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Introducing the Competitive Dimension to Corporate Foresight

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Abstract

While the competitive dimension plays an important role in strategy, the aspect of competitors seems to be rather neglected in corporate foresight. In this paper we want to shed some more light on this underexplored field of corporate foresight. The literature review discusses approaches in corporate foresight, in particular scenario planning and business wargaming, which address competitive dynamics. Further, literature on competitive strategy is discussed to assess approaches towards the identification of new rivals. One can conclude that there is an absence of structured approaches or frameworks towards the competitive dimension in corporate foresight. In the paper an illustrative case study is discussed, with a first attempt to provide a framework for structuring the competitive dimension in corporate foresight.
This paper was presented at The XXIV ISPIM Conference Innovating in Global Markets:
Challenges for Sustainable Growth in Helsinki, Finland on 16-19 June 2013. The publication is
available to ISPIM members at www.ispim.org.
1
Introducing the Competitive Dimension to Corporate
Foresight
Jan Oliver Schwarz*
Institute for Futures Studies and Knowledge Management (IFK), EBS
Business School, Konrad-Adenauer-Ring 15, 65187,Wiesbaden,
Germany.
E-mail mail@joschwarz.com
René Rohrbeck
Aarhus University, Business and Social Sciences, Department of
Business Administration, Bartolins Al 10, 8000 Aarhus C, Denmark.
E-mail rrohr@asb.dk
* Corresponding author
Abstract: While the competitive dimension plays an important role in strategy,
the aspect of competitors seems to be rather neglected in corporate foresight. In
this paper we want to shed some more light on this underexplored field of
corporate foresight. The literature review discusses approaches in corporate
foresight, in particular scenario planning and business wargaming, which
address competitive dynamics. Further, literature on competitive strategy is
discussed to assess approaches towards the identification of new rivals. One
can conclude that there is an absence of structured approaches or frameworks
towards the competitive dimension in corporate foresight. In the paper an
illustrative case study is discussed, with a first attempt to provide a framework
for structuring the competitive dimension in corporate foresight.
Keywords: Corporate Foresight, Strategy, Competitors, Business Wargaming
1 Introduction
Corporate foresight has been discussed as a means to create competitive advantage
(Ashton, Johnson, & Stacey, 1996). As a first step corporate foresight scholars generally
advocate to conduct an environmental analysis by for example directing a search towards
the environmental areas along the PEST (Political, Environmental, Social, Technological
environment) model or its variations (Godet & Durance, 2011; Lesca, 2004). Identified
change drivers are than used for example to develop scenarios or creating alternative
pictures of the future (Fink, Marr, Siebe, & Kuhle, 2005). Another goal is to explore and
support the development of new business fields (Costanzo, 2004; Heger & Rohrbeck,
2012). Many firms also aim to use insights into change drivers to assess and acquire
strategic resources to renew or create a competitive advantage (Makadok & Barney,
2001). Thus, such a corporate foresight process (Rohrbeck & Schwarz, 2013) is expected
to allow firms to perceive changes in their environment, to understand how the future
This paper was presented at The XXIV ISPIM Conference Innovating in Global Markets:
Challenges for Sustainable Growth in Helsinki, Finland on 16-19 June 2013. The publication is
available to ISPIM members at www.ispim.org.
2
could evolve, and to trigger organizational responses that create or sustain a competitive
advantage.
However, even though the reference is made towards a competitive advantage, little
discussion can be found on how to deal with competition. While a firm might be
successful in understanding how it needs to adapt to a changing environment and than
also be successful in triggering and implementing the change, a competitor might have
been for example faster in responding resulting in a loss of competitive advantage.
Another possibility is that the competitor anticipates the response of our focal firm and
takes measures to counteract (Helfat et al., 2007). We therefore feel that research and
practice on corporate foresight could profit from integrating methods and approaches that
allow dealing with competitive dynamics.
This paper consists of three parts. In the first part we review literature that discusses
the competitive dimension of corporate foresight. In the second part we use some case
examples to illustrate means used to integrate competitive dynamics into corporate
foresight exercises. In a third step part we draft a first conceptual framework that
integrates the competitive dimension into a generic corporate foresight process.
2 The competitive dimension in foresight
Only little evidence on approaches to include the competitive dimension into foresight
activities can be found in the literature. However, by referring to the broader literature on
foresight and its tools, we discuss available approaches and broaden the discussion by
also discussing strategy literature.
