovation • Exploring business environments • Strategy paradigms • Designing strategy and innovation • Realising innovation
- 4. © NormannPartners Forecasting Source: GBN Drilling activity in the USA (1980 view) Forecasts by major oil field equipment group Active rigs (yearly averages)
- 5. © NormannPartners Forecasting Conventional forecast Function Time Forecast Optimistic alternative Pessimistic alternative • Future is another past, tomorrow • No breaks in logics allowed Today
- 6. © NormannPartners Forecasting Forecasts often reinforce current biases Source: Energy Modelling Forum, expert consensus; Bloomberg
- 7. © NormannPartners Forecasting Dialogue with corporate VP NP:How long have you been buying these forecasts? Every year, for 20 years NP:Are they getting more, or less, accurate? They have never been accurate NP:So - why do you keep on buying them? For 2 reasons: - (i) they are the best ones in our industry, and - (ii) all our competitors buy them also
- 8. © NormannPartners Relations with the future • Prediction: stating what will be • Forecasting: extrapolating and modeling • Scenarios: simulating plausible futures of the context
- 9. © NormannPartners Two environments of something, for someone… Macroeconomics Legislation Geo-political trends Technology International Finance Energy prices Ecology Demographics Clients Investors Suppliers Competitors International Commerce Regulators Lobbies Contextual Environment Transactional Environment NGOs Survey & appreciate Influence & co-design Control Social values Exchange rates Employees Actor “Driving forces” Sources: Geoffrey Vickers; Fred Emery & Eric Trist; Bill WSmith
- 10. © NormannPartners Scenarios Future transactional environments Macroeconomics Legislation Geo-political trends Technology International Finance Energy prices Ecology Demographics Clients Investors Suppliers Competitors International Commerce Regulators Lobbies Contextual Environment Transactional Environment NGOs Social values Exchange rates Employees Sources: Geoffrey Vickers; Fred Emery & Eric Trist; Bill WSmith Now……………………………………Future(s) Actor Clients Investors Suppliers Competitors Regulators Lobbies NGOs Employees Actor Clients Investors Suppliers Competitors Regulators Lobbies NGOs Employees Actor Clients Investors Suppliers Competitors Regulators Lobbies NGOs Employees Actor
- 11. © NormannPartners Example of scenarios Futures of global transport by 2030 A global world; large companies and rich regions set the tone, driven by short-term economic priorities. Sustainability is the norm; consumers drive growing markets for green products and services Resources scarcity; globalisation has reversed, markets are volatile, and wealth is unequally distributed Three scenarios that explore what might happen with economic development, access to resources, societal values, climate change and its governance, and technological innovation – and implications for ground transportation. Source: Scania, amended
- 12. © NormannPartners When are scenarios effective? Uncertainty tends to rise with time/complexity Source: Kees van der Heijden Scenario zone Uncertainty Predetermined Time &/or complexity
- 13. © NormannPartners© NormannPartners Perception ConceptionBandwidth of senses 11 million bits/second Bandwidth of conscious image of impressions 10-50 bits/second Three interacting cognitive processes Representation Views of the world based on experience 60:1
- 16. © NormannPartners Mercator vs. Gall-Peter projection
- 17. © NormannPartners Even if you knew the future, would anyone listen to you?
- 18. © NormannPartners Scenario quality criteria A set of scenarios must be… • Relevant - Are these worlds useful to look at for my decision making? • (just) Plausible - Might the scenarios happen? Or are any of them totally implausible? • Challenging - Is there an “official future” scenario? Do the others challenge my assumptions?
- 21. © NormannPartners Neo-classical approach to strategy A value chain in heavy automotive… Suppliers Production & assembly Distribution Dealers & workshops Customers
- 22. © NormannPartners Neo-classical approach to strategy Strategy = how to compete in an industry Rivalry among existing competitors Bargaining power of buyers Bargaining power of suppliers Threat of substitute products Threat of new entrants Source: Porter (1980, 2014)
- 23. © NormannPartners Neo-classical approach to strategy The value chain view of a customer A buyer of goods, pays for it, and destroys value Source: Grassrootsmotorsports.com
- 24. © NormannPartners Neo-classical approach to strategy The value chain Source: Normann, amended Metaphore and model: • related to industrial logic • physical flow of goods • flow only in one direction • value added in each step • customer destroys value • zero-sum game against against actors in other parts of chain • 5-forces reviews relative strength of others in the game • competitive strategy is key Value chain
- 25. © NormannPartners Neo-classical approach to strategy Useful if business environment is characterised by: - Certainty and low level of complexity - Slow pace of change - Stable ‘industries’ in which firms hold stable vertical positions (up-stream… mid-stream… down-stream…) The value chain Source: Ramírez & Mannervik (2016) Not useful if business environment is: - Turbulent, Uncertain, Novel and Ambiguous (TUNA) - Systemic, connected, complex, with blurring borders
- 26. © NormannPartners Socio-ecological approach to strategy Systems thinking, values as enacted Sources: Normann (2001), Ramírez & Selsky (2014), Ramírez & Mannervik (2016) Supplier Client’s stake- holders The actor’s context Value created Client
- 27. © NormannPartners Value creating system Values co-created in interactions Source: Ramírez & Mannervik (2016)
- 28. © NormannPartners Designing a value creating system Design the configuring & support offerings
- 29. © NormannPartners Value creating system Case: caught between cost & quality Dominant internal value: Technical performance Dominant external stakeholder values: Quality of care Cost Access Problem: Easy to demonstrate medical technology contributing to rising healthcare costs. Difficult to prove contribution to improving quality of care and health outcomes. R&D engineers Health care providers Medical specialists Insurers Patients Government Performance (accuracy, speed) and features Performance and features Quality of care Quality of care and efficiency Quality of care and comfort Cost and health outcomes Cost Access Access and cost Quality of care
