competitor scenarios

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Competitor scenarios

Liam Fahey

Liam Fahey is internationally recognized as a

leading consultant on competitor analysis,

competitive strategy, and scenario learning

([email protected]). Of the

seven books he has published on these

topics, his three most recent are: Learning

from the Future (1998), Competitors:

Outwitting, Outmaneuvering and

Outperforming (1999), and The Portable MBA

in Strategy, Second Edi tion (2001). Based in

Needham, Massachusetts, he is an adjunct

professor of strategic management at Babson

College, a visiting professor of strategic

management at Craneld School of

Management in the UK, a founder andprincipal of Leadership Forum Inc, and a

Contributing Editor of Strategy & Leadership.

Editors noteThis is the second Strategy & Leadership article in Professor Faheys series on

understanding competitors. The rst one, Invented competitors: a new competitor

analysis methodology appeared in the November/December issue, Vol. 30 No. 6.

Scenario learning and competitor assessment are two tools for looking at the

future that leading edge companies are learning to use efciently and

effectively in combination. Given other demands on management attention,

not many companies can expend the resources to annually investigate a wide range of

future possibilities via scenario planning. Likewise, few companies can afford to

continually track the details of their competitors every strategic move. But almost all

companies need to periodically weigh potential competitive threats, and now a proven

methodology provides a look at rivals new and old in several scenario settings.

Managers need to be familiar with scenarios of future markets that are not merely

extrapolations of current trends. This is because history teaches that the most

potent competitors often emerge unexpectedly from surprising sources and under

unanticipated circumstances. For example, a decade ago book-retailing chains were

expanding at a record pace as they decimated their competition, small locally owned

bookshops. However, the overnight success of Amazon.coms Internet store a

potent combination of new marketing concepts, new technology, and new channel

strategy forced the chains to reassess the future of book retailing and as a

consequence make signicant changes to their historic strategy.

History teaches that the most potent competitorsoften emerge unexpectedly from surprisingsources and under unanticipatedcircumstances.

Liam Fahey

PAGE 32 | STRATEGY & LEADERSHIP | VOL. 31 NO. 1 2003, pp. 32-44, MCB UP Limited, ISSN 1087-8572 DOI


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Even long-time competitors sometimes do things completely out of character with

their strategic and organizational modus operandi. For example, large diversied rms

may suddenly decide to shed many businesses to concentrate on a few products and

technologies. Another shift of marketplace power can occur unexpectedly when rivals

make acquisitions that provide them with new competitive potential.

Scenarios are a proven means to identify and examine pathways into alternate futures

for which most managers, because of their focus on taking advantage of current

conditions, are currently unprepared. Scenarios of futures where the business

environment is distinctly different from current or anticipated conditions can help

managers project and analyze competitors futures: what competitors might do, how

they might do it, and why. After a few years of experience, several leading companies

that employ scenarios to better understand both current competitors potential moves

as well as the possible emergence of new rivals have learned several principles and

some ways to avoid various pitfalls. Their basic technique, and their suggestions for

avoiding missteps, can now be shared. In almost all cases, competitor scenarios

produced actionable insights about these rms own strategy alternatives.

To demonstrate how this competitor scenario process works in practice, this article

has a three-part structure:

First, to acquaint managers with the typical content of a competitor scenario.

Second, to explain the different types of competitor scenarios that can be created

and the purposes associated with them.

Third, to show what managers can learn from different competitor scenarios and

how they can use the understanding and information gained to improve strategy

development and execution.

Competitor scenarios: purposes, key elements, and principles

A competitor scenario starts with a logical narrative that considers what a competitor

might do over some specied time period, how its managers would do it, and why

they would choose to do so. As with all scenarios, we must remember that any

competitor scenario represents one projection of what a competitor might do. It is not

a prediction of what it will do.

The following competitor scenarios examine three broad aspects of marketplace

strategy: in which product-customer segments the competitor chooses to compete

(scope); how it competes (competitive posture); and what it seeks to achieve (goals).

Competitor scenarios, of course, often focus on other issues or topics including:

How a competitor might guide and manage its R&D efforts.

How a competitor might build and manage an integrated supply chain.

