tm Creating Tomorrow Out of the Changing of Today WorldFuture 2013 Dr. Michael Petty North Star Partners 1

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“What everybody knows is what has already happened or become obvious. What the aware individual knows is what has not yet taken shape, what has not yet occurred” Sun Tzu The Art of War 6

 Develop the ability to “fiercely” confront today’s reality  Introduce tools to initiate the creation of insight of today and foresight of the future  Recommend an ongoing foresight system to “fiercely” pursue the opportunities and risks of today’s reality and its changing environments 7

Foresight (noun): 1. care or provision for the future 2. the act or power of foreseeing 3. an act of looking forward 4. knowledge or insight gained by or as by looking forward; a view of the future. 8

 Fierce ( adjective ) : menacing, cruel, barbarous, threatening  Synonyms (Roget’s Thesaurus) : robust, intense, strong, powerful, passionate, unbridled, bold, relentless 9

Gaining a view(s) of the future by robust, intense, passionate, bold and relentless pursuit. 10

Interrogating Reality 11

“the present is the future in its most creative state” T. Irene Sanders Strategic Thinking and the New Science 12 Fierce Foresight tm

 The objective of interrogating reality is to answer three critical questions:  What are the current influences on the business?  What influences are changing?  What influences could change? 13

Insight of the present is the foundation of foresight of the future(s) 14

 Asking the tough questions about today’s operations:  Do we really understand our business model?  If not, Business Model Canvas is a great tool! 15

16 As we know it today

The Business Model Building Blocks

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 Asking the “fierce” questions about today’s operations/business model:  What’s working?  What’s not working?  What’s working that’s in jeopardy? 19

ComponentSocio/DemoTechEconomicEnvironLegal/Pol Customer Segments Value Proposition Distribution Channels Customer Relations Activities Partners Resources Cost Structure Revenue Stream 20

ComponentSocio/DemoTechEconomicEnvironLegal/Pol Customer Segments Value Proposition Distribution Channels Customer Relations Activities Partners Resources Cost Structure Revenue Stream 21

 Asking the “fierce” questions about tomorrow’s operations:  What’s working today that may not tomorrow?  What business environmental factors are changing?  What known critical future issues are not being discussed? 22

 Asking the “fierce” questions about tomorrow’s operations:  The Business Model Canvas on steroids  What are the underlying assumptions of each component of the Business Model?  Which assumptions are in jeopardy? 23

24 What are the critical assumptions underlying each building block? What assumptions are in jeopardy?

ComponentSocio/DemoTechEconomicEnvironLegal/Pol Customer Segments Value Proposition Distribution Channels Customer Relations Activities Partners Resources Cost Structure Revenue Stream 25

ComponentSocio/DemoTechEconomicEnvironLegal/Pol Customer Segments Value Proposition Distribution Channels Customer Relations Activities Partners Resources Cost Structure Revenue Stream 26

 Asking the “fierce” $64 billion question:  What STEEP factor could change?  What underlying assumption could be in jeopardy? 27

ComponentSocio/DemoTechEconomicEnvironLegal/Pol Customer Segments Value Proposition Distribution Channels Customer Relations Activities Partners Resources Cost Structure Revenue Stream 28

 Asking the “fierce” questions about today’s reality:  Is the business model understood and are the underlying assumptions identified?  Are ongoing changes in the environment being actively and “fiercely” assessed?  Are future (but yet unknown) changes in environment factors being actively assessed? 29

30  1) What general (tectonic) factors influence our business today?  2) What general factors are changing?  3) What general factors could change?

The Black Swan 31

 The Black Swan: The Impact of the Highly Improbable (2007)  Nassim NicholasTaleb : “we do not live in a probabilistic world”  One of most influential books of the first decade of the 21 st Century 32

 A Black Swan is an event that is:  Happens unexpectedly  Devastating in its consequences  Subsequently rationalized 33

What event (or related series of events) could make your business irrelevant or worthless in six months or less? 34

 What event (or related series of events) could make your business irrelevant or worthless in six months or less?  Example: The US auto industry 35

36 Underlying Assumptions Proper Needs Assessment Necessary Demand Acceptable Styling Appropriate Technology Available Resources Cost Efficient Operations Appropriate Quality Competitive Price Available inventory Available consumer credit

37 Underlying Assumptions Proper Needs Assessment Necessary Demand Acceptable Style Appropriate Technology Available Resources Cost Efficient Operations Appropriate Quality Competitive Price Available inventory Available consumer credit

 What event (or related series of events) could make your business irrelevant or worthless in six months or less?  Example: The US auto industry  Sixty year old business model  Key element – providing retail customers loans or leases to transact new car purchases  Made irrelevant in less than six months in 2008  Impact of banking industry credit crisis 38

 What event (Black Swan) or series of events could render the current business model irrelevant/worthless in six months or less  Identify ten “Black Swan”  Improbability of likelihood is irrelevant (What probability of total loss is acceptable to you?) 39

Black SwanSocio/DemoTechEconomicEnvironLegal/Pol

Black SwanDescriptionIndustry (In or Out) Environ. Factor (Existing or New) Strategy (Yes or No) 1 AAAInExistingYes 2BBBOutExistingNo 3CCCOUTNewNo 4DDDInNewNo 5EEEOutExistingNo 6FFFInNewNo 7GGGInExistingYes 8HHHOutNewNo 9IIIOutExistingNo 10JJJInNewNo 41

