Competitor scenarios

Liam Fahey

Liam Fahey is internationally recognized as a leading consultant on competitor analysis, competitive strategy, and scenario learning (liam.fahey@leadershipforuminc.com). Of the seven books he has published on these topics, his three most recent are: Learning from the Future (1998), Competitors: Outwitting, Outmaneuvering and Outperforming (1999), and The Portable MBA in Strategy, Second Edition (2001). Based in Needham, Massachusetts, he is an adjunct professor of strategic management at Babson College, a visiting professor of strategic management at Cran®eld School of Management in the UK, a founder and principal of Leadership Forum Inc, and a Contributing Editor of Strategy & Leadership.

Editor's note
This is the second Strategy & Leadership article in Professor Fahey's series on understanding competitors. The ®rst one, ``Invented competitors: a new competitor analysis methodology'' appeared in the November/December issue, Vol. 30 No. 6. cenario learning and competitor assessment are two tools for looking at the future that leading edge companies are learning to use ef®ciently and effectively in combination. Given other demands on management attention, not many companies can expend the resources to annually investigate a wide range of future possibilities via scenario planning. Likewise, few companies can afford to continually track the details of their competitors' every strategic move. But almost all companies need to periodically weigh potential competitive threats, and now a proven methodology provides a look at rivals new and old in several scenario settings.

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Managers need to be familiar with scenarios of future markets that are not merely extrapolations of current trends. This is because history teaches that the most potent competitors often emerge unexpectedly ± from surprising sources and under unanticipated circumstances. For example, a decade ago book-retailing chains were expanding at a record pace as they decimated their competition, small locally owned bookshops. However, the overnight success of Amazon.com's Internet store ± a potent combination of new marketing concepts, new technology, and new channel strategy ± forced the chains to reassess the future of book retailing and as a consequence make signi®cant changes to their historic strategy.

ã Liam Fahey

potent competitors `` History teaches that the mostfrom surprising often emerge unexpectedly ± sources and under unanticipated circumstances.

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STRATEGY & LEADERSHIP

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VOL. 31 NO. 1 2003, pp. 32-44, MCB UP Limited, ISSN 1087-8572

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For a brief description of each of the elements. J How a competitor might build and manage an integrated supply chain. Competitor scenarios consist of the four key elements common to all scenarios: an end-state. to acquaint managers with the typical content of a competitor scenario. Their basic technique. large diversi®ed ®rms may suddenly decide to shed many businesses to concentrate on a few products and technologies. Competitor scenarios: purposes. competitor scenarios produced actionable insights about these ®rms' own strategy alternatives. how they might do it. Note that there is no one right way to develop and interrelate these four elements. As will become evident in the following discussion. key elements. how it competes (competitive posture). can now be shared. we must remember that any competitor scenario represents one projection of what a competitor might do. constructing competitor scenarios is an iterative process[1]. this article has a three-part structure: J First. and principles A competitor scenario starts with a logical narrative that considers what a competitor might do over some speci®ed time period. and their suggestions for avoiding missteps. and what it seeks to achieve (goals). For example. 1 2003 | STRATEGY & LEADERSHIP | PAGE 33 . logics. are currently unprepared. J How a competitor might develop and manage a networked enterprise around a series of alliances with many types of external entities. After a few years of experience. It is not a prediction of what it will do. we start the scenario process by asking different types of what-if questions VOL. see Exhibit 1. To demonstrate how this competitor scenario process works in practice. J Third. J Second. The following competitor scenarios examine three broad aspects of marketplace strategy: in which product-customer segments the competitor chooses to compete (scope). In this article. End-states are shaped by what is learned in the process of articulating and detailing the plot and the driving forces. of course. to show what managers can learn from different competitor scenarios and how they can use the understanding and information gained to improve strategy development and execution. Another shift of marketplace power can occur unexpectedly when rivals make acquisitions that provide them with new competitive potential. several leading companies that employ scenarios to better understand both current competitors' potential moves as well as the possible emergence of new rivals have learned several principles and some ways to avoid various pitfalls. 31 NO. how its managers would do it. to explain the different types of competitor scenarios that can be created and the purposes associated with them. Scenarios of futures where the business environment is distinctly different from current or anticipated conditions can help managers project and analyze competitors' futures: what competitors might do. and why. plot.Even long-time competitors sometimes do things completely out of character with their strategic and organizational modus operandi. As with all scenarios. and driving forces. Scenarios are a proven means to identify and examine pathways into alternate futures for which most managers. and why they would choose to do so. In almost all cases. often focus on other issues or topics including: J How a competitor might guide and manage its R&D efforts. because of their focus on taking advantage of current conditions. Competitor scenarios.

