Strategy Kinetics, LLC

Backcasting

Recently, someone pointed out to me that Future Mapping / Scenario Mapping / Problem Resolution Mapping is a form of Backcasting, a set of strategic planning techniques that work backwards from some assumed future. In researching the use of "backcasting," I found this presentation from the Information Architecture 2007 Summit by Matthew Milan and Sam Ladner that provides a high level overview of how they use Backcasting in client engagements.

I'm a big fan and practitioner of "cards on the wall" meetings (or in Milan and Ladner's case, of Post-its on the wall). Their form of Backcasting and Scenario Mapping share some common assumptions, including: assuming divergent futures, working backwards, avoiding the forecasting frame, interactive discovery, and participant ownership of the results.

In over-viewing the history of Backcasting, Milan and Ladner indicate (slide 11) that the '90s saw the development of "big backcasting," whose liabilities (slide 12) include projects that are complex undertakings, resource intensive, and time consuming. Locating most Scenario Mapping projects in their "big backcasting" category, they have a point. The question is whether these are really liabilities.

Milan and Ladner also indicate that "big backcasting" projects are inaccessible to non-experts. If they mean that the content, results, and recommendations are inaccessible, I would quickly disagree. If they mean that actually facilitating / leading / doing a "big backcasting" project is difficult for non-experts, that often seems to be the case.

When clients have attempted to do Scenario Mapping projects without the involvement of consultants, with rare exceptions they find it difficult to do successfully. Consultants who do a lot of these projects have a wide range of experience to call upon. Internal facilitators usually do these kinds of projects less often. Although they may understand the process, they typically lack a wide range of Scenario Mapping project and facilitation experience. Consequently they often lack knowledge of the many variations and options available to facilitators.

There is another reason why Scenario Mapping is often difficult for non-experts. One of the requisite skills is the ability to assemble, prioritize, synthesize, and "chunk" a very large amount of information. Although this skill can be taught, it seems to require some basic facility. For example, certain Myers-Briggs types are often particularly adept, INTJs and many ENFPs, for example. Thus not everyone will be able to facilitate successfully a "big backcasting" project based on processes such as Scenario Mapping.

There's probably a set of clients for which the Milan-Ladner form of Backcasting is appropriate and cost effective. Although I have not been a participant in any of their projects, I believe that bottoms up, made-up-on-the-spot engagements provides an excellent brainstorming context, a forum for idea generation, and some good ideas that are actionable.

However, you get what you pay for. Scenario Mapping is more complex, more resource intensive and more time consuming. As noted, Scenario Mapping combines simulated hindsight or  Backcasting with a high prepared meeting. The work that goes into meeting preparation lays a foundation for more informed decision-making, developing a clear set of action priorities, and in many engagements, the association of responsibilities with action items.

Scenario Mapping participants routinely report that strategy setting aside, they leave with a much expanded personal knowledge base and views of their company, industry, markets, technologies, etc. Although time consuming and perhaps complex, this knowledge base becomes a valuable resource that clients typically draw on post meeting. In short, Scenario Mapping challenges and then enhances the mental models of workshop participants.

Here's a brief overview of Scenario Mapping.

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.

 

World Without Borders? PWC CEO Survey

PWC has released is 10th Annual Global CEO Survey [registration may be required]:
Was:
Within borders
Is:
Across borders
Will be:
Without borders?

Being able to anticipate many different scenarios is one of the keys to success on a global scale:

As a consequence of complex technology, multiple regulatory regimes and a trend towards geopolitical tensions, risk is becoming more complex. This requires that executives be extremely attuned to establishing control and risk management mechanisms and that they possess the foresight needed to anticipate many different risk scenarios.

To be successful in this rapidly changing global environment, CEOs thought four characteristics were key:

• Possess vision – Exploiting the potential of ever-expanding markets and harnessing the power of technology and innovation requires vision. Global executives must possess the vision required to redefine their business models. They must also be able to inspire, motivate and empower their people to fulfill that vision.

• Demonstrate agility – The successful global executive will be agile enough to react to rapidly changing business conditions and to collaborate in support of new business models.

• Become global citizens – In the global marketplace, parochial or territorial thinking will not suffice. Global business leaders must embrace diversity, understand and be able to reconcile cultural differences, and contribute in meaningful ways to the communities in which they do business.

• Show courage – Important at any time, courage is even more necessary in an environment defined by uncertainty and increased risk. The courageous business leader boldly embraces new opportunities, responds to new risks and takes on new responsibilities. Such a leader is prepared to make tough decisions to ensure that the needs of sometimes competing stakeholders are fairly and equitably met. 