The field of competitive intelligence has been connected with foresight before (e.g.
Neugarten, 2006; Schwarz, 2007), but these papers have contributed little insights into
how to implement competitor foresight approaches. Competitive intelligence has been
perceived as an activity primarily concerned with analyzing the competitors of an
organization and as an activity that considers the environments of that corporation
(Bernhardt, 1994). In this realm it has been proposed that firms should aim to anticipate
the moves of their competitors and that foresight can assist in this activity. In that respect
Beal (2000) revealed a positive effect of environmental scanning on the firms capability
to align its competitive strategies with the environment.
It has also been noted that maintaining a competitive advantage becomes increasingly
difficult. There are indications that achieving temporary advantage is more difficult than
previously thought and that the erosion of advantage occurs routinely as a result of
dynamic and interactive rivalry (Sirmon, Hitt, Arregle, & Campbell, 2010). Also
particularly in hypercompetitive industries with escalating levels of competition and
reduced periods of competitive advantage, it might be important to act boldly and
aggressively to create a competitive advantage (Bogner & Barr, 2000)
Business Wargaming and Scenario Planning
Two techniques that are particularly promising for navigating uncertain competitive
environments are business wargaming and scenario planning. It has been argued that
business wargames (Kurtz, 2003a; Oriesek & Schwarz, 2008; Schwarz, 2011) and
scenarios (Perrottet, 1998) are particularly suited to create foresight on the competitive
landscape of a firm.
A business wargame is a role-playing simulation of a dynamic business situation.
Each team in the wargame is cast in the role of certain stakeholder, for example a
competitor, to act in a given business situation. The typical business wargame lasts
several rounds, each one representing a defined time period into the future. A business
wargame is usually preceded by extensive research on the industry in which the wargame
takes place. Wargames can have several purposes, such as strategy testing, crisis planning
and management, change management, planning, and training and education (Oriesek &
Schwarz, 2008). Despite the field of application, business wargames predominately
evolve into the future and incorporate the reactions of competitors, herby not only
developing foresight concerning an industry, but also concerning the possible actions and
reactions of competitors. It has been argued that a business wargame can be connected to
a corporate foresight process, providing insights on the future dynamics in an industry
(Schwarz, 2009).
Fahey (1998) has argued that scenarios can be used to identify and test plausible
competitor strategy alternatives, he refers to competitor scenarios. He describes two types
of competitor scenarios:
“One type of scenario stems from open-ended or unconstrained what-if
questions that suggest possible end states, such as a completely new
competitor strategy. […] On the other hand, scenario developers can
also ask what the competitor would do under distinctly different
competitive or industry end states” (Fahey, 1998: 225).
While this approach has its merits, two shortcomings in respect to our discussion are
evident. First, a prerequisite for this approach is that the competitors are known. This
approach is therefore less suitable for developing foresight on the competitive landscape,
where new entrants are commonplace. Second, this approach is too static in the sense that
it does not allow to capture the dynamics of an industry or competition evolving into the
future.
Learning from the past: the history of foresight
In order to understand the role of the competitor perspective in foresight it appears to be
interesting to consider the history of foresight and in this respect also the history of future
studies. Andersson (2012) argues that the focus of futures studies work in the early 1960s
in the US was strongly influenced by an American security political nexus and that the
later spread of future studies can be linked to movements which were concerned with the
future of mankind.
If we consider the history of the scenario technique, one of the fundamental tools of
foresight, we can in particular shed light on the competitor perspective in foresight. The
evolution of the scenario technique, and later the development of scenario planning, is
credited to work at the US Department of Defense after World War II and later at the
RAND Corporation (Amer, Daim, & Jetter, 2013). While we can assume that the focus of
this work was primarily on the Soviet Union (e.g. Andersson, 2012), we can develop two
hypothesis: 1. Early work of foresight was focused on military planning and public
policy. 2. Only a limited number of competitors were analyzed at the same time. It
appears that the origins of foresight were more concerned with the military and public
policy environment and that only one competitor, e.g. the Soviet Union, was reflected on.
This paper was presented at The XXIV ISPIM Conference Innovating in Global Markets:
Challenges for Sustainable Growth in Helsinki, Finland on 16-19 June 2013. The publication is
available to ISPIM members at www.ispim.org.
