This segment of the business strategy process is both interesting and creative. Prior to starting with step one (Environment), you should assemble a small, but business/industry knowledgeable group of professionals to help ponder the future.
In the first step the team should get into a work room with multiple electronic white boards or large charts to contemplate the future of your industry. Think about the next three to five years and what drivers of change could have a significant impact upon your industry. Document the drivers, both exogenous (external/uncontrollable) and endogenous (internal/potentially controllable) and the components of your industry that will likely change as a result of these drivers. Once the drivers and expected changes are documented, develop at least three scenarios describing how your industry could possible look in the future (again 3 to 5 years out). The three scenarios should reflect the:
- Worst case operational scenario from your company's perspective
- Best case scenario
- Most likely scenario
Now hypothesize and document three business models (what your company would look like in the future), one targeted at each of these industry scenarios. In other words, what would your business model have to look like to survive, at minimum and desirably to prosper within each operational scenario, the worst, the best and the most likely. When all three business models are complete, document them to a moderate level of detail. Within this documentation, make sure that you identify and define the major initiatives and strategic projects which must be undertaken from today's baseline model to make each of the three business models functional within their selected environmental scenario. You certainly won't be perfect in your guesses with respect to these scenarios or the business models and initiatives, but just by working through them with your team you will build knowledge, open up minds, and promote communications about what the future might bring.
Basically, this approach is called scenario planning. My belief is that many professionals don't see their industry and market trends changing around them because they have never thought about the possibilities of the future. Effectively, they are closed to many aspects of the future simply because they have never considered the full array of possibilities. By performing scenario analysis you force professionals to think about and ponder the possibilities of the future and thereby make them more in tune to detect early any of these trends or key changes which actually do occur in the future.
At this point you have three business models, each targeted at a different business scenario of the future. We have built these because we simply don't know and cannot predict what will happen in the future. No one can accurately and reliably see the future. So, by looking at the best, worst and most likely scenarios and building business models around them, we have addressed what we think are the potential extremes of the future. That is the best that we humans can do.
Now we array the three business models in a common format where the entire team can see them so that we can look horizontally across them. Initially we want to identify all initiatives and strategic projects which appear in all three business models. These are our strategic core and they are the initiatives and projects which we should proceed to implement under any condition, since they support all three of our potential scenarios of the future. So get started with the planning for these.
Next we want to look for initiatives or strategic projects which appear in two of the business models. These are our strategic options for the future. We likely want to make a optional investment in building or gaining access to these capabilities. For example, we could make an investment in another company that already has a needed operational capability. If the investment is structured correctly, we could walk away from it if the need for the capability never materializes and simply consider the spent money as a cost of business insurance or buy more, possibly controlling interest if the need for the capability does materialize. Thus these really are strategic options for the future.
If the initiative or project appears in only one scenario, do nothing now except to scout the market for future options on that capability should the need arise.
This part of business strategy building is both interesting and fun. It is also a great training ground for up and coming professionals in whom you, as company management, would like to make an investment.
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