How a competitor might develop and manage a networked enterprise around a

series of alliances with many types of external entities.Competitor scenarios consist of the four key elements common to all scenarios:

an end-state, plot, logics, and driving forces. For a brief description of each of the

elements, see Exhibit 1. Note that there is no one right way to develop and interrelate

these four elements. As will become evident in the following discussion, constructing

competitor scenarios is an iterative process[1]. End-states are shaped by what is

learned in the process of articulating and detailing the plot and the driving forces. In

this article, we start the scenario process by asking different types of what-if questions

VOL. 31 NO. 1 2003 | STRATEGY & LEADERSHIP | PAGE 33


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about competitors likely future marketplace strategies. From the answers we craft the

end-states that describe what the competitor strategy would look like.

Competitors serve as one useful, and in some respects, ideal focal point for scenarios

for a number of reasons. First, competitors are always at the heart of every signicant

analysis of the competitive or industry context[2]. Thus, competitor scenarios

provide one critical means of learning about the current and potential competitive

environment. Second, strategy, however designed and executed, must win against

current, emerging, and potential competitors in the marketplace. Customers and

channels almost always possess the option to switch to rivals. Thus, competitor

scenarios enable unique insights into the rivals that will shape the nature, direction,

and intensity of marketplace rivalry. Third, once the notion of relevant competitors

extends beyond large market share rivals, competitor scenarios generate learning

about both competitors and the competitive context that would otherwise be unlikely

to occur. Finally, because of the frequently intense emotions and feeling about rivals,

managers and others often bring heightened energy and commitment to constructing

and learning from competitor scenarios.

Principles

Some fundamental principles should always guide the construction and use of

competitor scenarios (Exhibit 2). Sometimes these principles may seem counter-

intuitive. For example, why should learning about competitors not be the prime goal of

competitor scenarios? The answer is that too often, competitor scenario developers

become enamored of the p ossibility of crafting the most perfect scenario about

the competitor one that is surprisingly comprehensive, self-evidently internally

Exhibit 1 Competitor scenarios: key elements

The components of every competitor scenario are: an end-state, plot, logics, and driving

forces.

End-state The end-state details the competitors marketplace strategy scope,

posture, and goals at the end of the scenario period. A radical new

strategy would require the scenario developers to lay out what is

radical about the strategy: how the products are revolutionary, what

changes the products would imply for channels and customers, and

other ways in which the strategy would be dramatically different from

rivals current approaches to competing and winning in themarketplace.

Plot The plot or story describes what the competitor must do to get to the

end-state. What would the competitor have to do to develop, design,

manufacture, market and sell the revolutionary products? Frequently,

such plots must also address change within the competitor for

example, the change in culture, systems, operating processes, assets,

and leadership that would be required to facilitate and lead the drive

toward a radical new marketplace strategy.

Driving forces Driving forces constitute the forces that shape or drive the plot. Some

forces may be what is happening or likely to happen in and around the

marketplace: what customers may do, trends related to sales of

particular products, the emergence of new entrants, and governmental

policies and regulations. Other forces are specic to the competitor

such as changes in its goals or leaders, culture, competencies, etc.

Logic Finally, the scenario logic constitutes the explanation or rationales for

the content, direction and intensity of changes postulated in the plot.

The logic addresses the why questions: Why does the competitor

want to pursue a revolutionary strategy? Why would customers

respond to the proposed products in one particular way or another?

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consistent, elegantly articulated, and of course strikingly imaginative in everything it

addresses and says about the competitor. Ultimately this commitment to constructing

the perfect scenario limits the usefulness of the scenario project and consumes

resources that are better employed elsewhere. Experienced managers instead use

competitor scenarios as a source of learning about the broader competitive context

and of the implications for their rms strategy and operations. Competitor scenarios

work best when they produce knowledge and insight that broadly informs and

prepares decision makers to act rapidly as competitive conditions change.

Which competitors should be the focus of competitor scenarios? The guiding principle

should be, apply scenario thinking beyond your current large market share rivals. The

reason is, competitor scenarios that address functional substitute rivals, small

emerging rivals, and even invented rivals (that is, rivals that do not exist today but

might exist at some point in the future) generate insights into the emerging and

potential marketplace that often simply cannot be obtained no matter how acutely

managers develop scenarios around the leading market share rivals.

