Monday, February 12, 2018

Step Two: Creating Scenarios Based on Megatrends

Two weeks ago, in Step One: Identifying the Megatrends, I continued a description of a Scenario Planning exercise my Board chair and I decided to conduct at our upcoming Board meeting. I ended the previous post with our decision to construct a short, one-question survey for the Board members to respond to prior to our Board meeting. We asked them to tell us the Megatrends that they see having the greatest possible impact on our industry in the next five years.

A Megatrend, as a quick reminder, is an external force acting on the industry our association represents. It is something everyone agrees will create change in our environment, but for which few can accurately predict the full impact of that change. It could reasonably force our industry in multiple possible directions. Our plan was to collect all the suggestions that come in, examine them for common themes, and prepare what appears to be the most relevant subjects for deeper analysis and discussion at the Board meeting.

Here, verbatim, are the results of our Megatrend survey:
  • Aging workforce, lack of qualified replacement. Industry 4.0/Connected Industry, how does that impact fluid power technologies?
  • Miniaturization of components.
  • Lack of interest in fluid power from graduates; stronger electric drives and cylinders and battery advancements.
  • (1) Globalization of demand, consumption and production; (2) Impact of adjacent competing technologies upon fluid power products/producers.
  • Electric.
  • Adaptive manufacturing.
  • Continued electrification of power source and power train.
  • Demographics, North American energy independence, sovereign debt, hardware digitization.
  • Augmented reality & artificial intelligence.
  • Politics.
  • (1) IoT integration into all products; (2) Electric prime movers; (3) Continued pressure on energy management.
  • Digitalization, replacement with electronics.
  • Electrification.
  • Digitalization.
  • Full automation of industries; Adoption of artificial intelligence; Electric powered transportation.
  • Electrification of off-highway machinery, battery technology, micro-farming, strength of the dollar and Brazilian farming coupled with the end of ethanol subsidies causing major contraction on the American agricultural industry.
  • (1) Globalization of demand and consumption; (2) Merging of technologies.
  • (1) Industry 4.0 (smart/connected systems); (2) Security/Safety; (3) Aging manufacturing workforce; (4) Globalization of supply chains (and ecommerce).
  • IoT and electronics.
  • Interconnectivity of equipment and machinery, push toward electrification of mobile for "green" sake.
All in all, a good response rate (20 responses out of 24 people polled) and a lot of common ideas. In terms of what we plan to do with these responses at the Board table, it's important to look at our next step in the Scenario Planning process: Creating Scenarios Based on Megatrends.

Allow me to ground this description in the results of our Board's last Scenario Planning exercise, conducted in 2013 and looking ahead to 2018. Then, the two Megatrends chosen were the hybridizaton of technologies in our industry and the globalization of our supply chains and market strategies. For each of these Megatrends, two alternate futures were chosen that described the possible impact of the Megatrend on our industry. Remember, by definition, a Megatrend is an external force working on an industry, which could reasonably force it in multiple directions.

For what we called "Technology" we envisioned two possible futures: One in which fluid power was successfully hybridized with its competing and complementing technologies, and a second in which fluid power proved resistant to hybridization and became a stand alone technology solution for an increasingly niche set of applications. And for what we called "Geography" we also envisioned two possible futures: One in which fluid power companies were more focused on international markets, and a second in which they were more focused on U.S. markets.

With me so far? Because now comes the sometimes confusing part. The future that our industry actually finds itself in will not be any one of the four futures I just described. It will instead be an unpredictable combination of those four futures. Our technology will be either more or less hybridized AND our industry will be either more or less global. In other words, the two futures associated with each Megatrend can be combined in four different ways: (A) Less hybridized and less global; (B) More hybridized and less global; (C) Less hybridized and more global; or (D) More hybridized and more global.

Look at the diagram accompanying this post and you may get a better sense of what I'm talking about. In a way, it's a simple quadrant analysis, where two variables result in four different outcomes. These four Scenarios are the possible futures that our industry may possibly face -- the ones that bound the Cone of Uncertainty that I talked about in my previous post.

So this will be one of our essential tasks at our Board meeting in two weeks: To look at the responses from our Megatrend survey and select two Megatrends, two futures, and four Scenarios that the rest of our Scenario Planning exercise will be built around.

To help jump start that conversation, we've already provided a couple of examples in the agenda materials sent in advance of the meeting to our Board members. Looking for common themes in the responses to our Megatrend survey, we offered the following four examples of Megatrends and their possible future impacts of our industry:

The Megatrends and futures chosen by our Board may come from this list and they may not. We'll have to get through the discussion in order to determine that. But one thing is certain. Given the Scenario Planning methodology that we've chosen, and the way that Megatrend futures combine to form Scenarios, choosing just two Megatrends to focus on will be important -- unless we want to open up our Cone of Uncertainty to a dizzying number of variables. Going with all four of the example Megatrends, after all, does not result in just eight possible futures, but sixteen.

But determining the Scenarios is just one thing we want our Board to do at our meeting in two weeks. The second is to describe them in as much detail as possible. That's Step Three in the Scenario Planning process, and that will be the subject of a future post.

+ + +

This post first appeared on Eric Lanke's blog, an association executive and author. You can follow him on Twitter @ericlanke or contact him at

No comments:

Post a Comment