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What about planning for a future that’s just an improbable?

/ 01:13 AM September 18, 2015

Question: Your column last week dealt with how to plan for a highly improbable future. We agree that planning time and money are wasted if the planning is for prediction. It should instead be for preparation of the known consequences of the unknown highly improbable.

But we’re in the canned and packaged food industry. We have not had over the past 10-15 years a highly improbable change. The changes we’ve experienced were a mix of the probable and the improbable. So we had typical financial plans that sought to manage likely changes via contingency plans.

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It’s in what we anticipated to be the likely future changes in our contingency plan where we had been more wrong than right. Would you please share your experience in this regard?

Answer: Most of the time, the future of our business and market is a mix of the probable and the improbable. It’s not zero or near zero visibility. It’s about 50 percent visibility.

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Because the change in your industry’s future has 50 percent visibility, you can plan by prediction and that prediction will have a 50 percent success rate. However, it has also a 50 percent failure rate. For that failure rate, do you plan as in the highly improbable future that we covered last Friday?

Lessons from my own consulting experience say: “not really.” That 50 percent invisibility is not a highly improbable future change. It’s just improbable. Therefore, it has a precedent, in the sense that we have some data to analyze and base our predictions on.

In the highly improbable, there are no data that can be used to make informed predictions.

Consider the series of changes in the advertising industry. Way way back, there was only the print media. Then came an innovation, the radio. Radio declared that the days of newspaper advertising were numbered. But it did not happen. Advertising went from mono-media to media dyad. Then came TV and soon TV claimed that radio advertising would be gone. But radio stayed and so did print. The ad media industry went from media dyad to trimedia. Then at the turn of the century came online advertising. There was immediate talk about how digital advertising would take over TV advertising. But the industry just went from trimedia into quadmedia.

In the advertising industry, this cycle of change is likely to govern the change that will take place in the future.

You can find the underlying logic of this model and several cases of its detailed applications in the 2006 best-seller book, “FutureThink: How to Think Clearly in a Time of Change” by Edie Weiner and Arnold Brown. The change cycle is a trend-countertrend-synthesis cycle.

In our advertising example, think of the newspaper advertising as the starting trend. Radio advertising was the countertrend. The partnership between print and radio was the synthesis. Then came another trend, namely, TV. Online figured as the countertrend. The synthesis stage consisted of the current quadmedia system.

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Under this model, long range planning follows the cycle. If you’re in a trend, predict the likely countertrend and ride on it.

Then anticipate the synthesis and if that’s the combination of the trend and countertrend, then don’t give up on the market segment created by the trend and countertrend. Be on both.

What if there’s no clear cycle of trend-countertrend-synthesis? What if the pressure for change comes from a very minor problem that’s supposed to go away when ignored? This was what happened to Intel’s Pentium innovation.

In 1997, a math professor published an article in an online academic newsgroup about finding an inconsistent accuracy in the mathematical functions for the Pentium chip’s formula. Then an editor of a trade press who read the story spread the word around the university. The general press picked up the story and interviewed Intel about it. Intel was too quick to dismiss the news by saying: “This is a minor problem that affects only a tiny proportion of our customers.”

Online discussion groups kept talking and fed the offline media with the highlights of their virtual discussions. Two events combined to serve as the tipping point. The first was IBM’s announcement that it was not using Intel chips in its computers. The second was Intel’s share value dropping more than 20 points. These quickly led to Intel’s decision to replace the chips.

The model of change and its prediction here are under Mark Penn’s Microtrends.

His best-selling 2007 trend spotting book, Microtrends: the Small Forces behind Tomorrow’s Big Changes tells us that every future change starts as a microtrend.

The Pentium chips case tells us to pay attention to a small change that’s quick to grow in magnitude and without letup. That kind of change is not difficult to isolate. Monitor them. In my own research, I used to overlook, for example, such new products. If in a UAI or omnibus, it scores a 0.2 percent market share, those of us in market research don’t even include this in our data tables. But after learning from Mark Penn, my researchers track some new products that had a starting market share of 0.2 percent. Then six months after it scored a 0.4 percent market share and again doubled after another six months. At this point, we predicted that this was soon going to be a major industry participant and that happened in two years.

Overall then, in planning for a 50 percent visibility future, base your plan’s prediction on at least two models of future change. Avoid a one-model source even if or especially if it’s the most popular model. Keep your questions coming. Send them to me at [email protected]

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