31 NO. such plots must also address change within the competitor ± for example. competitors are always at the heart of every signi®cant analysis of the competitive or industry context[2]. logics. Driving forces constitute the forces that shape or drive the plot. competitor scenarios provide one critical means of learning about the current and potential competitive environment. ideal focal point for scenarios for a number of reasons. strategy. First. once the notion of relevant competitors extends beyond large market share rivals. The plot or story describes what the competitor must do to get to the end-state. Thus. The logic addresses the why questions: Why does the competitor want to pursue a revolutionary strategy? Why would customers respond to the proposed products in one particular way or another? Plot Driving forces Logic about competitors' likely future marketplace strategies. Second. Customers and channels almost always possess the option to switch to rivals. direction. design. why should learning about competitors not be the prime goal of competitor scenarios? The answer is that too often. managers and others often bring heightened energy and commitment to constructing and learning from competitor scenarios. Thus. and potential competitors in the marketplace. however designed and executed. Finally. What would the competitor have to do to develop. trends related to sales of particular products. and in some respects. and intensity of marketplace rivalry. the change in culture. competitor scenarios enable unique insights into the rivals that will shape the nature. From the answers we craft the end-states that describe what the competitor strategy would look like. direction and intensity of changes postulated in the plot. Principles Some fundamental principles should always guide the construction and use of competitor scenarios (Exhibit 2). Some forces may be what is happening or likely to happen in and around the marketplace: what customers may do. assets. plot. Competitors serve as one useful. emerging. and leadership that would be required to facilitate and lead the drive toward a radical new marketplace strategy. operating processes. because of the frequently intense emotions and feeling about rivals. must win against current. culture. and driving forces. competencies. and goals at the end of the scenario period. For example. the scenario logic constitutes the explanation or rationales for the content. what changes the products would imply for channels and customers. competitor scenarios generate learning about both competitors and the competitive context that would otherwise be unlikely to occur. and other ways in which the strategy would be dramatically different from rivals' current approaches to competing and winning in the marketplace. posture. self-evidently internally PAGE 34 | STRATEGY & LEADERSHIP | VOL. 1 2003 . A radical new strategy would require the scenario developers to lay out what is radical about the strategy: how the products are revolutionary. Other forces are speci®c to the competitor such as changes in its goals or leaders. and governmental policies and regulations. the emergence of new entrants. manufacture. Finally. systems. Sometimes these principles may seem counterintuitive.Exhibit 1 Competitor scenarios: key elements The components of every competitor scenario are: an end-state. competitor scenario developers become enamored of the possibility of crafting the most perfect scenario about the competitor ± one that is surprisingly comprehensive. End-state The end-state details the competitor's marketplace strategy ± scope. etc. Third. market and sell the revolutionary products? Frequently.

Exhibit 2 Competitor scenarios: guiding principles Scenario purposes 1. and even invented rivals (that is. rivals that do not exist today but might exist at some point in the future) generate insights into the emerging and potential marketplace that often simply cannot be obtained no matter how acutely managers develop scenarios around the leading market share rivals. etc) Scenario analysis 6. skills. employed `` Several leading companies haveboth current scenarios to better understand competitors' potential moves as well as the possible emergence of new rivals. Scenario developers need to disengage themselves from their own ®rm 10. elegantly articulated. and knowledge 7. The purpose of competitor scenarios is not to learn about competitors 2. Competitor scenarios should serve as one input to identifying. Competitor scenarios work best when they produce knowledge and insight that broadly informs and prepares decision makers to act rapidly as competitive conditions change. Ultimately this commitment to constructing the perfect scenario limits the usefulness of the scenario project and consumes resources that are better employed elsewhere. small emerging rivals. challenging and re®ning the organization's knowledge (including its beliefs. Which competitors should be the focus of competitor scenarios? The guiding principle should be. and organization implications 8. A competitor scenario should be fully constructed before it is assessed for its competitive. The reason is. assumptions and projections about future) 4. apply scenario thinking beyond your current large market share rivals. strategy developers should not seek the perfect scenario before moving to assessment 9. 31 NO. competitor scenarios that address functional substitute rivals. Scenario construction and scenario assessment require distinct frames of reference. making decisions faster. However. Experienced managers instead use competitor scenarios as a source of learning about the broader competitive context and of the implications for their ®rm's strategy and operations. There are two distinct types of competitor scenarios that originate in two quite different forms of what-if questions: unconstrained what-if scenarios and constrained what-if competitor scenarios. strategy. The ultimate purpose of competitor scenarios is to develop knowledge and insight that aids decision makers (in identifying strategy alternatives. Competitor scenarios should be used to learn about the competitive context beyond competitors (both the competitive or industry context and the macro environment) 3. Competitor scenarios should be constructed for a range of rivals (and not just large market share rivals) consistent. and of course strikingly imaginative in everything it addresses and says about the competitor. 1 2003 | STRATEGY & LEADERSHIP | PAGE 35 . Competitor scenarios should also serve as one input to outwitting. outmaneuvering and outperforming rivals 5. '' VOL.