- 30. © NormannPartners Value creating system From products to systems of interaction PEOPLE+ Highly qualified medical personnel Experienced consultants and managers PROCESS+ Scientifically validated medical protocols Efficient internal procedures Optimised workflows 15% 15% 15% BETTER OUTCOMES Improvements in outcomes are the result of interactions in systems, not products alone! TECHNOLOGY Better imaging and diagnostic technology Software system INFORMATION+ Imaging information Care system information Scientific and historical evidence =
- 31. © NormannPartners The VCS framework Five offering elements Source: Ramírez & Mannervik (2016)
- 32. © NormannPartners The VCS framework Digital: densify, re-design value co-creation Source: https://vimeo.com/107569286 , www.apple.com Radio Shack 1991 iPhone 2016
- 33. © NormannPartners The VCS framework Digital: densify, re-design value co-creation Source: Ramírez & Mannervik (2016)
- 34. © NormannPartners Socio-ecological approach to strategy VCS view of client (+other actors’) role © NormannPartners Pays for being relieved or enabled to create value 34
- 35. © NormannPartners Socio-ecological approach to strategy Value creating system Source: Cummings and Wilson, Images of strategy Metaphore and model: • related to service logic • many values - also immaterial flows • flows in many directions • value created in systems of use • customer (+ other actors) co-create value • reconfiguration can enhance system efficiency and new value creation • system analysis explores roles and resources • collaborative strategy is key Source: Normann (2001), Ramírez & Mannervik (2016) Value creating system
- 36. © NormannPartners Strategy frameworks Belong to different (sticky) paradigms Source: Cummings and Wilson Value creating systemValue chain Core competence is a firm’s position in a chain Distinctive competences enable strategic fit between a firm and its environment
- 40. © NormannPartners Value alignment scenario design Source: Adam Kahane Dominant events in South Africa Is a settlement negotiated ? Is the transition rapid and decisive ? Are the policies sustainable ? Yes No FLIGHT OF THE FLAMINGOS (inclusive growth and democracy) ICARUS (Macro-economic populism) LAME DUCK (Long transition) OSTRICH (non representative government) Current negotiation Yes No Yes No
- 41. © NormannPartners Scenarios/option matrix Using South Africa scenarios to test strategy Short-term investments - +++ ++++ Long-term Investments --- - ++++++ Sell out 0 00 0 Keep ticking over + + ++0
- 42. © NormannPartners Using scenarios to test a VCS A Scania value creating system Source: Strategy for a networked world (Ramírez & Mannervik)
- 43. © NormannPartners Using scenarios to test a VCS A new Scania VCS, with LOTS addition Source: Strategy for a networked world (Ramírez & Mannervik)
- 44. © NormannPartners “Our strategy is not to own trucks or other production equipment, but to collaborate with local contractors in the systems we set up, and enhance their operations. This will provide a long-term business environment with profitable and sustainable growth for both our customers and their suppliers.”
- 45. © NormannPartners Offering: Designs, sets up and operates sustainable logistics systems, in partnership with vehicle and other production equipment companies, transport companies, ICT partners, and clients with recurring transport flows Values enabled: minimise waste + optimise total operating economy Distinct competences: business design, expertise in road transportation, modular products and production systems, and a culture of continuous improvement and lean operations
- 46. © NormannPartners Designing VCS in practice (Iterative) process Source: Ramírez & Mannervik (2016) • Understand purpose • Adjust process • Clarify links to other initiatives • Establish team Purposing • Internal interviews • Current VCS and its historical emergence (ANT analysis) • Learn from earlier similar initiatives Historical analysis • Test higher system logics • Map actors in systems, test system logics • Search for invaders • External interviews & field studies Upframing • Explore global trends & uncertainties • Structure future developments into contextual VCS scenarios • Reframe configuring offering Future assessment • Reperceive support offerings • Challenges in VCS actor relations • Identify under-utilised resources • Define & assess opportunity areas Downframing • Define configuring and support offerings • Estimate resourcing & revenues • VCS feedback & prioritise options • Plan realisation & early actions Design definition
- 48. Realising innovation • Let the vision guide, not define • Redirect management attention • Create organisational ownership • Step-by-step realisation
- 49. © NormannPartners Realising innovation Source: Ramírez & Mannervik Let the vision guide, not define Individualised Healthcare Imaging, diagnostics and bioprocessing to achieve healthcare better targeted to needs of individuals (+ turn big pharma into sub-supplier role…) Visionary leadership – A learning vision, guiding a transformation into a new business logic. Innovation serves to enable new ’paradigm’. t
- 50. © NormannPartners Realising innovation Redirect management attention VS
- 51. © NormannPartners Realising innovation Source: Ramírez & Mannervik (2016) Step-by-step realisation of new VCS TRUCK MAKER TRANSPORT COMPANIES INSURANCE LOGISTICS EMPTY TRUCK WARRANTIES HR ADMINISTRATION MAINTENANCE REPAIRS PIRATE PARTS TRAILERS xn INFORMATION
- 52. © NormannPartners Realising innovation Create organisational ownership W.L. Gore & Associates Cross-functional teams Voluntary initiatives Involve champions Engage with users Recruit users
- 53. © NormannPartners Engelbrektsgatan 9-11 SE-114 32 Stockholm Sweden Tel: +46 (0)8 410 84 000 33 St. James’s Square London, SW1Y 415 United Kingdom Tel: +44 (0)20 7129 1209 Ulf Mannervik ulf.mannervik@normannpartners.com ulf.mannervik@sbs.ox.ac.uk