Dr. Aly, O,
Computer Science
Introduction
Scenario planning first emerged for application to businesses in a company set up for researching new forms of weapons technology in the RAND Corporation (Chermack, Lynham, & Ruona, 2001). Kahn of RAND corporation pioneered a technique titled “future-now” thinking (Chermack et al., 2001). Scenario planning encourages organizational leaders to think the unthinkable (Chermack et al., 2001). It has been identified as a useful means of conducting strategic organization planning (Chermack et al., 2001). With a focus on long-term and short-term future, scenario planning forces the organizational planners to consider paradigms which challenge their current thinking (Chermack et al., 2001).
In (Wade, 2012), scenario planning is described as a productive, creative, and existing way to develop the groundwork for a strategic plan which does not bet the future on the company on a single most likely scenario. Scenario planning challenges the idea of a single future but an array of possible future which could potentially unfold (Wade, 2012). The outcome of the scenario planning process is a portfolio of future scenarios, each of which represents a different way the business landscape could look in a few years, and not just the landscape, but also the players who involve in the business such as competitors, suppliers, customers, employees and other stakeholders (Wade, 2012). Scenario planning is considered to be a critical tool for anyone who is not just managing, but also leading (Wade, 2012). It enables the leader to create a realistic vision for the future and craft the strategies which will make the leader successful (Wade, 2012).
The good scenario planning goes beyond just high-low projections (Schoemaker, 1991). In (Peterson, Cumming, & Carpenter, 2003), scenario planning is described as a systematic method for thinking creatively about possible complex and uncertain futures. The underlying concept of the scenario planning is to consider a variety of possible futures which include many of the important uncertainties in the system instead of focusing on accurate prediction of a single outcome (Peterson et al., 2003). There are many approaches to scenario planning such qualitative approach,
The applications of scenario planning can be organized by their use of qualitative or quantitative methods and their approach toward the uncertainty (Peterson et al., 2003). Most scenario planning incorporates both qualitative and quantitative details, and the relative mix of these two aspects distinguish different scenarios exercises (Peterson et al., 2003). Some scenario planning is intended to facilitate the management uncertainty, while others are used to discover it (Peterson et al., 2003). Three examples of scenarios which have been used to approach problems which were beyond the read of the traditional predictive methods include “Shell Oil,” “Monte Fleur, South Africa,” and “Northern Highland Lake District, Wisconsin” (Peterson et al., 2003). In the Shell Oil, the traditional forecasting was found inappropriate, and scenario planning was used to allow well-defined actor “Shell” with a clear goal to maximize shareholder value to develop a strategy for an uncertain future (Peterson et al., 2003). In Monte Fleur, scenario planning is used by bringing a group of disconnected people with divergent goals together to create a shared understanding of the uncertainties surrounding the transition to democracy (Peterson et al., 2003). In Northern Highland Lake District in Wisconson, a team of scientists created an initial set of scenarios to begin a scenario-planning process among a broad group of stakeholders (Peterson et al., 2003). These examples demonstrate that scenario planning can be modified in a multitude of ways to fit a particular context (Peterson et al., 2003).
Scenario Planning Could Have Saved Blockbuster
Blockbuster is a very good example of the business which did not do the proper scenario-type planning and only relied on standard forecasting. Blockbuster Inc. was an American-based DVD and video game rental service. It was founded by David Cook, who used his experience with managing large database networks as the foundation for the retail distribution model of the Blockbuster (Albarran, 2013). In 2009, Blockbuster had an estimated 7,100 retail stores in the US with additional locations in 17 countries worldwide, and had over 60,000 employees in the US and worldwide (Albarran, 2013). The headquarter of the company was in McKinney, Texas (Albarran, 2013). Blockbuster filed for bankruptcy just prior its 25th anniversary on September 22, 2010, and on April 11, Blockbuster was acquired by satellite television service provider Dish Network at an auction price of $233 million and the assumption of $87 million in liabilities and other obligations (Albarran, 2013).
