I. Factors driving the radio business changed dramatically from 2002 to the present
II. Scenario Option Development Model offers multiple futures that may evolve based on the business drivers that are least predictable and not in the control of radio management
III. Forecasting vs. Scenario Option Development
IV. Why consider multiple futures?
What are Scenarios?
Scenarios are plausible alternative futures, developed to help people imagine what might happen over the course of time to their industry. Here are the steps in developing them.
- Brainstorm the DRIVING FORCES (political/ legislative, economic, social, competitive, technological, environmental) that might have an impact on your business.
- Select those forces that are the MOST POWERFUL and the MOST UNPREDICTABLE.
- State those forces as POLARITIES (i.e., things that can go from one extreme to another, not binary, either/or choices). It is important that these forces be orthogonal, i.e., different enough that they will create a good model when plotted together.
- Plot 2 or 3 of those forces together as AXES to create a 2 or 3 dimensional model. Many end up being 3 dimensional, creating a cube. However only 4 scenarios are developed, each with the three attributes.
- Develop the SCENARIOS.
- Define LEADING INDICATORS to help identify what would be happening as each potential scenario unfolded.
BACKGROUND: THE 1995 SCENARIOS
Jim Hooker has been wrestling with these issues for the radio industry since 1995. In November of that year, Susan Hooker, his wife, who was leading organization development and strategic planning efforts at Motorola, led his leadership team at Pride Communications (which then owned 3 suburban Chicago stations) in the development of the first session,“Radio Scenarios 1995.” That group agreed that these were the most powerful and most unpredictable forces driving the radio industry at that time:
- Would the industry be “MORE REGULATED” or “LESS REGULATED”? (Remember this was 1995, the year BEFORE the “Telecommunications Act of 1996,” which changed ownership rules.
- Would Radio command “MORE SHARE OF MIND” of the listener or “LESS SHARE OF MIND”?
- Would advertisers do “MORE MASS MARKETING” or “MORE ONE-ON-ONE ADVERTISING”? (Direct Mail was gaining traction, and the Internet was beginning, with the impact on advertising as yet unknown, but participants wondered how it could be used.)
Two of the resulting scenarios, were quite positive, but the other two, indicated trouble ahead. It was that work that gave Jim Hooker the insight to believe that the offer he received in 2000 for Pride Communications, which then owned 9 suburban Chicago stations, was one he should accept. Despite the fact that business was great and radio valuations were holding strong, he was concerned enough about the trends he saw in the advertising community and among listeners that he made the difficult decision to sell.
The Current Scenarios
In 2009, Jim Brewer, who was a participant in developing the 1995 scenarios, convinced Hooker to test the waters to see if a larger group of broadcasters would be interested in taking another look at the radio industry to develop scenarios based on the current environment. Groups then met each year from 2009-2012, first to develop and then to track the industry against the new scenarios. The driving forces for the radio industry identified in 2010, and reaffirmed in the following two years were:
- Whether radio would remain locked into “TOWERS” as the primary source of its revenue, or would truly be transformed into a “MULTIMEDIA ENTERPRISE,” described by participants as a “Multimedia App.”
- Whether ADVERTISER CONFIDENCE and EXPENDITURES would grow or decline.
- Whether USERS would VALUE OUR CONTENT AND BE LOYAL or MIGRATE AWAY.
Once again, four divergent scenarios developed, two of which had distinct but mostly positive characteristics, but two of which indicated many difficulties for the industry. The key is how the radio operators adapt and take advantage of a world that is operating on multiple platforms. Both advertisers and consumers increasingly expect all of the flexibility that digital offers in every aspect of their lives. How radio operators leverage the relationships they have had with both listeners and advertisers and provide products and services that meet or exceed their needs and build their loyalty is the challenge of the day.
For more about the scenarios and our past conferences, please see “White Papers.”
Forecasting vs. Scenario Option Development
Forecasting vs. Scenario Option Development Forecasting (developing budgets based on optimistic views of the future with little consideration of your assumptions) disguises uncertainties, results in single point, linear projections that are quantitative by design. It conceals risks and fosters inertia in a direction that reflects the past. SOD focuses on the uncertainties, clarifies risk, and encourages flexibility and responsiveness.
In scenario work we develop multiple possible futures for our business, depending on how the critical uncertainties play out. That’s the thing about an uncertain future. We just don’t know how it will turn out, so we have to prepare for the unknowable. By thinking through what might happen, and what we need to do IF those things to occur, we can be prepared to take action before our competitors. We also identify the early indicators that each of the scenarios is about to unfold, further helping us to be prepared to take necessary action.
Why consider multiple futures?
1. Because there are more than one possibilities for the future. Any effective structured problem solving model challenges you to start by analyzing the components of the issue before jumping to solutions first. It helps you to know you are working on the right issues and gives you greater depth of understanding. With SOD we start by asking ourselves, “What are the most powerful, least predictable drivers of the radio business?” When you put together two or three unpredictable drivers you get multiple and very diverse futures.
2. Not considering multiple futures locks you into one strategy. If the drivers of the business change you might be unprepared for the new future.
3. By considering multiple futures, you can choose one for planning purposes, knowing you have thought about other alternatives and are prepared to shift gears if an alternative scenario evolves.
4. Having used the SOD model for strategic planning, you can track unpredictable drivers over time knowing you can alter your plan based on trends in the drivers.
What follows is a write up of our proceedings from our meetings in Hilton Head in 2009 and 2010. In each case you will see a list of the persons who contributed to the discussions and thoughts about the future of radio. You will also see the agenda for our meeting to take place in March of 2011. Please review the data and contribute your thoughts on our blog. We value divergent thoughts about our discussions and conclusions. This is an on going narrative.