4
By analyzing the history of foresight we come to the conclusion that the competitive
dimensions firms are faced with, is yet to be introduced into the practice of corporate
foresight and possibly tailored to the needs of a firm.
The competitive dimension in strategy
To understand the need to tailor competitor foresight approach for the application in
firms it is useful to look at literature on competitive strategy. The founding father of
competitive strategy is arguably Michael Porter (1980), who identified Five Forces that
drive industry competition. One of these forces is ‘new entrants’, in which respect he
points out that:
“The threat of entry into an industry depends on the barriers to entry
that are present, coupled with the reaction from existing competitors
that the entrant can expect. If barriers are high and/ or the newcomer
can expect sharp retaliation from entrenched competitors, the threat of
entry is low” (Porter, 1980: 7).
Porter (1980) underlines the relevance of not only analyzing existing competitors but
also potential ones. While he admits that forecasting potential competitors is a difficult
task, he suggest that these potential competitors can be identified from the following
groups:
“firms not in the industry but who could overcome entry barriers
particular cheaply; firms for whom there is obvious synergy from being
in the industry; firms for whom competing in the industry is an obvious
extension for the corporate strategy; customers or suppliers who may
integrate backward or forward” (Porter, 1980: 50).
While Porter (1980) argues that predicting the future goals of competitors will also
add to assessing how competitors might change their strategy, it appears that Porter is
arguing from the point of view of rather stable industries. New competitors might either
find the industry interesting to enter (low entry barriers) or might already be part of the
value chain (expansion of value chain). However, what appears missing here is how
changes in the industry in the future might either led to the convergence of industries,
create new business models or allow new competitors to enter.
Geroski (1999) takes these ideas a step further when he argues for an approach for the
early warning of new rivals.
“New entrants act like other firms: they observe events in the market
develop new ideas, and decide to enter markets using rational similar to
that of incumbents. This is why companies can spot new competitors.
They are not aliens from Mars acting in bizarre and unpredictable
way” (Geroski, 1999: 108).
This also implies that new competitors might come from firms operating from within
or nearby the particular industry (Geroski, 1999). He goes on to argue that a central skill
in identifying new rivals is assessing the effects of innovations in the own industry. In
this respect one could argue that corporate foresight could actually enable firms to
identify these innovations early and therefore also allow to early identify potential
competitors. Further, Geroski (1999) argues that putting oneself in the shoes of the
competitor is a way to see the industry from the competitor’s perspective, which is the
same idea underlying the business wargaming technique.
3. First evidence from case studies
In the following a first case study is described to illustrate how foresight can be used for
exploring competitive dynamics. The insights from this case study shall than be used to
formulate a conceptual framework for competitor foresight. However, the aim of our
overall research project is to further collect evidence and use this evidence to enhance
and develop the framework
Identifying new competitors
The following case study will only reflect on methodological aspects concerning the
approach to competitor foresight and will not disclose any details concerning the
company (referred to later as CompanyA) or industry.
The industry in which our CompanyA operates is challenges by a particular
technology development. The foresight activity was conducted to determine if the
technology development would lead to new entrants in the industry. The project was
started with the development of a set of scenarios to identify potential development
trajectories. In the next steps the firm aimed at determining the likelihood of new
competitors entering the industry.
In a first step a SWOT of the industry was created, building on insight which had
been generated within the preceding scenario planning exercise. To challenge this SWOT
a workshop was carried out with the aim to identify and map the mental models of the
particular industry. These insights were than again fed into the industry SWOT.
Acknowledging that it might be difficult to identify individual industries that have a
higher propensity to enter CompanyA’s industry than others, a comprehensive industry
list was used as a starting point. Each industry was analyzed to determine if it has the
potential to address strengths, weaknesses, opportunities or threats of CompanyA’s
industry. Through this process several industries could be positively identified. In each
industry the top three top ranking firms by market capitalization were selected and
analyzed in detail.
The detailed analysis of the selected firms not only considered the SWOT of the
company and of the industry of CompanyA but also analyzed the value chains, existing
activities that could be related to the industry of CompanyA or for instance former
experience of the respective management in the industry. These factors were analyzed to
determine the likelihood of entry into the industry of CompanyA.