There are two distinct types of competitor scenarios that originate in two quite different

forms of what-if questions: unconstrained what-if scenarios and constrained what-if

competitor sc enarios.

Exhibit 2 Competitor scenarios: guiding principles

Scenario purposes

1. The purpose of competitor scenarios is not to learn about competitors

2. Competitor scenarios should be used to learn about the competitive context beyond

competitors (both the competitive or industry context and the macro environment)

3. Competitor scenarios should serve as one input to identifying, challenging and

rening the organizations knowledge (including its beliefs, assumptions and

projections about future)

4. Competitor scenarios should also serve as one input to outwitting, outmaneuveringand outperforming rivals

5. The ultimate purpose of competitor s cenarios is to develop knowledge and insight

that aids decision makers (in identifying strategy alternatives, making decisions

faster, etc)

Scenario analysis

6. Scenario construction and scenario assessment require distinct frames of reference,

skills, and knowledge

7. A competitor scenario should be fully constructed before it is assessed for its

competitive, strategy, and organization implications

8. However, strategy developers should not seek the perfect scenario before moving to

assessment

9. Scenario developers need to disengage themselves from their own rm

10. Competitor scenarios should be constructed for a range of rivals (and not just large

market share rivals)

Several leading companies have employedscenarios to better understand both currentcompetitors potential moves as well as thepossible emergence of new rivals.



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Unconstrained what-if scenarios

Unconstrained or open-ended questions encourage scenario developers to pose any

question that occurs to them pertaining to one or more rivals marketplace strategies.

Unconstrained what-if questions are limited only by the experience, imagination and

creativity of those involved in thinking about the possible strategies of rivals. Four

categories of what-if questions lead to competitor scenarios with different foci.

Standard questions

The standard questions that are frequently used to initiate unconstrained scenarios

are noted in Exhibit 3. These questions have high relevance to most rms. Shaping

these questions leads to determination of the relevant end-state a statement of what

the competitors marketplace strategy might be. Clearly, such statements can be

detailed considerably beyond the examples cited in Exhibit 3. However, they should

not exceed a half-page of carefully constructed narrative.

A plot can then be detailed that leads to the end-state. This stage severely tests the

knowledge and foresight of the scenario developers. Indeed, plot development all too

often points up issues and questions that require access to external expertise. In this

way, articulation of plots becomes a source of extensive knowledge for those involved.

Sometimes plot elaboration forces managers and others to come face-to-face with

issues and questions that are as challenging and insightful as they as unexpected. As

one computer peripherals rm found, for example, in shaping the plot that explained

how a rivals marketplace strategy resulted in product and technology dominance, it

suddenly discovered how critical alliances in particular components would be to any

rms future success in this product space.

Base question scenarios

A different but related way to generate unconstrained competitor scenarios stems from

asking a set of questions that are frequently raised in rms about rivals strategies.

These, unfortunately, rarely receive any kind of formal analysis (see Exhibit 4). This

Exhibit 3 Unconstrained what-if competitor scenarios: some typical

questions

What if the competitor commits to a diversication of its product line (new products for

existing and new customers) through a combination of current and new technologies?

What if the competitor launches a series of new products (source internally and

externally)?

What if the competitor launches a sequence of extensions to its current product lines

(with the specic aim to attract new customers into the market)

What if the competitor suddenly divests a number of its product lines and/or pulls out ofa number of geographic regions

What if the competitor moves rapidly to a customization-driven strategy?

What if the competitor fundamentally changes its core value propositionhow it

competes to win customers in the marketplace?

What if the competitor commits to gaining signicant market share (and to do so as

quickly as possible) withoutregard to the its long-term consequences (eitherfor the rm

itself or for the marketplace)?



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method often produces unique insights into competitors strategies and their

implications.

These base-question scenarios exemplify how rich insights can many times be

gleaned without fully elaborating and detailing the relevant end-states, plots and

logics. This is so in part because end-states and associated plots and logics based

upon these what-if questions lead in turn to further questions (and insights) about

rivals that in all likelihood would remain unasked (and not obtained).

