scenario analysis use case: 3g/4g wireless data
DESCRIPTION
What does the future hold for the wireless telecommunications industry and which players will extract maximum value from providing services, equipment and applications?This is a version of the presentation that I delivered at the China Institute of Competitive Intelligence conference in Shanghai, November 2009. I used the question of the future of 3G/4G wireless as a use case for using comprehensive scenario analysis to help firms maintain strategic dexterity in the face of uncertainty.TRANSCRIPT
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Scenario Analysis: 3G/4G Wireless
August Jackson
Verizon
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Why do Scenario Analysis?
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Process to Create Scenarios
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STEEP Analysis
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3G Drivers: Social
Changing workplace norms and expectations of younger generations of workersContinued growth in the application of outsourcing non-core business activities leads to growing distributed, non-centralized organizationsLower birth rates among native populations in Western Europe, North America and JapanIncrease in the proportion of immigrant and ethnic minority populations in Western Europe and North America
Impact of H1N1 global pandemic and other diseases
Obvious potential for criminal activity to migrate to digital mediaVariances in concerns for individual privacy based on geography, generation and cultureInnovative corporate cultures defined by iterative, lean product development and "perpetual beta"
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3G Drivers: Technological
Growth in market for smart phones that combine phone, computer, GPS and often camera
Increase in mobile data volumesUnbundled Mobile VoIP made possible by 3G data services disrupting traditional switched voice hold of wireless carriers
Increase in mobile data speeds (3G and 4G)
Enterprise-class applications on mobile telephonesMobile OS proliferation: Apple, Google Android, Palm WebOS, Nokia Symbian, RIM Blackberry, etc.Fixed-mobile convergence and unified communications platforms enabling business users to unify fixed and mobile voice and messaging servicesVirtualization of computer assets for efficient use of capital assets and securityCloud Computing displacing need for capital investment for information technology deployments
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3G Drivers: Technological (cont.)
Increasing acceptance of open source software in government and enterprise for an increasing number of applicationsInteractive, collaborative software platforms that benefit from a network effect (Web 2.0, social media, social software)
Semantic web technologies (Web 3.0)
As yet unproven interoperability of LTE and TD-LTE
Early success of Wi-Max (802.16m) deployments in US and Africa
Competition between LTE and WiMax for 4G standards
Delayed deployment of 3G in China and IndiaTimeframe for widespread 4G / LTE rollout in major wireless markets?"Developing" markets where 3G has yet to be deployed or is only now starting to be deployed are better-suited for lower-cost offerings from the likes of Huawei and ZTEIncreasing proportion of total Internet and IP traffic moving over wireless networks
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3G Drivers: Technological (cont.)
Carriers committing to a roadmap for 4G deployment and speed of LTE deploymentGrowing use of cloud computing for distributed applications and infrastructureIncreasing quality of consumer-grade software and applications to support enterprise requirementsGrowth in use of machine-to-machine wireless data and consumer electronic devices with embedded wireless data connectivity (example: Amazon Kindle, GPS navigation)
Will TD-SCDMA be accepted broadly outside of China?How will the China market develop as a consequence of a variety of 3G technologies being designated as part of the 3G spectrum license?Increased application of video conferencing, telepresence and web conferencing as medium for business collaboration and personal communicationsContinued concerns about the health impact of constant use of mobile telephone equipment
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3G Drivers: Economic
Economic crisis and the new normal in the West (project 2 - 3% growth compared to 6+ and 8+ percent growth in India and China, respectively
Growing economic power of China and India
Continued reluctance to support Foreign Direct Investment in India
Tie of RMB to the DollarConsolidation among Western telecommunications equipment manufacturersOversupply of consumer retail space in the US commercial real estate marketReverse innovation of low-cost/innovative products introduced in developing marketing finding in-roads as low-cost solutions in Western markets
Possibility of an East Asian asset bubble driven in part by investors borrowing at low interest rates in the US and investing in what they perceive to be the high growth markets in East AsiaGeneral volatility in the price of oil
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3G Drivers: Economic (cont.)
Variances in the availability of credit, leverage ratios in national markets to fund capital investment of network build-outs, M&A activity, R&D investmentBusiness and broader economic impact of attempt to revise financial and tax regulationBusiness impact of efforts of US Federal Reserve and European Central Bank to pull-back from policies of quantitative easing to minimize the economic impact of failure of large banks in 2008
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3G Drivers: Environmental
Push to "go green" in ICT and companies investing in green R&D and marketing
Continued expansion in greenhouse gas emissions and growing among developing economies
Outcome of continued R&D for clean energy sources
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3G Drivers: Political
Concern about the magnitude of US federal deficit and growth in national debt likely to be a defining characteristic of 2012 presidential electionConcerns over cyber warfare by state and non-state actorsUS Federal Communications Commission (FCC's) stated intention to mandate rules for network neutrality, extending potentially to freedom for device connectivity, VoIP over data networks and applications on devicesHints of protectionism among US politicians, particularly vis-à-vis ChinaStimulus spending in the US focusing on rural broadband, primarily wirelessStimulus spending in the US and China devoted to Health IT
Stimulus spending in the US devoted to "smart grid" including wirelessAvailability of white space spectrum for unlicensed wireless services
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3G Drivers: Political (cont.)