Sometimes plot elaboration forces managers and others to come face-to-face with issues and questions that are as challenging and insightful as they as unexpected. A plot can then be detailed that leads to the end-state. for example. In this way. in shaping the plot that explained how a rival's marketplace strategy resulted in product and technology dominance. Shaping these questions leads to determination of the relevant end-state ± a statement of what the competitor's marketplace strategy might be. However. This stage severely tests the knowledge and foresight of the scenario developers. articulation of plots becomes a source of extensive knowledge for those involved. 31 NO. such statements can be detailed considerably beyond the examples cited in Exhibit 3. Four categories of what-if questions lead to competitor scenarios with different foci. it suddenly discovered how critical alliances in particular components would be to any ®rm's future success in this product space. unfortunately. rarely receive any kind of formal analysis (see Exhibit 4). These questions have high relevance to most ®rms. This Exhibit 3 Unconstrained what-if competitor scenarios: some typical questions J What if the competitor commits to a diversi®cation of its product line (new products for existing and new customers) through a combination of current and new technologies? J What if the competitor launches a series of new products (source internally and externally)? J What if the competitor launches a sequence of extensions to its current product lines (with the speci®c aim to attract new customers into the market) J What if the competitor suddenly divests a number of its product lines and/or pulls out of a number of geographic regions J What if the competitor moves rapidly to a customization-driven strategy? J What if the competitor fundamentally changes its core value propositionÐhow it competes to win customers in the marketplace? J What if the competitor commits to gaining signi®cant market share (and to do so as quickly as possible) without regard to the its long-term consequences (either for the ®rm itself or for the marketplace)? PAGE 36 | STRATEGY & LEADERSHIP | VOL. they should not exceed a half-page of carefully constructed narrative. As one computer peripherals ®rm found. Clearly. plot development all too often points up issues and questions that require access to external expertise. Unconstrained what-if questions are limited only by the experience. imagination and creativity of those involved in thinking about the possible strategies of rivals.Unconstrained what-if scenarios Unconstrained or open-ended questions encourage scenario developers to pose any question that occurs to them pertaining to one or more rivals' marketplace strategies. 1 2003 . Standard questions The standard questions that are frequently used to initiate unconstrained scenarios are noted in Exhibit 3. These. Indeed. Base question scenarios A different but related way to generate unconstrained competitor scenarios stems from asking a set of questions that are frequently raised in ®rms about rivals' strategies.

