Random Musings:

Scenario Planning for M&A, Portfolio Management

Scott Moeller, coauthor of a book on the use of business and military intelligence in M&A deals and CEO of Executive Education at Cass Business School in London, England, points out that Scenario Planning can be helpful in thinking about M&A deals. Exactly so.

Scenario Planning is "fractal." It can be used to address risk and uncertainty at the product, business unit, and corporate levels. Understanding possible trajectories for industries, markets, portfolio companies, and possible acquisition targets enables CEOs and Directors to evaluate possible futures and to choose their most desirable future and identify the key events and milestones leading to that future.

Sometimes it's useful to look a the future of the key business units and then at the future of the company and its portfolio of companies. Such a  sequence of Scenario Planning projects can help the CEO and Directors approach acquisition and divestiture using more rigorous tools to evaluate many possible outcomes.

For example, one project for a Fortune 500 company convinced the CEO that he should sell a particular business unit because the competencies needed for success were fundamentally different than his other portfolio companies. His principal businesses essentially required making bets on 30 year capital investments in manufacturing plants where technologies evolved slowly. The business sold required competence in managing in markets whose technologies and structures were rapidly evolving.

 

The Future of Newspapers

Writing in the Wall Street Journal, Andy Kessler says that Peer-to-Peer is the foundation of the emerging threat:

The real dark cloud is technology known as peer-to-peer (P2P) bubbling up from the underground that leverages this architecture. Here's how it works: I might have a copy of this week's "American Idol" on my hard drive. You want a copy, you stream it from my PC, not FOX. Then you share it with five or six people that are close to you geographically so it gets to them quickly. They share as well, and on and on. Live video streams like a virus, which means once started you can't stop it....

BitTorrent and eDonkey are the top P2P networks and half the usage is for TV shows. P2P hogs something like 35% or more of all Internet traffic. Thirty-five percent! But to replace cable, it has to be real time, and there are tons of real time P2P players, especially out of China: TVU, SopCast, PPMate. As I write this, I'm watching ESPN on my PC, denying Disney another outrageous $2.30 per month they charge me via Comcast. Just as the iPod opened up stolen music to the masses, devices like Apple TV mean I can stream to my wide screen. Is this Napster redux? It might well be. TV is no longer the safe cuddly business it once was.

The Futurist on the Future in 25 Years

The Futurist magazine has posted some of its 25 years forecasts. (Those allergic to marketing be forewarned.) A few that got my attention:

Forecast #2: Dwindling supplies of water in China will impact the global economy. With uneven development across China, the most water-intensive industries and densest population are in regions where water is scarcest. The result is higher prices for commodities and goods exported from China, so the costs of resource and environmental mismanagement are transferred to the rest of the world.

Forecast #6: Outlook for Asia: China for the short term, India for the long term. By 2025, both countries will be stronger, wealthier, freer, and more stable than they are today, but India's unique assets--such as widespread use of English, a democratic government, and relative transparency of its institutions--make it more economically viable farther out.

Forecast #8: The costs of global-warming-related disasters will reach $150 billion per year. The world’s total economic loss from weather-related catastrophes has risen 25% in the last decade. According to the insurance firm Swiss Re, the overall economic costs of catastrophes related to climate change threatens to double to $150 billion per year in a decade. The U.S. insurance industry’s share would be $30-$40 billion annually. However, the size of these estimates also reflects increased growth and higher real-estate prices in coastal communities.