Highly variable adoption of wireless LAN technologies (namely Wi-Fi) using unlicensed spectrum in national marketsNational policies allowing for the introduction of nuclear powerNational policies on regulating financial markets following economic crisis of 2008National policies to encourage reduction in greenhouse gasesChina's Ministry of Industry and Information Technology and related regulatory bodies mandates for home-grown wireless standards like TD-SCDMA and TD-LTE
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Themes of Uncertainties
Unbundled Mobile VoIP
Unlicensed Wireless Spectrum
US FCC rules on “net neutrality”
LTE and TD-LTE Interoperability
Externalities of multiple 3G standards
China’s MIIT’s require TD-LTE
Volatility in oil, commodity prices
Financial regulatory reform in US, Europe
US Fed and ECB draw down money supplies
Move in RMB : $ ratio
Asset bubble in developing markets?
Availability of credit and cost of capital
Standards
Openness Economic Volatility
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3G/4G & ICT Scenarios
Telco Sets the Pace Modest speed increase Carriers set pace of ICT innovation Very high ROC for telcos Highly regulated
Google World Rapid speed increases Carriers lower ROC ICT central to strategic competitiveness of all firms Total ICT market grows fast
Innovation Stagnation Almost no bandwidth growth Almost no innovation in ICT Telcos purchase equipment makers Regulated, cost-plus pricing
Reverse Innovation World Slow speed increase Increased use of open source hardware and software Business and ICT innovations move from China & India to West
Closed & Controlled Open Ecosystem
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Important Attributed of Scenarios
Stable Growth, Closed & Controlled
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Scenario 1: Telco Sets the Pace
Stable Growth, Closed & Controlled
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Scenario 2: Google World
Stable Growth, Open Ecosystem
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Scenario 3: Innovation Stagnation
Economic Volatility, Closed & Controlled
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Scenario 4: Reverse Innovation World
Economic Volatility, Open Ecosystem
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Caveats & Observations About Scenarios
China and US may face different scenarios
Different ideas of “Regulatory Intrusiveness” in China and US
High growth in China will only slightly blunt impact of commodity price volatility
Global economic state will define success of Chinese equipment makers outside China
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Appendix
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Sources
Blenkhorn, David, and Craig Fleischer. Managing Frontiers in Competitive Intelligence. New York: Quorum Books, 2000.
Bensoussan, Babette and Craig Fleischer. Analysis Without Paralysis: 10 Tools to Make Better Strategic Decisions. New York: FT Press, 2008.
Day, George. "Looking in to Marketing's Future.” Marketing Management September/October 2009: 12-17.
Dewar, James. Assumption Based Planning: A Tool for Reducing Avoidable Surprise. New York: Cambridge University Press, 2002.
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Steps to Scenario Analysis
1. Identify the decision(s) that need to be made
2. Define the scope of the analysisA. Products
B. Markets
C. Customers
D. Geographies
E. Timeframes
3. Identify the stakeholders
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Steps to Scenario Analysis
4. Identify the basic trendsA. Explain trends
B. Why does this trend affect the firm related to the decision to be made
5. Identify uncertainties among the trends/driversA. Possible outcomes for each uncertainty
B. Relationships among the uncertainties?
C. Any mutual exclusivity?
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Steps to Scenario Analysis
6. Select 2 most important uncertainties
7. Cluster strings of possible outcomes
8. Identify the extremes with all positive/negative outcomes
9. Check for consistency and plausibilityA. Are the scenarios compatible with the timeframe in
question
10.Identify relevant themes and organize trends and uncertainties around these trends
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Steps to Scenario Analysis
11.Identify research requirements to better understand uncertainties and trends
12.Develop qualitative models for uncertainties that can be formalized and quantified
13.Develop scenario narratives of the future state and a back-story of how we got there. “Histories of the future.”
14.Describe the competitive and financial implications of each scenario
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Steps to Scenario Analysis
15.Develop the competitive strategy narrative around each scenario.
A. The common strategies to all scenarios?
16.Choose an overall strategy with respect to the scenarios
A. Shape the future?
B. Adapt to the future?
C. Minimize overt vulnerability
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Steps to Scenario Analysis
17.Build early warning milestones for each scenario
A. What kinds of things will we see if a scenario is coming true?
B. Where will we see it?
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