A case

Consider the case of one electronics rm that asked the dumb what-if question:

What strategic move might the competitor make that would be least in its own

strategic interest? After an extensive analysis of the change in the marketplace,

including emerging technologies and the recent emergence of new competitorspromoting new product forms, the analysis team concluded that the least

advantageous future strategy for this particular market share leading competitor

would be to stick tenaciously to its current strategy that is, continue to incrementally

improve its current products and to enhance its value added for customers in small

but consistent steps. The team concluded that this strategy would be dumb

because the competitor would likely nd itself losing the competitive, market and

technology war that was about to breakout in this particular market space.

A number of signicant strategy implications emerged that required the electronics

rms immediate attention:

First, it needs to quickly analyze whether it would suffer a similar fate if it too did not

radically shift from its current product portfolio.

Second, the rm had to develop one or more projections, in scenario form, of the

potential paths the technologies might take, and their potential interactions, over

the next ve years.

New competitors

Unconstrained competitor scenarios are ideal for tackling one of the most

fundamental issues that confronts the creators and advocates of any strategy:

Exhibit 4 Competitor scenarios: baseline questions

Scenario title Basic question Why create the scenario Scenario benets

The dumb scenario What might the competitor do

that would be least in its own

strategic interest?

Learn what could most

negatively affect one or more

rivals

May be possible to aid the

competitor to commit to these

actions

The ideal s cenario Wh at wou ld be th e ideal

strategy for the competitor?

Learn what might be in the

short-term interest of the

competitor

May be possible to inhibit some

of these benets accruing to the

competitor

The best long-term scenario What would be in the

competitors long-term best

interest?

Learn what the competitor

would have to do to win in the

long-term

Some of these decisions and

actions may also be appropriate

for us

The most helpful scenario Which strategy might the

competitor pursue that would

most help our rm?

Learn how and why a

competitors actions might

benet our rm

May indicate new ways to view

actions of rivals; may i ndicate

actions we should take

The most hurtful scenario What strategy might the

competitor pursue that would

most hurt our rm?

Learn how a competitor could

make our rm most vulnerable

May be possible to identify

preemptive actions



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How might new types of competitors come into the market? New types of competitors

include any organization that would provide a product or solution unlike the rmscurrent product or solution but which customers would purchase instead of its

offering.

Although issues and questions pertaining to the emergence of potential new types of

competitors often arise in the course of strategy discussions inside most rms, few

rms seem to devote any serious analytical thinking to them. Most do not consider the

potential impact of such new entrants until either they actually have products in the

market or they announce their imminent arrival. Indeed some management teams

have remained aloof from any attention to such rivals even after the relevant staff teams

such as a competitor analysis unit or a team with strategic planning responsibility had

documented the (potential) emergence and threat of these rivals.

New competitors

Two avenues have proved especially useful in identifying new types of competitors

the search for functional substitute rivals and interactions across technologies.

Functional substitute rivals

Here the dominant unconstrained what-if question is quite straightforward: How might

functional substitute products or solutions come to be and what kind of rm might

create and bring them to the market?

Developing even tentative answers to these questions, however, is not nearly quite so

straightforward. One reason why this is so quickly becomes evident when a team of

managers and others begin to develop this type of competitor scenario. It requires

considerable knowledge and expertise outside the rms historic comfort zones. Yet

even preliminary efforts to develop this scenario can generate substantial returns

in terms of new knowledge about current and emerging technologies, changing

customer needs, potential new marketplace dynamics, and new competencies in

many functional areas including R&D, manufacturing, marketing, and sales.

The basic what-if question is: What if a functional substitute emerged that had the

following specic product features? Consider the case of a medical equipment

manufacturer manager who asked: What if a pharmaceutical rm were to develop a

drug that would relieve or eliminate the medical problem for which one of our product

lines is used in surgery? The analysis team then had to call upon many external

sources of knowledge and expertise to identify which pharmaceutical rms were

conducting relevant research or already had potential products in the early stages of

development or clinical trials. Then they had to determine what the development and

product lifecycle of such products might be. They used this data to generate an end-

state that specied what the product might be, the strategy required to take it to

market, the plot that described how the rm could develop, test, and introduce the

Experienced managers use competitor scenariosas a source of learning about the broadercompetitive context and of the implications fortheir rms strategy and operations.