The innovation is not about developing new products, but it is about reinventing business process and building entirely new markets to meet untapped customer needs (Albarran, 2013). For some businesses, innovation is deliberative and planned, while for others innovation is the direct result of a triggering event such as a change in external market conditions or internal performance which forces a change in business strategy (Gershon). Three main types of innovations: product innovation, process innovation, and business model innovation. Blockbuster followed the traditional forecasting model without paying attention to any innovation and the impact of the technology on its business. If Blockbuster had implemented scenario-typed planning in their Business Process, it would not have failed. The Blockbuster retail model was going to be difficult to sustain in the presence of advancing technology (Albarran, 2013). Figure 1 illustrates a Scenario Planning Model.
Figure 1: Scenario Planning Model
Forces Driving Blockbuster Out of Business
The Internet made the future of e-commerce and “disruptive technologies” possible. Netflix is one of these “disruptive technologies” which took the form of a unique business process innovation (Albarran, 2013). Netflix is an online subscription-based DVD rental service founded by Reed Hastings in 1997during the emergent days of electronic commerce (EC) when companies like Amazon and Dell Computer were starting to gain prominence (Albarran, 2013). Netflix provides greater value to the consumer when compared to the traditional video rental store which charges by the individual DVD rental unit, by offering two to three DVDs per week for a fixed monthly price (Albarran, 2013). Moreover, Netflix offers greater convenience in the form of “no late fee.” (Albarran, 2013). The success of Netflix is the direct result of personalized marketing which involves knowing more about the particular interest and viewing habits of the customers (Albarran, 2013). Netflix utilizes the power of the Internet to promote a proprietary software recommendation system (Albarran, 2013). This recommendation system solved the common complaints with Blockbuster when renting an unfamiliar movie, and the customer gets dissatisfied with the viewing experience later. With this recommendation system, Netflix offers suggestions of other films that the customer might like based on the past selection and the brief evaluation filled by the customers (Albarran, 2013).
Blockbuster failed to react to the competition and revise its business model (Albarran, 2013). Blockbuster could have re-position itself strategically as early as 2011 (Albarran, 2013). However, Blockbuster could have acquired Netflix or modified its strategy by duplicating many of the same EC efficiencies which Netflix’s business model had already demonstrated (Albarran, 2013). Blockbuster chose to ignore the competitive threat posed by Netflix.
Scenario Planning could have saved Blockbuster. Scenario Planning offers a framework for resilient conservation policies when faced with uncontrollable, irreducible uncertainty (Peterson et al., 2003). Scenario Planning consists of using a few contrasting scenarios to explore the uncertainty surrounding the future consequences of a decision. Blockbuster could have benefitted from a few contrasting scenarios to explore the uncertainty that is resulted from the competition, the technology, and the presence of the Internet and e-Commerce. The key benefit of the Scenario Planning process is that it reveals different ways of the future based on which more flexible and more thoughtful and better decision can be made today (Wade, 2012). An additional benefit of scenario planning includes the increased understanding of key uncertainties, the incorporation of alternative perspectives into conservation planning, and greater resilience of decisions to surprise (Peterson et al., 2003).
In summary, the traditional
forecast model did not help Blockbuster stay in business. On the contrary, the traditional forecast
model did not forecast the future of Blockbuster. The forces such as the Internet, the emerging
technologies supporting e-commerce, recommendation systems for customers,
monthly rental for two to three DVDs, and no late fee have driven Blockbuster
out of business. Blockbuster could have
saved itself if it has applied scenario planning strategically to protect
itself from the uncertainty of the future, instead of following the same
traditional forecasting model which worked perfectly in the past but became not applicable any longer in the
presence of the Internet and other emerging technologies and innovations driven
by these technologies.
References
Albarran, A. B. (2013). Media management and economics research in a transmedia environment: Routledge.
Chermack, T. J., Lynham, S. A., & Ruona, W. E. (2001). A review of scenario planning literature. Futures Research Quarterly, 17(2), 7-32.
Gershon, R. A. MEDIA INNOVATION: Disruptive Technology and the Challenges of Business Reinvention: Kalamazoo, Western Michigan University.
Peterson, G. D., Cumming, G. S., & Carpenter, S. R. (2003). Scenario Planning: a Tool for Conservation in an Uncertain World. Conservation Biology, 17(2), 358-366.
Schoemaker, P. J. H. (1991). When and How to Use Scenario Planning: A Heuristic Approach with Illustration. Journal of Forecasting, 10(6), 549-564.
Wade, W. (2012). Scenario planning: A field guide to the future: John Wiley & Sons.
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