1. MD 815 Session #3 Technology Forecasting & Scenario Planning 1. Introduction 2. S-Curves and quantitative forecasting 3. Scenario Planning

2. Introduction l Why forecasting is crucial –Will there be a market for your product? –How fast will it mature? –What will be happening to competing and complementary technologies? –What hazards lie on the horizon for your established products?

3. Why are we so bad at forecasting? "This ‘telephone' has too many shortcomings to be seriously considered as a means of communication." ---Western Union memo, 1876 "While theoretically and technically television may be feasible, commercially and financially it is an impossibility.” ---Lee DeForest, inventor "I think there is a world market for maybe five computers. ---Thomas Watson, chairman of IBM, 1943 "There is no reason anyone would want a computer in their home." ---Ken Olson, president of DEC 1977 "640K ought to be enough for anybody”. ---Bill Gates, 1981

4. The key is to forecast wisely... l Understanding the circumstances under which forecasting is most feasible l Knowing when you most need it/how much you should spend –Fast changing environments –Long planning horizons –Large stakes involved –More complex underlying problems –Aggressive (rather than defensive) R&D strategies l Matching technique to need

5. Example: FedEx ZapMail l About ZapMail –Two hour high quality facsimile service –$25 for a 30 page fax –Conceived in 1979; delivered in 1984 –Cost: $400 million l Was this a good idea? –What tools could have been used to decide? l Lesson: –Every major business decision contains an implicit forecast –Better make sure yours is not way, way off

6. The Technology S-Curve

7. Technological Discontinuities

10. Moore’s Law

11. The Diffusion S-Curve

12. Example: Networked PDA adoption in 1994 l Use comparables to develop a range of possibilities l Prominent IT products provide a set of potential analogs: –Cellular telephones –Pagers –Facsimile machines –Modems –Desktop PCs –Laptop PCs –On-line services –ISDN (narrow band)

13. Were Networked PDAs circa 1994 more like Cellular or ISDN?

14. Example: Interpreting Growth Trends l Sales growth: Which of these companies would you rather invest in?

15. Example: Interpreting Growth Trends l How about these two?

16. Scenario Planning: How to Hold a Strategic Conversation (Schwartz) 1.Create a hospitable climate 2.Establish an initial group including key decision makers and experts 3.Include outside information and outside people 4.Look ahead far in advance of decisions 5.Begin by looking at the present and the past 6.Conduct preliminary scenario work in smaller groups 7.Playing out the conversation 8.Living in a permanent strategic conversation