Through this process a number of potential new entrants could be identified. Further,
the analysis provided a basis for discussion around the questions of how to deal with
these potential entrants.
4 Competitor foresight
The goal of this paper is to assess how the competitive dimension can be integrated into
Corporate Foresight. More precisely, the goal of this paper is to discuss an approach that
allows firms to include the competitive dimension into their foresight activities.
From the literature analysis we expect that firms would aim to answer in their competitor
analysis these questions:
Which new competitors might be entering my industry in the future?
This paper was presented at The XXIV ISPIM Conference Innovating in Global Markets:
Challenges for Sustainable Growth in Helsinki, Finland on 16-19 June 2013. The publication is
available to ISPIM members at www.ispim.org.
6
How will the boundaries of my industry change?
What actions might my current and future competitors utilize to gain competitive
advantage?
Or more specifically: What kind of innovations are my competitors working to gain
competitive advantage?
While the case study revealed how a particular company worked towards answering
question one and two, we learned less on how to address the latter two. The first two
questions were primarily supported by the foresight methods
Trend analysis, through which the firm identified the disruptive technological change
and later identified the change drivers that would form the basis for the scenario
analysis
The scenario analysis, which was used to identify possible development trajectories.
For the next two questions about anticipating potential competitor actions business
wargaming seems a particular promising method. It would allow to play out different
tactics and action portfolios both from the firm’s and the competitor’s perspective.
In that respect it is in many industries particularly relevant to focus on the role of new
innovations in gaining a competitive advantage (Rohrbeck & Gemünden, 2011). From
previous research we know that firms compile overviews of competitor products and
services even before they are on the market (Rohrbeck, Arnold, & Heuer, 2007). This
allows them to anticipate the disruptive and competitive-advantage-building potential that
such innovations might yield.
To integrate such information and prepare decision making business wargaming has
multiple strengths (Bergeron & Hiller, 2002; Bracken, 2001; Kurtz, 2003b; Kurtz &
West, 2002; Mendonca & Sapio, 2009; Treat, Thibault, & Asin, 1996):
Allows integrating any foresight insights including technological, political, socio-
cultural and competitor environment
Allows to prepare future decisions by playing them out
Allows to provide decision makes with a dynamic perspective on their and their
competitor’s actions
Allows decision makers to live through future scenarios and experience decision
making in these future settings
We can thus tentatively conclude that integrating the competitor dimension in
foresight activities can be achieved by (1) focusing ‘classical' foresight methods on
current and future competitors, with a particular focus on their potential future
innovations, and (2) by using business wargaming to simulate possible futures and thus
prepare management for future decisions.
5 Conclusion
This paper discusses the relevance of the competitive dimension for corporate foresight.
We believe that the paper adds a new aspect to the discussion on corporate foresight. By
linking foresight to competitive strategy we identify the key questions that firms aim to
answer, when engaging in future-oriented strategizing.
These questions provide guidance for searching for relevant foresight methods and
point at the need for an integrative method to bring together the different elements and
provide a platform to preparing future decisions.
This paper and the underlying research is still in an early stage, but we hope that it
provides already some food for thought and helps to facilitate a fruitful discussion at the
conference.
This paper was presented at The XXIV ISPIM Conference Innovating in Global Markets:
Challenges for Sustainable Growth in Helsinki, Finland on 16-19 June 2013. The publication is
available to ISPIM members at www.ispim.org.
8
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Full-text available
Purpose – The aim of this article is to introduce business wargaming as a tool for ex ante strategy evaluation. Reviewing criticism of other approaches, such as scenarios and computer-based simulations, this article explores whether business wargaming is a suitable response to this criticism. Design/methodology/approach – This article reviews and discusses the literature on strategy testing and business wargaming. Findings – Business wargaming is capable of responding to criticism of scenarios and computer-based simulations when applied to the ex ante evaluation of strategy. Business wargaming, which arose from military wargaming, is a strategic simulation that is dynamic and participative, allowing managers to experience how their strategy will compete and endure in their business environment. Research limitations/implications – Additional research is needed to explore the application of business wargaming in practice as a tool for the testing of strategy. Practical implications – The article suggests that business wargaming is a valuable tool for testing strategies in a simulation, which is participative and dynamic. Originality/value – This article fills the research gap on strategy testing and points to a tool – business wargaming – that has been applied intensively in the military field.
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