1. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 1 Scenario Thinking in Industrial Innovation Ian Osborne Principal, Osborne Associates www.osborneassociates.com

2. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 2 Agenda Two case studies drawn from personal experience at HP/Agilent Technologies Demonstrate the power of Scenario Analysis in strategic planning Technology Strategy Business Strategy Beneficial side-effects

3. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 3 Industrial Innovation and Strategy Innovation is a renewable source of competitive advantage Hewlett-Packard differentiates itself and creates value through innovation –Product –Process The ability to innovate reflects an understanding of customer needs, technology and markets The development of markets is not easily predicted

4. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 4 HP Corporate Research & Development HP Labs charged with leading technological innovation Legacy of breakthroughs: Atomic Clock; Laser & Inkjet Printers; HP-PA; Itanium; Navigator Chip Develop technology for transfer to operating divisions for commercialisation Maintain technological competencies in key areas of HP business. Key tasks: –Assess technology needs of company businesses –Align research areas to those of high uncertainty and greatest benefit –Develop forward looking view of technology and market –Identify key areas of uncertainty/opportunity –Address key points of influence

5. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 5 Pervasive Computing Initiative pursued over several years Looking at convergence of computing, communications and information At heart of future of HP computer business Key questions: –What will happen when? How? –What are the opportunities that are presented? Inputs required: –technology roadmaps –understanding of evolution of user needs –potential for innovation Reasoned about future of computer “packaging” in connected world –Information Utility –Information Appliance –Smart packaging –“Everyone is connected”

6. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 6 Formulating Strategy Emphasis on incorporating “expert” inputs and perspectives Use scenario analysis to formulate and test breakthrough ideas –I.e. In this context what happens to this idea? More organic and exploratory than practically focused Process can lead to breakthrough thinking For example: –What if you could walk up to any device and communicate with it? –What if your car is able to monitor its operation and advise the garage of an emerging problem? –What if you buy processing capacity by the unit in real- time? –What if you could order up a video link for the lowest cost over your phone line in real time?

7. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 7 Results Formulated strategies to underpin: –Move to Internet based communications –Move to information appliances (e.g. PDA) –Move to infra-red inter device communication –Move to digital imaging Understanding of breakthroughs required to realise potential in: –Wearable computing (e.g. Virtual Reality) –Personal area networks (e.g. Blue Tooth) Developed a long term strategic competence at heart of HP Research & Development –Influence present today in product successes.

8. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 8 Telecom Systems Division, Agilent Technologies Ltd. HP/Agilent Operating Division – commercial business unit Focus: Operational Support Systems in Telecoms Market comprises: –Fixed and Mobile –Incumbent and Competitive Suppliers –Government Regulated Organisation: –R&D, Marketing, Manufacturing Key Tasks: –Market Analysis –Product Definition –Product Development –Operations –Sales/Delivery partner management –Services Support Product: –Large, distributed systems –Hardware, software and services

9. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 9 1999 Scenario Planning Exercise Objectives: –Assess impact of Mobile and Internet technologies on traditional telecom market –Identify opportunities and threats emerging –Revise strategies for addressing opportunities –Embrace new management team in division and representatives from partner organisations –Lay foundations for FY2000-03 Business Plan Programme –Solid preparation led by Marketing Manager and me –Engaged strategic marketing team from Business Unit –Substantial engagement with facilitation team –preparation on process and content –2 day offsite event including dinner exercise –Broad representation from senior/middle management, plus selected experts

10. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 10 Results Energetic and enthusiastic meeting, helped by pleasant surroundings, good facilitation Good team work, many new players Opportunities and threats assessed – partitioned Foundations laid for broader understanding of business Identified major areas of uncertainty, i.e. When? How fast? On what basis? Realisation that business plan vulnerable to changes in underlying technology and business patterns Developed a new strand of business aimed at Internet based telecommunications (e.g. VoIP) Encouraged team to explore these changes with customers Identified triggers : enabled scanning for evidence of trends emerging

11. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 11 Scenario Analysis Essential Tool in process of planning Build and sustain a capability for the organisation to imagine the future … and the paths that might lead there. Structured and disciplined methods available Developing the competence takes careful preparation and sustained activity Benefits from a diversity of inputs –Customer, Supplier, Technologist, Marketer, …

12. 10/2/2004Copyright Osborne Associates (Scotland) Ltd 12 Thank you!