25th Anniversary blog series: 1994 – Developing new business streams
Gill Ringland introduces our 1994 blog, which comes from an article written by an employee of a major white goods company, engaged on a scenario planning exercise to shape its environmental policies. This case study was contributed to Scenario Planning: Managing for the Future. Its relevance today is two-fold: one, the emergence of a strategy from one scenario leading to good business in all scenarios, and secondly, it foresaw the move to shared resources and rental, and away from purchase and disposal.
A key concern for the Group, a major supplier of white goods, is environmental issues – and working with environmental issues is all about dealing with short term uncertainties and understanding long term trends. The management team wanted the group staff of Environmental Affairs to develop an awareness of those trends and strategies for dealing with environmental issues integrated with the business process throughout the company.
Environmental issues needed to form part of the thinking process of the businesses. The scenario process was key in developing a picture of what was happening in the broader market and business environment that affected the product groups.
The staff surveyed the literature available on scenario planning, internal experience from change programmes, and received advice from Graham Galer, former Strategic Planning Manger at Shell, about Shell’s experience of using scenario planning.
The scenario methodology, called the Environmental Change Programme, ECP, was developed using internal expertise and the services of the academic partner, Gothenburg Research Institute, and a management consultancy.
Two pilot projects were run, one with a group from the consumer side and one with a group from the commercial side, of commercial cleaning appliances. On the consumer side, the group had already experienced pressure from environmental issues.
The first step of the ECP was to undertake a strategic investigation of the business environment with a special focus on environmental issues and demands. The second step was to look at the impact on the current strategy, of the current and possible future conditions. The process and the results were used as a way of broadening management thinking. However the key was to integrate the concern and awareness of the environmental issues with the business strategy and to set up action plans.
The scenario process worked as an eye opener. The group started with the product line managers and then rolled it out to other management teams on lower levels.
The process of building the fact base for the scenarios took around three months. During this period there was an extensive data collection process. Interviews were undertaken with suppliers, customers, environmental organizations. The scenarios were developed by a core team of 4 to 5 people from Environmental Affairs. The process was finalized by a brainstorming session based on a presentation of the fact base. The resulting skeleton scenarios were then fleshed out by obtaining additional information from experts and desk research.
Three scenarios were developed.
Focused on Global Warming
Global Warming had caused strict legislation to be put in place to restrict the use of fossil fuels
Energy prices rising
Focusing around the use and abuse of toxins, both real and perceived
Focusing on material use, re-use and recycling
THE USE OF THE SCENARIOS
The process of introducing the scenarios with the businesses was started with a slide presentation of the driving forces behind environmental problems and demands. This was, during the first pilots, followed by a set of slides highlighting the most important aspects of each scenario. This was presented to the full product line management team and other key managers, about 15 people. This group was then split to work in three groups looking at the different scenarios. Each group was asked to consider what they would do if they were working in the company, and this scenario turned about to be a reality in 10 years’ time. For their assistance, they were provided with five pages explaining each scenario in detail.
After presenting their ideas to the other groups, each group was asked to consider what strategies could or should be put in place anyway – whatever scenario happened. The management teams recognized that many of the strategies would be good to implement even if the scenarios did not come true. The actions they had identified made sense in terms of current environmental and business pressures.
There were several impacts of the change in thinking.
One was a major strategic change in the commercial cleaning business. As a result triggered by one of the scenarios, the division became more service oriented. The company became more aware that there was value in its products even beyond the economic use for the customers. As a supplier, the materials or parts of the product could be reused. The idea was then to sell the customer a service and not a product. This can be compared with a successful scheme developed by Rank Xerox of renting copiers with full service, guaranteed function, and charging based on the number of copies made, instead of only selling a copier machine.
The scenario process at the company is ongoing. Less effort is now put into data collection and more effort is put into rolling the scenarios out to the businesses. The objective is to pass it on to all the product lines. In 1997, around 25% of product lines had used the techniques.