Another big loss was announced at Ford (chart here) today (read article here). After announcing a $9billion loss, the CEO said he was looking to convert some truck plants to make hybrid cars. And the company is considering bringing some of its high-mileage European cars to the U.S. Let’s see, after announcing a quarterly loss that was 85% of the company’s entire market value, the CEO thinks maybe it’s time to change the product line-up and manufacturing capacity configuration.
How hard would hit have been over the last 8 years to expect the need for higher mileage autos to increase? Instead of looking at what historically made the most money (which were trucks and SUVs), and trying to milk those products for profit forever, can you think of any future scenario which would not have predicted the need to switch customers to different products? Only by focusing on the past – what used to make money – could a leadership team walk so far out on the gangplank.
Compare this with today’s announcement at Google (chart here) to launch a competitive on-line encyclopedia to Wikipedia (read article here). This would appear to be creating a "me to" product in a market already well served. Why should Google bother? Such a viewpoint would be looking backward, rather than at future scenarios.
How many new users will come to the internet over the next 10 years? How many people may want a different approach than used at Wikipedia? What are the odds that it is possible to have a product that is possibly better than Wikipedia? If you look at the future, and you recognize that (a) internet use is unlikely to slow for many, many years (b) products with lots of acceptance, and no competition, are easy targets because some people have to be underserved, and (c) competition always improves products — doesn’t it suddenly seem logical to offer this new product?
Scenarios should point out not only future risks, but future opportunities. Yes, Google is #1 in search and #1 in on-line ad placement. And growth in both those markets looks very good. But your future scenarios should be looking for additional markets as well. In this case, Google sees potential to use its capabilities in both search and ad placement to better the on-line encyclopedia product market. Thus, its a market opportunity which is very likely to do well given this future view.
We can’t wait on market confirmation to make plans. We have to develop scenarios, and take management action based upon them. If we do, we can identify and test markets early enough to be prepared when customers start to shift. If we don’t, we’ll be caught "flat footed" when they shift – and as Ford is demonstrating this can be an expensive, possibly deadly, position to be in.