J Second. over the next ®ve years. plots and logics. the analysis team concluded that the least advantageous future strategy for this particular market share leading competitor would be to stick tenaciously to its current strategy ± that is. A number of signi®cant strategy implications emerged that required the electronics ®rm's immediate attention: J First. and their potential interactions. in scenario form. including emerging technologies and the recent emergence of new competitors promoting new product forms. continue to incrementally improve its current products and to enhance its value added for customers in small but consistent steps. of the potential paths the technologies might take. These base-question scenarios exemplify how rich insights can many times be gleaned without fully elaborating and detailing the relevant end-states. A case Consider the case of one electronics ®rm that asked the ``dumb'' what-if question: What strategic move might the competitor make that would be least in its own strategic interest? After an extensive analysis of the change in the marketplace. This is so in part because end-states and associated plots and logics based upon these what-if questions lead in turn to further questions (and insights) about rivals that in all likelihood would remain unasked (and not obtained). may indicate actions we should take May be possible to identify preemptive actions The ``ideal'' scenario The ``best long-term'' scenario The ``most helpful'' scenario The ``most hurtful'' scenario method often produces unique insights into competitors' strategies and their implications. 1 2003 | STRATEGY & LEADERSHIP | PAGE 37 . market and technology war that was about to breakout in this particular market space.Exhibit 4 Competitor scenarios: baseline questions Scenario title The ``dumb'' scenario Basic question What might the competitor do that would be least in its own strategic interest? What would be the ideal strategy for the competitor? What would be in the competitor's long-term best interest? Which strategy might the competitor pursue that would most ``help'' our ®rm? What strategy might the competitor pursue that would most ``hurt'' our ®rm? Why create the scenario Learn what could most negatively affect one or more rivals Learn what might be in the short-term interest of the competitor Learn what the competitor would have to do to win in the long-term Learn how and why a competitor's actions might bene®t our ®rm Learn how a competitor could make our ®rm most vulnerable Scenario bene®ts May be possible to ``aid'' the competitor to commit to these actions May be possible to inhibit some of these bene®ts accruing to the competitor Some of these decisions and actions may also be appropriate for us May indicate new ways to view actions of rivals. The team concluded that this strategy would be ``dumb'' because the competitor would likely ®nd itself losing the competitive. it needs to quickly analyze whether it would suffer a similar fate if it too did not radically shift from its current product portfolio. 31 NO. the ®rm had to develop one or more projections. New competitors Unconstrained competitor scenarios are ideal for tackling one of the most fundamental issues that confronts the creators and advocates of any strategy: VOL.

They used this data to generate an endstate that speci®ed what the product might be. the plot that described how the ®rm could develop. New competitors Two avenues have proved especially useful in identifying new types of competitors ± the search for functional substitute rivals and interactions across technologies. Functional substitute rivals Here the dominant unconstrained what-if question is quite straightforward: How might functional substitute products or solutions come to be and what kind of ®rm might create and bring them to the market? Developing even tentative answers to these questions. One reason why this is so quickly becomes evident when a team of managers and others begin to develop this type of competitor scenario. and introduce the PAGE 38 | STRATEGY & LEADERSHIP | VOL. '' How might new types of competitors come into the market? New types of competitors include any organization that would provide a product or solution unlike the ®rm's current product or solution but which customers would purchase instead of its offering.managers `` Experienced of learning use competitor scenarios as a source about the broader competitive context and of the implications for their ®rm's strategy and operations. It requires considerable knowledge and expertise outside the ®rm's historic comfort zones. Then they had to determine what the development and product lifecycle of such products might be. and new competencies in many functional areas including R&D. few ®rms seem to devote any serious analytical thinking to them. The basic what-if question is: What if a functional substitute emerged that had the following speci®c product features? Consider the case of a medical equipment manufacturer manager who asked: What if a pharmaceutical ®rm were to develop a drug that would relieve or eliminate the medical problem for which one of our product lines is used in surgery? The analysis team then had to call upon many external sources of knowledge and expertise to identify which pharmaceutical ®rms were conducting relevant research or already had potential products in the early stages of development or clinical trials. Indeed some management teams have remained aloof from any attention to such rivals even after the relevant staff teams such as a competitor analysis unit or a team with strategic planning responsibility had documented the (potential) emergence and threat of these rivals. is not nearly quite so straightforward. 1 2003 . Yet even preliminary efforts to develop this scenario can generate substantial returns in terms of new knowledge about current and emerging technologies. manufacturing. test. changing customer needs. Most do not consider the potential impact of such new entrants until either they actually have products in the market or they announce their imminent arrival. 31 NO. the strategy required to take it to market. however. Although issues and questions pertaining to the emergence of potential new types of competitors often arise in the course of strategy discussions inside most ®rms. marketing. potential new marketplace dynamics. and sales.

