Scenario planning â how to find the right strategy at ... - Roland Berger

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Roland Berger Strategy Consultants 4. Detecting weak signals and blind spots The next step is to compare internal and external stakeholders' assessments and consolidate findings. All factors that show potentially significant influence are identified, paying particular attention to "weak signals" and "blind spots". "Weak signals" are trends only a few stakeholders mention in the first survey, but nearly all second-round respondents rate as factors that could become highly relevant to a company's future performance. For example, the global manufacturing study detected that companies greatly underestimate the importance of securing access to rare earth metals. Future demand will be enormous. The industry already uses around 130,000 tons per year of these rare metals worldwide. Neodymium and yttrium, for example, are particularly important in electric car batteries and engines. Rising use of these materials is also boosted by electronic equipment like flat-screen televisions and industrial superconductors. Analysts predict that demand will reach 190,000 tons in 2015. To meet that demand, Europe is highly dependent on maintaining good relationships with supplier countries, notably China. "Blind spots" are differences in how internal and external stakeholders interpret a factor's importance. For example, our pharmaceutical and automotive sector studies show that when management gives excessive attention to internal perceptions and preoccupations, important market opportunities may be missed. A recent pharmaceutical industry survey of all stakeholders detected insufficient in-house appreciation of biosimilars. These are bioengineered follow-on drugs officially approved after the original drug's patent has expired. Experts predict the biosimilar market, with total sales of USD 400 million in 2010, will grow in four years to USD 2 or 3 billion. 2 The reason why biosimilars are an exciting option for the pharmaceutical industry is that more and more emerging countries will demand and have the resources to pay for improved healthcare. The trends are already apparent. Over the past five years, per capita health spending in the BRIC countries rose by USD 87. In absolute terms, this means people purchased an additional USD 252 billion 3 in healthcare services. Our survey of the automotive sector discovered another blind spot: some managers severely underestimate the market potential of simpler, more affordable vehicles. In India, small or economy cars account for over 70% of all new vehicle registrations. Another internal misperception was a failure to appreciate emerging economy manufacturers' competitive strengths. Over the last five years, passenger car production in developed countries decreased by 2% annually to 32 million, but in developing countries, car assembly doubled from 16 to 32 million cars. Emerging market manufacturers now also venture into European territory: Great Wall Motors will be the first Chinese automaker to assemble cars in the European Union when the company opens a car manufacturing plant in Bulgaria. The plant will have an annual production capacity of 50,000 units and assemble four different models – a sports utility vehicle (SUV), a pickup and two passenger car models – which are all expected to be sold in the European Union. Qoros, a Chinese brand previously unknown in Germany, recently announced plans to sell cars in Europe. Starting in mid-2013, some 150,000 vehicles will roll off Qoros production lines and capacity will ramp up to double the output within the next few years. The company intends to earn half its revenue in Europe. These examples show how European-based companies may miss market opportunities and lose revenue if they concentrate too intently on internal opinions and priorities. 2) Global Industry Analysts (2010) 3) Euromonitor (2011)
Study 13 5. Deriving scenarios To illustrate this step, we return to our study of the global manufacturing industry. Based on stakeholder evaluations, the factors that influence global manufacturing can be allocated into the following categories: F4 Influencing factors are categorized by potential impact and certainty High Critical uncertainties or weak signals (low certainty but highest impact on the scenarios) Definite trends* (high certainty, high impact) Potential impact Secondary elements These elements elements are eliminated (low impact) LOW LOW Certainty high * Definite trends: Growth of developing countries as end-use markets (e.g. China and India) Use of nanotechnology, miniaturization and microelectronics Transition to lightweight materials (e.g. composites) Source: Roland Berger
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Scenario planning â how to find the right strategy at ... - Roland Berger