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product, and a set of logics explaining why the rm would go through with the

research, commit the resources required for an expensive product launch, and

eventually win in the market against a number of existing products. In sum, a

pharmaceutical product might be chosen by hospitals and doctors instead of a

surgical procedure as a preferable form of treatment for the particular medical

condition for which surgeons now use one of the rms product lines.

Consideration of this competitor scenario led to new understanding into:

How and why pharmaceutical products evolve.

How they could compete against the rms traditional medical instruments.

The forces shaping treatment decisions within hospitals.

How and why the rms long established and highly successful products could be

vulnerable to products that many managers simply did not see as being part of the

industry.

Technology linkages

As evident in the discussion of functional substitutes, technology change leads to the

emergence of new products and solutions. The critical question guiding the efforts of

competitor scenario developers thus becomes: How might technology developments

interact to give rise to new customer offerings? Ultimately, this question becomes:

What if these technologies were to develop in particular ways?

When technology is dened broadly to include all spheres of R&D, technology linkages

as a source of competitor scenarios prove to be critical for rms in almost every

industry. But even in product areas not thought to be technologically advanced,

linkages across a variety of technologies, some of which may seem at rst glance not

terribly related, can sometimes give rise to new competitors. Some nancial services

companies now nd themselves competing directly for the same customers with far

smaller providers who have used Internet and communications technologies along

with database and related technologies to deliver superior value along a number of

dimensions.

Invented competitors

A distinct class of c ompetitor scenarios revolves around invented competitors[3], that

is, competitors that do not exist today but which could exist at some point in the

future[4]. Invented competitors possess the great merit of shifting the frame of

reference in projecting and assessing rivals strategies from current or emerging rivals

to one or more rivals that, by denition, are strikingly dissimilar to any rival managers

have had to contemplate to date. As a consequence, invented competitors enable

managers and others to challenge their underlying assumptions indeed their whole

world-view of competition in a unique way. Unconstrained what-if questions are

personied by the notion of invented competitors: only the imagination and creativity of

those involved limits the range and character of the competitors that might be invented.

Let us take the case of a nancial services rm that used an invented competitor

scenario to establish a radically distinct perspective on its future marketplace from

which to assess its current strategy and its key underlying assumptions. The guiding

what-if question was, What if a competitor emerged that possessed a marketplace

strategy characterized by:

Interactions with external entities principally channels and customers that were

exclusively e lectronic.



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A full commitment to attracting new customers into the market.

A driving aim to dominate this particular market segment.

In detailing this end-state, the team carefully built a rich narrative around the following:

How the rm would reach customers and channels electronically.

How many types of customers could be reached.

The electronic methods employed to reach customers.

How the methods would be used to develop two-way ows of information.

How the rm could use data and information gathered from customers in almost

real time to amend the offer to individual customers.

What the elements of the product offer or solution would be to customers (that is,

what the nancial product would be that customer would actually be purchasing).

For the next step, the team had to detail what plot or story would explain how the

invented competitor reached this end-state over the next four years. Each years plot

affected what would or could take place in subsequent years. A signicant element of

the plot described how the invented competitor would actually come to be, that is,

what would have to happen for it to come into existence and then grow and develop

as a company. The chronology of the plot revolved around the following items:

A small group of individuals with extensive experience in the relevant product

domain exiting an existing nancial services rm.

Select individuals from other nancial services rms then join them.

This set of individuals then in itially develops a loose alignment with a small boutique

with considerable expertise in a variety of aspects of doing e-business.

The rm develops a technology platform to interact with customers.

At the same time, it b egins to develop the rst outlines of what the offer would be

to customers.

It then works with one large institutional customer as a test-bed for the offer as a

location to develop a serious trial of the platform technology.

Because of the radical nature of the proposed strategy and especially because of the

degree of change involved for customers for example, all facets of how they would

interact with a nancial services provider it was critical to set out and assess the

logics underlying the plot. Central issues and questions were identied for each major

step in the plot and for the plot as a whole. Key questions included:

Why would different segments of the invented competitors customers move to an

electronic mode of doing business?

What advantages would its customers gain from buying via e-business?

How would developments in e-technologies facilitate what the invented competitor

wanted to achieve?

In what ways, might the invented competitor be able to leverage success with the

proposed customer solutions into other customer offerings?