In sum. technology change leads to the emergence of new products and solutions. can sometimes give rise to new competitors. J How and why the ®rm's long established and highly successful products could be vulnerable to products that many managers simply did not see as being part of ``the industry''. by de®nition. this question becomes: What if these technologies were to develop in particular ways? When technology is de®ned broadly to include all spheres of R&D. and eventually win in the market against a number of existing products. and a set of logics explaining why the ®rm would go through with the research. Invented competitors A distinct class of competitor scenarios revolves around invented competitors[3]. linkages across a variety of technologies. What if a competitor emerged that possessed a marketplace strategy characterized by: J Interactions with external entities ± principally channels and customers ± that were exclusively electronic. But even in product areas not thought to be technologically advanced. The guiding what-if question was. Invented competitors possess the great merit of shifting the frame of reference in projecting and assessing rivals' strategies from current or emerging rivals to one or more rivals that. Consideration of this competitor scenario led to new understanding into: J How and why pharmaceutical products evolve. a pharmaceutical product might be chosen by hospitals and doctors instead of a surgical procedure as a preferable form of treatment for the particular medical condition for which surgeons now use one of the ®rm's product lines. that is. VOL. J The forces shaping treatment decisions within hospitals. 1 2003 | STRATEGY & LEADERSHIP | PAGE 39 . 31 NO.product. are strikingly dissimilar to any rival managers have had to contemplate to date. commit the resources required for an expensive product launch. technology linkages as a source of competitor scenarios prove to be critical for ®rms in almost every industry. Some ®nancial services companies now ®nd themselves competing directly for the same customers with far smaller providers who have used Internet and communications technologies along with database and related technologies to deliver superior value along a number of dimensions. invented competitors enable managers and others to challenge their underlying assumptions ± indeed their whole world-view of competition ± in a unique way. As a consequence. some of which may seem at ®rst glance not terribly related. competitors that do not exist today but which could exist at some point in the future[4]. The critical question guiding the efforts of competitor scenario developers thus becomes: How might technology developments interact to give rise to new customer offerings? Ultimately. J How they could compete against the ®rm's traditional medical instruments. Let us take the case of a ®nancial services ®rm that used an invented competitor scenario to establish a radically distinct perspective on its future marketplace from which to assess its current strategy and its key underlying assumptions. Unconstrained what-if questions are personi®ed by the notion of invented competitors: only the imagination and creativity of those involved limits the range and character of the competitors that might be invented. Technology linkages As evident in the discussion of functional substitutes.

what would have to happen for it to come into existence and then grow and develop as a company. Because of the radical nature of the proposed strategy and especially because of the degree of change involved for customers ± for example. Central issues and questions were identi®ed for each major step in the plot and for the plot as a whole. J This set of individuals then initially develops a loose alignment with a small boutique with considerable expertise in a variety of aspects of doing e-business. J What the elements of the product offer or solution would be to customers (that is. J The electronic methods employed to reach customers. J How many types of customers could be reached. might the invented competitor be able to leverage success with the proposed customer solutions into other customer offerings? PAGE 40 | STRATEGY & LEADERSHIP | VOL. J It then works with one large institutional customer as a ``test-bed'' for the offer as a location to develop a serious trial of the platform technology. The chronology of the plot revolved around the following items: J A small group of individuals with extensive experience in the relevant product domain exiting an existing ®nancial services ®rm. A signi®cant element of the plot described how the invented competitor would actually come to be. the team had to detail what plot or story would explain how the invented competitor reached this end-state over the next four years. J A driving aim to ``dominate this particular market segment''. 31 NO. all facets of how they would interact with a ®nancial services provider ± it was critical to set out and assess the logics underlying the plot. J Select individuals from other ®nancial services ®rms then join them. J How the methods would be used to develop two-way ¯ows of information. the team carefully built a rich narrative around the following: J How the ®rm would reach customers and channels electronically. it begins to develop the ®rst outlines of what the ``offer'' would be to customers. that is. J At the same time.J A full commitment to attracting new customers into the market. 1 2003 . Key questions included: J Why would different segments of the invented competitor's customers move to an electronic mode of doing business? J What advantages would its customers gain from buying via e-business? J How would developments in e-technologies facilitate what the invented competitor wanted to achieve? J In what ways. J The ®rm develops a technology platform to interact with customers. For the next step. Each year's plot affected what would or could take place in subsequent years. In detailing this end-state. what the ®nancial product would be that customer would actually be purchasing). J How the ®rm could use data and information gathered from customers in almost real time to amend the ``offer'' to individual customers.