 Sony Walkman – market leader for 20+ years  MP3 technology - alternative (albeit illegal) music delivery system (Napster)  Apple via iTunes/ iPod - capitalized on the change in technology and change in music contracting  The Walkman - officially retired for lack of market demand. 42

 Sony Trinitron Television – the premium TV product for three decades  Sony Walkman – market leader for 20+ years  Sony eBook reader – on market almost four years before the iPad. 43

The Flip-Side: The Golden Goose 44

 The Golden Goose is an event that is:  Happens unexpectedly  Creates extraordinary opportunities as a consequence  Subsequently rationalized 45

 Identify the event (Golden Goose) or series of events that would render your current business model extraordinarily successful in “6” months  Identify ten “Golden Geese”  Improbability of likelihood is irrelevant (What probability of extraordinary success would you pass up?) 46

Golden GooseSocio/DemoTechEconomicEnvironLegal/Pol

Black SwanDescriptionIndustry (In or Out) Environ. Factor (Existing or New) Strategy (Yes or No) 1 AAAInExistingYes 2BBBOutExistingNo 3CCCOUTNewNo 4DDDInNewNo 5EEEOutExistingNo 6FFFInNewNo 7GGGInExistingYes 8HHHOutNewNo 9IIIOutExistingNo 10JJJInNewNo 48

49  1) Are you aggressively hunting the Black Swan?  2) Are you aggressively hunting the Golden Goose?  3) If not, why not?

Fiercely Creating Tomorrow 50

 Three Fierce Questions  Black Swan  Golden Geese Now, what do we do about it? 51

52  1) What general factors influence our business today?  2) What general factors are changing?  3) What general factors could change?

 Priority “A” – High potential impact or “indeterminable” impact – immediate action  Priority “B” – Moderate impact or probability – regular and recurring monitoring  Priority “C” - periodic review 53

 Assign each potential Fierce Action to a senior executive for immediate analysis and action  Immediate identification of trigger event for follow-up action  Monthly update to senior management team ( evolving impact assessment)  Contingency plan at trigger event 54

 What must be done now?  What can be done now?  How fast can it be done?  What must be done at a trigger event? 55

56  1) Are you “fiercely” hunting your Black Swans?  2) Do you have contingencies plans in place?  3) If not, why not?

 Assign each potential Black Swan to a senior executive for analysis and monitoring  Identification of trigger event for action  Quarterly update to senior management team – any change in status (look for “perking” data)  Contingency plan at trigger event 57

 What must be done now?  What can be done now?  What must be done at trigger event? 58

59  1) Are you “fiercely” hunting your Golden Geese?  2) Do you have aggressive action plans in place?  3) If not, why not?

 Assign each potential Golden Goose to a senior executive for analysis, action and/or monitoring  Quarterly update to senior management team  Identification of trigger event for action  Aggressive action plan at trigger event 60

Issue No./Name Fierce Action Black Swan Golden Geese Futures Wheels Scenario Analysis 1. Tech Platform Smith 2. Power Shortage Jones 3. Bionic Network Clark 4. Consumer App Burke 5. Genetic App Christopher 61

Issue Priority: “A” Issue Category: “Black Swan” Issue Description: Power Outage Accountable Executive: J. J. Jones Date Identified: July, 2012 Potential Impact: Total loss in six months Critical Trigger Points (defined): Critical Trigger Points Status: Change in Status Since Last Report: Action Taken: Description of Follow-up Action & Timing: Contingency Plan Activation Date: 62

 Create a budget fund for opportunities and defensive expenditures  Simplify justification for strategic opportunities  Create of periodic reporting system – parallel to operational reporting – and accountability  Include a “foresight” performance component to performance evaluation at both executive and management level  Board level reporting and accountability function 63

You have just developed the foundation for a robust strategic issues identification and action system. You now have the ability to modify and enhance this system and empower your team to think, analyze and act strategically! You now have the ability to significantly influence the future – to create your own preferred, fierce future! 64 Create Your “Fierce” Future

 Interrogate reality by understanding your business model  Interrogate reality by identifying the critical underlying assumptions  Interrogate reality by using the BMC/Environment (tectonic) Factor Matrix  Aggressively hunt the Black Swan and Golden Goose  Actively manage all identified potential strategic risks and opportunities 65 Creating Tomorrow

 Dr. Michael Petty  North Star Partners, LLC  6166 Hidden Canyon Rd.  Centreville, VA,     mpettyiii 66

 References:  T. Irene Sanders, (1998), Strategic Thinking and the New Science  Nassim N. Taleb, (2007), The Black Swan: The Impact of the Highly Improbable  Alexander Osterwalder, (2010), Business Model Generation 67

68 Be Fierce!

Black SwanDescriptionIndustry (In or Out) Environ. Factor (Existing or New) Strategy (Yes or No)

Golden Goose DescriptionIndustry (In or Out) Environ. Factor (Existing or New) Strategy (Yes or No)

Priority “A” Issues /Exec. Fierce Action Black Swan Golden Geese Futures Wheel Scenario Analysis Issue: Executive: Issue: Executive: Issue: Executive: Issue: Executive: Issue: Executive: 71

Issue No./Name Fierce Action Black Swan Golden Geese Futures Wheels Scenario Analysis 1. Tech Platform Smith 2. Power Shortage Jones 3. Bionic Network Clark 4. Consumer App Burke 5. Genetic App Christopher 72

Black SwanSocio/DemoTechEconomicEnvironLegal/Pol

Golden GooseSocio/DemoTechEconomicEnvironLegal/Pol