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Constrained what-if competitor scenarios

Constrained competitor scenarios start from a common point of departure: What

would the competitor do if a specic set of marketplace or macro environmental end-

states or conditions were to arise? These scenarios start with some specication of

what the world would look like at some point in the future and then ask, What would

the competitor do under these conditions?. Thus, these scenarios explore the

initiatives a competitor might take if it were to nd itself in a particular world end-

state (such as emerging new technologies and new product regulations) or how it

might react to the strategic moves of rivals. They are therefore constrained what-if

questions.

Constrained competitor scenarios are especially appropriate when your rm wants to

identify and assess:

What would a particular competitor do under specied marketplace conditions?

Constrained what-if competitor scenarios

Why a competitor would adopt one strategy rather than another?

Which marketplace changes might lead one or more competitors to adopt a

particular strategy?

The competitive context that serves as the constrained what-if can be established

in at least two distinct ways. First, industry or competitive scenarios, if alreadydeveloped for other purposes, provide one ideal context.

Second, carefully articulated what-ifs that describe a brief set of future competitive

conditions can also serve as the backdrop for constrained competitor scenarios. A

number of such constrained what-ifs are briey described in Exhibit 4. Although at

rst glance they may seem relatively simple and obvious, more often than not,

development of such short what-if lists typically requires extensive reection on what

could happen in the next few years and which what-if questions would give rise to the

most productive competitor scenarios. It may require considerable dialogue around

what could happen, before scenario developers converge on one or two what-ifs that

raise interesting and perplexing questions about how one or more categories of rivals

might respond to the stipulated competitive conditions. For example, a projectedcompetitive context dominated by e-business may not lead to difcult strategy

choices for a particular competitor but the potential emergence of a substitute product

might lead to strategy choices ranging from divestment from the industry to acquiring

or aligning with a provider of the substitute product.

When existing industry or competitive scenarios constitute the rst critical step in

shaping and using constrained competitor scenarios, the end-states serve as the

principle focus of the competitive conditions. Although industry or competitive

Competitor scenarios work best when theyproduce knowledge and insight that broadlyinforms and prepares decision makers to actrapidly as competitive conditions change.



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scenarios can be created in multiple ways, constrained industry or competitive end-

states are typically crafted around a small set of key uncertainties. Exhibit 5 illustrates

one such set of constrained competitive end-states constructed by a research and

development intensive company that was confronting two key uncertainties:

(1) A number of emerging technologies at varying stages of development that may

or may not advance further, but if they did, they could dramatically affect research

breakthroughs and thus new products; and

(2) Considerable regulatory ux that could directly effect the ability of all current rivals

to market and sell new and existing products or major product line extensions in

various channels and to different end-customer segments.

The four scenario cells shown in Exhibit 5 depict four quite different worlds. A strategy

designed to win in one world, for example, extended status quo, could well fail

miserably in the unbridled battle world.

The steps in constructing competitor scenarios are then relatively straightforward:

Identify the strategy issues for the competitor.

Develop the scenario plot outline.

Detail the scenario plot.

Articulate the logics.

Determine the business issues to be addressed.

When a rm identies key competitor strategy issues associated with each end state

new marketplace opportunities, threats to traditional ways of competing or to the

rms planned strategies it establishes a more rened understanding of the

competitive context within each end-state. As a result its managers can better

understand the strategy challenges that would confront the competitor in each end-

state. For example, a preview of the intensive nature of the vehement rivalry unleashed

Exhibit 5 Four competitive end-state worlds

Modest regulatory change Extensive regulatory change

Low level of

technology change

Status quo

In this end-state, rivals continue

to slowly adapt their customer

solutions in the historic

customer segments. Rivalry is

moving toward an emphasis

upon service elements. Rivals

are still prohibited from entering

signicant market segments

Customer skirmish

In this end-state, rivals compete

with slowly changing products.

But they now compete ercely

in the pursuit of new customer

segments. Rivalry is now

intense as the number of rivals

has increased in all customer

segments

High level of

technology change

Product fragmentation

In this end-state, product

modications unfold at a rapid

rate. Some new products

challenge the dominance of old

solutions in some customer

segments. Customers can

choose from clearly

differentiated solutions. Rivalry

has shifted to product or

solution superiority

Unbridled battle

In this end-state, both product

change and market change

persist. Continuous product

change keeps shifting the range

of available customer solutions.