a projected competitive context dominated by e-business may not lead to dif®cult strategy choices for a particular competitor but the potential emergence of a substitute product might lead to strategy choices ranging from divestment from the industry to acquiring or aligning with a provider of the substitute product. if already developed for other purposes. '' Constrained what-if competitor scenarios Constrained competitor scenarios start from a common point of departure: What would the competitor do if a speci®c set of marketplace or macro environmental endstates or conditions were to arise? These scenarios start with some speci®cation of what the world would look like at some point in the future and then ask. Thus. When existing industry or competitive scenarios constitute the ®rst critical step in shaping and using constrained competitor scenarios. the end-states serve as the principle focus of the competitive conditions. development of such short what-if lists typically requires extensive re¯ection on what could happen in the next few years and which what-if questions would give rise to the most productive competitor scenarios. ``What would the competitor do under these conditions?''. A number of such constrained what-ifs are brie¯y described in Exhibit 4. They are therefore constrained what-if questions. 31 NO. It may require considerable dialogue around what could happen. carefully articulated what-ifs that describe a brief set of future competitive conditions can also serve as the backdrop for constrained competitor scenarios. industry or competitive scenarios. provide one ideal context. For example. First.when they `` Competitor scenarios work best that broadly produce knowledge and insight informs and prepares decision makers to act rapidly as competitive conditions change. these scenarios explore the initiatives a competitor might take if it were to ®nd itself in a particular world endstate (such as emerging new technologies and new product regulations) or how it might react to the strategic moves of rivals. more often than not. Second. 1 2003 | STRATEGY & LEADERSHIP | PAGE 41 . Although at ®rst glance they may seem relatively simple and obvious. Constrained competitor scenarios are especially appropriate when your ®rm wants to identify and assess: J What would a particular competitor do under speci®ed marketplace conditions? Constrained what-if competitor scenarios J Why a competitor would adopt one strategy rather than another? J Which marketplace changes might lead one or more competitors to adopt a particular strategy? The competitive context that serves as the ``constrained what-if'' can be established in at least two distinct ways. before scenario developers converge on one or two what-ifs that raise interesting and perplexing questions about how one or more categories of rivals might respond to the stipulated competitive conditions. Although industry or competitive VOL.

Exhibit 5 illustrates one such set of constrained competitive end-states constructed by a research and development intensive company that was confronting two key uncertainties: (1) A number of emerging ``technologies'' at varying stages of development that may or may not advance further. Rivalry is now intense as the number of rivals has increased in all customer segments Unbridled battle In this end-state. But they now compete ®ercely in the pursuit of new customer segments. Some new products challenge the dominance of old solutions in some customer segments. Rivalry has shifted to product or solution superiority Extensive regulatory change Customer skirmish In this end-state. product modi®cations unfold at a rapid rate. When a ®rm identi®es key competitor strategy issues associated with each end state ± new marketplace opportunities. rivals can aggressively pursue most customer segments High level of technology change PAGE 42 | STRATEGY & LEADERSHIP | VOL. Rivals are still prohibited from entering signi®cant market segments Product fragmentation In this end-state. but if they did. The steps in constructing competitor scenarios are then relatively straightforward: J Identify the strategy issues for the competitor. J Develop the scenario plot outline. for example. constrained industry or competitive endstates are typically crafted around a small set of key uncertainties. For example. a preview of the intensive nature of the vehement rivalry unleashed Exhibit 5 Four competitive end-state worlds Modest regulatory change Low level of technology change Status quo In this end-state. rivals continue to slowly adapt their customer solutions in the historic customer segments. Rivalry is moving toward an emphasis upon service elements. threats to traditional ways of competing or to the ®rm's planned strategies ± it establishes a more re®ned understanding of the competitive context within each end-state. rivals compete with slowly changing products. As a result its managers can better understand the strategy challenges that would confront the competitor in each endstate. they could dramatically affect research breakthroughs and thus new products. both product change and market change persist. J Determine the business issues to be addressed. J Detail the scenario plot. could well fail miserably in the unbridled battle world.scenarios can be created in multiple ways. Customers can choose from clearly differentiated solutions. 31 NO. 1 2003 . extended status quo. Continuous product change keeps shifting the range of available customer solutions. And. and (2) Considerable regulatory ¯ux that could directly effect the ability of all current rivals to market and sell new and existing products or major product line extensions in various channels and to different end-customer segments. A strategy designed to win in one world. J Articulate the logics. The four scenario cells shown in Exhibit 5 depict four quite different worlds.

