3 Benefits of Scenario-Based Innovation

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Innovation is a growth driver for businesses, markets, and the economy. However, even the best-run corporations struggle to sustain market-beating levels of performance for more than 10 to 15 years. In fact, the turnover rate of companies on the S&P has accelerated every decade since 1920. In the 1920s, the average tenure of a company on the S&P was anticipated to be 65 years. By the 1990s, it was down to 10 years.

Therefore, it is essential for companies to get ahead of the curve when it comes to innovation. Here, the main challenge is to anticipate large market shifts and maintain a culture centered on new ideas. Here, many innovation approaches fall short because they focus on the near future.

By contrast, scenario-based innovation takes mega trends and industry-specific trends and translates them into future scenarios. These scenarios define future states – for example, over the next five to eight years – to identify potential long-term ideas. Those ideas are then typically used to create a concrete business model and a tangible action plan.

Diverging from other approaches, scenario-based innovation offers companies three main benefits.

Fosters a High Input Variety

As scenarios depict real-life situations, scenario-based innovation encourages employees to step out of their daily businesses, think outside the box, and share ideas. Putting together employee ideas generated by a diversity of inputs can lead to ideas with significant potential. The energy company Engie is a great example. Engie promotes innovation through Engie communities, where members openly contribute ideas. In doing so, Engie enables its members to become drivers of innovation within the company, furthering its growth.

Triggers Future Thinking

Scenario-based ideation is the key technique to think beyond the short- and mid-term horizon. It triggers businesses to envision the idea’s evolution into the long-term environment. BMW, for example, imagined the scenario of people demanding flexibility and convenience in the mobility sector. To address this potential demand, it developed Share now, a public car-sharing ecosystem that blends into the service economy. Like with BMW, scenario innovation can not only help companies anticipate and solve future problems but also bring to light what is lacking in their overall business strategy: a holistic view of the landscape and what’s to come. 

Leverages Cross-Industry Potential

Scenario-based innovation isn’t just about planning. It’s primarily about learning. Mapping future scenarios allows people to think creatively and learn new things outside of their area of expertise. It encourages them to ideate across industries and broadens their horizons. For instance, the US insurance company Hippo is one of the leading players to leverage smart home technology to prevent claims. Instead of using smart home devices as a gimmick to turn on the light or check the temperature in the freezer, their monitoring technology makes home safer.

In dynamic times characterized by the rapid development of new business models, it is crucial for companies to identify long-term innovation opportunities early to be one step ahead of the competition. Scenario-based innovation enables companies to go beyond typical innovation efforts and actively plan their path to growth.

Mario Bartels is Senior Engagement Manager and Lisa Coenen is an intern at Vivaldi.