------------------

Strategy Kinetics, and its network of affiliated consultants, can help CEOs anticipate alternative futures, manage in the face of uncertainty and complexity, reduce risk, and develop and implement strategies that are responsive to rapidly changing conditions. Email us to find out how.

IP Strategies - 4 - Value Checklist

[Nothing in this article is or should be construed as the giving of legal advice and/or the practice of the law.]

So you think you have patents that might be valuable if licensed and/or litigated. Don't rush out to celebrate.

Value is contextual; it depends. Value depends on numerous factors, of which these are just a few:

• Do you have clear, unambiguous ownership of the patents? Was it developed on the job or while at a university? Did someone contribute to the patent who was not named an inventor?
• Are the patents likely to stand up in court or are they likely to be held invalid? A patent attorney can be most helpful here.
• Do the patents cover products or services offered by the patent holder, which is to ask, is the patent holder an operating company that's actually using the patents?
• Do the claims (statements that define the inventions) address systems or methods in use by others?
• Did the inventors, owners participate in any standards setting processes?
• Do the claims pertain to a big industry, segment, product group, etc.?
• Can you show using publicly available information that one or more parties infringes one or more claims? It's difficult for lay persons to make this determination with out the help of a qualified patent attorney, preferably one who has depth knowledge of the industry, technology, etc.

Even if you have the right answers to these and related questions, the value may ultimately--some would say only-- be determined in a court of law.

Be aware that many US patents are not valuable at all, especially software patents. In this regard, see the writings of Greg Aharonian, who provides a lively usefully opinionated newsletter on patent validity and a broad range of other patent-related topics.

IP Strategies - 3 - Licensing & Assertion

[Nothing in this article is or should be construed as the giving of legal advice and/or the practice of the law.]

A broad range of strategies are available to patent owners to realize value from assets that are not strategic to the company or that cover inventions the company declines to bring to market. These include licensing and/or funding litigation, putting the patent portfolio up for auction, litigation through a law firm that is willing to work on a contingent fee basis, and licensing or sale to one of the patent licensing and assertion companies.

Here are a few examples of such firms.

• Acacia. One of the better known and I believe the only publicly traded company among this group is Acacia Research Corp (ACTG) whose business includes acquiring patent portfolios and the licensing the patents to relevant parties. In some cases, Acacia has used litigation as a tool to enforce patents. Consequently, most take them seriously.

• Altitude Capital Partners. ACP is a hedge fund based in New York that specializes in funding patent licensing and related litigation. They currently have at least 15 different portfolios, principally in high tech.

• Intellectual Ventures. Founded by Nathan Myhrvold (former CTO at Microsoft),  Intellectual Ventures creates and/or acquires patent portfolios which are then licensed to third parties.
  

• Rembrandt Fund. Led by Dr. Paul Schneck, the Rembrandt Fund also acquires, licenses, and asserts when necessary patents that have significant commercial value.

IP Strategies - 2 - Triage

[Nothing in this article is or should be construed as the giving of legal advice and/or the practice of the law.]

One of the points made by the Rembrandts book is that companies may own valid patents that are no longer useful to them. For example, maybe the discontinued a product line and have no plans to resurrect anything similar. Maybe some of the engineers created innovations that may not be useful to the company.  Nevertheless, in some circumstances subsets of a larger patent portfolio may have value that owners can realize.

These no-longer-useful patents can be licensed to others who are practicing the inventions. If the potential financial rewards and financial resources are sufficiently attractive, the company can consider litigation, especially when the potential licensee is being recalcitrant.

Alternatively, companies such as Ocean Tomo provide a patent auction service to help patent owners unlock the value of their IP. It's unclear whether this approach provides the best return on patents, especially when a portfolio may apply to large markets and large participants. Nonetheless, Ocean Tomo and similar companies deserve credit for helping to organize and shape a market.

In addition to undertaking litigation to enforce patents, IP owners may turn to patent licensing and assertion firms or to certain law firms who undertake patent litigation on a contingency fee basis. If the case for infringement is strong, if the patents are of the highest quality, and if the parties believed to be infringing have deep enough pockets, the contingency firms may ask for a third of the proceeds if successful. Since there are a multitude of factors, financial arrangements differ from firm to firm and case to case.

I'll address patent licensing and assertion firms in the next installment.

IP Strategies

[Nothing in this article is or should be construed as the giving of legal advice and/or the practice of the law.]

Back in 1999, the book Rembrandts in the Attic was one contributor  to increasing awareness that Intellectual Property considerations should be an important part of most company's business strategies. IP generally refers to patents, trademarks, copyrights, and trade secrets, but Rembrandt authors (and numerous others) focused on patents and patent strategies. In addition to promoting a tool for patent analysis, the authors describe how in certain instances companies can create patents that block their competitors, anticipate future technology developments, and create a stronger foundation for defensibility.