J Develop a full line of products (perhaps by developing alliances with a number of other ®rms). Scenario developers gain insight not only into how the strategy might win in the marketplace but also into what the competitor would have to do both in the marketplace and within the ®rm in order to realize the opportunity at the heart of the strategy. 31 NO. and competitor fragmentation? J What if over the next three years. Indeed. Execution Once a scenario plot has been outlined. resulting in solution segmentation. understanding how the competitor might execute a particular strategy often represents the core learning that emanates from these constrained competitor scenarios. managers can then detail what it would take to execute the projected strategy. J Move to become more of a research and development ®rm and less of a manufacturer and distributor (perhaps by leveraging its current and potentially accessible technology skills and capabilities). the core competitor scenario question must now come to the fore: What would the competitor do (that is. including functional substitutes that are signi®cantly more sophisticated than current products? J What if rivalry intensi®es but it is solely among the current dominant players in this speci®c product space and all ®rms commit extensive new resources to the battle? J What if the economy continues in stagnation and technology increases in importance as the platform for both new products and new ways of competing in the marketplace? in the unbridled battle end-state clari®es the what-if set of conditions in which the competitor will have to identify and choose its preferred strategy: J A blizzard of new products.Exhibit 6 Examples of constrained what-if competitive conditions J What if our competitive context in four years time is dominated by e-business connections between all players in the industry. what strategy would it pursue) were it confronted with the competitive context in each end-state? It is important to note that the strategy options may vary dramatically from one end-state to another. consolidation in traditional channels. In order to develop a scenario plot (and sometimes perhaps more than one) for each end-state represented in Exhibit 5. the competitor staring into the unbridled battle world might consider: J Divesting entirely out of this product range (due to the intensity of the rivalry and the absence of the necessary resources to stay the course). 1 2003 | STRATEGY & LEADERSHIP | PAGE 43 . technology propels the emergence of new products. choosing a strategy option does not identify or explain how it could be executed. For example. J The relentless search for new opportunities to enter into any channel. In other words. The logics in these competitor scenarios address one fundamental question: Why would the competitor pursue this strategy? What forces within and external to the competitor would support or drive the competitor to adopt this strategy becomes the VOL. J Offering an entirely new range of enticements to customers and channels. J Concentrate on one product segment (perhaps as a way to avoid the head-on clashes guaranteed with other ®rms if it develops a full product portfolio).

1 2003 . see Liam Fahey. in Liam Fahey and Robert M. They require both imagination and creativity on one hand. the issues can vary signi®cantly across the end-states. The reward: insight and alternatives Competitor scenarios provide a methodology to enable managers and others to construct and assess a variety of potential strategies that rivals might adopt. of course. PAGE 44 | STRATEGY & LEADERSHIP | VOL. Learning from the Future: Competitive Foresight Scenarios (John Wiley & Sons). 2. 30 No. In almost all cases. Learning from the Future: Competitive Foresight Scenarios (John Wiley & Sons). and considerable knowledge and understanding of what strategies might be available to rivals.central question. pp. In the unbridled competitive end-state. Randall (1998). Readers interested in constructing industry or competitive scenarios. Strategy and Leadership. and how and why they might pursue them. speci®c regulatory developments (not evident at all in the status quo world) might lead the competitor to seriously consider reducing its presence in. November/ December. Vol. 3. Randall (1998). 223-45. can be used to identify potential new forms of competitors. or even withdrawing entirely from the product-market sector. pp. As a last step. 6. 4. it is essential to ask: What business issues emerge from each scenario that pose opportunities and threats that the organization must explore? Again. For a discussion of the invented competitors. ``Competitor scenarios: projecting a rival's marketplace strategy''. 189-222. Invented competitors. Notes 1. The relevant external forces and how they affect a projected strategy may be speci®c to individual end-states (see Exhibit 5). see Liam Fahey. ``Invented competitors: a new competitor analysis methodology''. see Liam Fahey. ``Industry scenarios''. For a more elaborate and detailed discussion of the generic analysis process involved in both constructing and assessing competitor scenarios. in Liam Fahey and Robert M. competitor scenarios lead to rich insight into the ®rm's own strategy alternatives ± and sometimes to alternatives that were previously not on the ®rm's radar screen. 31 NO.

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