And, rivals can aggressively

pursue most customer

segments



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in the unbridled battle end-state claries the what-if set of conditions in which the

competitor will have to identify and choose its preferred strategy:

A blizzard of new products.

The relentless se arch for new opportunities to enter into any channel.

Offering an entirely new range of enticements to customers and channels.

In order to develop a scenario plot (and sometimes perhaps more than one) for eachend-state represented in Exhibit 5, the core competitor scenario question must now

come to the fore: What would the competitor do (that is, what strategy would it

pursue) were it confronted with the competitive context in each end-state? It is

important to note that the strategy options may vary dramatically from one end-state

to another. For example, the competitor staring into the unbridled battle world might

consider:

Divesting entirely out of this product range (due to the intensity of the rivalry and the

absence of the necessary resources to stay the course).

Concentrate on one product segment (perhaps as a way to avoid the head-on

clashes guaranteed with other rms if it develops a full product portfolio).

Develop a full line of products (perhaps by developing alliances with a number of

other rms).

Move to become more of a research and development rm and less of a

manufacturer and distributor (perhaps b y leveraging its current and potentially

accessible technology skills and capabilities).

Execution

Once a scenario plot has been outlined, managers can then detail what it would take

to execute the projected strategy. In other words, choosing a strategy option does

not identify or explain how it could be executed. Indeed, understanding how the

competitor might execute a particular strategy often represents the core learning thatemanates from these constrained competitor scenarios. Scenario developers gain

insight not only into how the strategy might win in the marketplace but also into what

the competitor would have to do both in the marketplace and within the rm in order to

realize the opportunity at the heart of the strategy.

The logics in these competitor scenarios address one fundamental question: Why

would the competitor pursue this strategy? What forces within and external to the

competitor would support or drive the competitor to adopt this strategy becomes the

Exhibit 6 Examples of constrained what-if competitive conditions

What if our competitive context in four years time is dominated by e-business

connections between all players in the industry, resulting in solution segmentation,

consolidation in traditional channels, and competitor fragmentation?

What if over the next three years, technology propels the emergence of new products,

including functional substitutes that are signicantly more sophisticated than current

products?

What if rivalry intensies but it is solely among the current dominant players in this

specic product space and all rms commit extensive new resources to the battle?What if the economy continues in stagnation and technology increases in importance

as the platform for both new products and new ways of competing in the marketplace?



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central question. The relevant external forces and how they affect a projected strategy

may be specic to individual end-states (see Exhibit 5). In the unbridled competitive

end-state, specic regulatory developments (not evident at all in the status quo world)

might lead the competitor to seriously consider reducing its presence in, or even

withdrawing entirely from the product-market sector.

As a last step, it is essential to ask: What business issues emerge from each scenario

that pose opportunities and threats that the organization must explore? Again, the

issues can vary signicantly across the end-states.

The reward: insight and alternatives

Competitor scenarios provide a methodology to enable managers and others to

construct and assess a variety of potential strategies that rivals might adopt. They

require both imagination and creativity on one hand, and considerable knowledge and

understanding of what strategies might be available to rivals, and how and why they

might pursue them. In almost all cases, competitor scenarios lead to rich insight into

the rms own strategy alternatives and sometimes to alternatives that were

previously not on the rms radar screen.

Notes

1. For a more elaborate and detailed discussion of the generic analysis process involved in both

constructing and assessing competitor scenarios, see Liam Fahey, Competitor scenarios:projecting a rivals marketplace strategy, in Liam Fahey and Robert M. Randall (1998),

Learning from the Future: Competitive Foresight Scenarios (John Wiley & Sons), pp. 223-45.

2. Readers interested in constructing industry or competitive scenarios, see Liam Fahey,

Industry scenarios, in Liam Fahey and Robert M. Randall (1998), Learning from the Future:

Competitive Foresight Scenarios (John Wiley & Sons), pp. 189-222.

3. For a discussion of the invented competitors, see Liam Fahey, Invented competitors: a new

competitor analysis methodology, Strategy and Leadership, Vol. 30 No. 6, November/

December.

4. Invented competitors, of course, can be used to identify potential new forms of competitors.


competitor scenarios

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