For example, a growing patent portfolio is a valuable resource when competitors show up demanding that the company take a license to the competitors patents and pay royalties. A company approached in this manner can counter-sue, offer to cross-license, and usually avoid payment (and collection) of royalties. For large technology-based companies, cross-licensing is a useful strategy that can be practiced with all but their most serious competitors.

But what about small companies? Inventors? Companies with patents pertaining to products they have abandoned? Good topics for the next installment.

WSJ Tribute To Peter Druker

The WSJ Online has an extensive tribute to the late management consultant Peter Drucker here [Subscription required, I believe]. In addition to articles of praise, the tribute also includes, among several other of Drucker's pieces, the full version of the Five Deadly Business Sins article.

The Education of Andy Grove

Harvard historian Richard Tedlow's lengthy article on Andy Grove in Fortune is not to be missed. It might have also been called Zen and The Art of Corporate Maintenance, or more simply, Zen Strategy Master. The story of Intel and Grove have been told before, of course, but Tedlow's article distills the important lessons. A snippet from the article setup:

Goodby Peter Drucker

Peter Drucker has died at the age of 95.  One of the few management consultants worth listening to, whose thoughts and views were usually far from the current fads. His article on the 5 deadly business sins has been a personal favorite.

His NYTimes obit provides an appreciation and history.

Scenario Planning: An Irish Perspctive

The Derry Journal (Ireland) has a longish article (registration required) that deals with scenario planing and strategic management. Snippets:

Drucker's 5 Deadly Business Sins

I was cleaning my office and sorting papers when I came across a Xerox of the original WSJ version of Peter Drucker's famous The Five Deadly Business Sins article published in 1993. From time to time it's been on my bulletin board, which it is now, as a reminder of the eternal value of his comments. Here are excerpts:

1. The worship of high profit margins and "premium pricing" always creates a market for the competitor.  And high profit margins do not equal maximum profits.


2. Mispricing a new product by charging "what the market will bear." This, too, will create a risk-free opportunity for the competition. It's the wrong policy even if the product has patent protections.

 

3. Cost-driven Pricing. The only thing that works is price-driven costing. The only sound way to price is to start out with what the market is willing to pay--and thus what the competition will charge--and design to that price specification.

 

4. Slaughtering tomorrow's opportunity on the alter of yesterday. It's what derailed IBM. IBM's catching up almost overnight, when Apple brought out the first PC in the mid-1970s. But then when IBM had gained leadership in the new PC market, it subordinated this new and growing business to the old cash cow, the mainframe computer.

 

5. Feeding problems and starving opportunities. All one can get by "problem-solving" is damage containment. Only opportunities produce results and growth. And opportunities are every bit as difficult and demanding as problems are. First, draw up a list of the opportunities facing the business and make sure that each is adequately staffed (and adequately supported). Only then should you draw up a list of the problems and worry about staffing them.
   

Strategy Implementation

A SVP in a large Sillicon Valley company said to me a few years after completion of a scenario-based consulting project, "yours is the only consulting project I've seen that stuck on the wall here," by which he meant, of course, that our work had real and positive consequences for the Company. Why?

Scenario planning and strategy setting is not enough. It's cool, it's fun, everyone feels good at the end. Everyone who is open to doing so learns something. Some of the learning is even important to the Company.

Here are some of the requisites for effective implementation:

• There absolutely positively has to be high level executive sponsorship and commitment. Usually this means the CEO. But this may mean the head of of a functional unit such as IT. Or it may mean the general manager of a business unit.
• The whole management team has to be involved. Don't leave the IT, financial, human resources, and legal people out. They will have to be part of the implementation. The sooner they know what's what the better. And they usually make good contributions to strategy decisions.
• Have a presentation that summarizes the results of the strategy setting project and share that presentation internally as widely as makes good common sense.
• Written narrative documents are expensive to produce and become obsolete quickly. One exception is in IT and similar areas where the result is consensus on the internal IT architecture, including standards, best practices, and currently preferred vendors and products.
• At least monthly, Management Team meetings should have a spot for receiving and assessing War Room feedback on the strategy and key Events.
• Actively look for signs that the strategy is working as planned.
• More importantly, actively seek disconfirming information. Knowledgeable outsiders can be particularly helpful here. Most importantly, don't shoot the messenger.
• In addition to Events, make sure that the strategy has been defined in terms of the key metrics used to run the business. Which numbers are important indicators of success? Order backlog? Call center utilization? Returned merchandise?