TECHNOLOGY ROADMAPPING IN AN UNCERTAIN ENVIRONMENT

UNCERTAIN ENVIRONMENT

Integrated technology roadmapping and scenario planning design

at Heerema Marine Contractors

University of Groningen

Heerema Marine Contractors

Graduation Thesis

A.J. Klinkers

UNCERTAIN ENVIRONMENT

Integrated technology roadmapping and scenario planning design

at Heerema Marine Contractors

A.J. Klinkers | s2138964 Hennepstraat 5 3572 TR Utrecht +31 (0)6 42987651 allardklinkers@gmail.com February 2013 University of Groningen

Faculty of Economics and Business MSc Business Administration

Specialization Business Development Heerema Marine Contractors

Head Office | Leiden

First supervisor University of Groningen: Dr. J.D. van der Bij Second supervisor University of Groningen: Mw. drs. H.P. van Peet First supervisor Heerema Marine Contractors: Ir. P. Salome

PREFACE

This master thesis is written as final stage of the master Business Administration, specialization Business Development at the University of Groningen. The research was executed during an internship at Heerema Marine Contractors (HMC) in Leiden. The report presents the research executed on an integrated technology roadmap and scenario planning design.

Writing this thesis in a professional setting has been an extremely valuable experience, which I could not have achieved without the support I received. I want to thank all employees of HMC who have invested time and have given me input for this paper. Special thanks to my first supervisor at HMC, Peter Salome. It would not have been possible to conduct this research successfully without all the time and effort he has put in. Furthermore, I owe thanks to my second supervisor at HMC, Catherine Barney. She helped me to stay focused on the process and gave me personal support and advice during the whole project.

Of course I want to thank my supervisor from the University of Groningen, Hans van der Bij. I really enjoyed the meetings in which he gave me advice and support to stay on track. My thesis would not have been what it is now without the knowledge, help and time he invested in my research. I would like to thank drs. H.P. van Peet as well, for contributing as co-assessor.

Last but definitively not least, I want to thank my parents, brother, sister, friends and of course Annelie for their endless support and faith. Without them, writing this thesis would have been a lot harder and less fun.

Allard Klinkers

ABSTRACT

Technology roadmapping has proven to be a successful method for planning of technologies and innovations in a business environment. Although technology roadmapping has proven its success, the method also includes some shortcomings. One of these shortcomings is the inability to deal with uncertainty. This research focuses on the design of a technology roadmap that deals with uncertainty, using scenario planning. The following research question has been derived for this paper:

What steps need to be included in an integrated roadmap design based on the technology roadmapping and scenario planning methods?

To answer this question, a design oriented approach has been executed at Heerema Marine Contractors (HMC). HMC is a marine contractor in the oil and gas industry. The organization thinks a design of a technology roadmap that deals with uncertainty is an important business opportunity for the organization. HMC wants to remain competitive in the markets the organization is currently serving and therefore wants to be able to make informed choices when it comes to technology investments in these continuously changing markets.

Literature combined with qualitative research based on interviews with experts on the subject of technology roadmapping and scenario planning forms the foundation for the design of the integrated approach. Moreover, document analysis, interviews and a focusgroup session in the organization were used to gain insight in the crucial steps for an integrated design in the business environment.

Literature was consulted to gain insight in the crucial characteristics of a technology roadmap. Subsequently, literature on the subject of scenario planning was used to gain knowledge on the crucial process steps for this method that deals with uncertainty. Thereafter, expert interviews were held. These interviews gave insight in the perspective of experts on the integration of both methods.

The next step in the research process was to test the combination of both methods in practice. In order to set boundaries for the test environment, interviews within the organization were conducted. A focusgroup session in a workshop setting was used to develop four plausible scenarios for HMC. Insight in the technical consequences of the four scenarios was gained using interviews in the organization.

This research resulted in an integrated service-technology roadmap with scenario planning design which provides insight in the required capabilities and technology areas per scenario. This four phase integrated method can form as basis for management for future investment decisions.

To obtain a better understanding on the generalizability of the developed method at other organizations and industries further research is required. Furthermore further research may focus on the integration of other types of technology roadmaps with scenario planning.

CONTENT

2.1.1 Technology roadmapping – Definitions & functions 9

2.1.2 Technology roadmapping – Process 11

2.2 Scenario Planning 13

2.2.1 Scenario planning – Definitions 14

2.2.2 Scenario planning – Functions & benefits 16

2.2.3 Scenario planning – Process 17

2.3 Technology Roadmapping & Scenario Planning 19

3. METHODOLOGY 20 3.1 Research Design 20 3.2 Research Environment 21 3.2.1 Organization Analysis 21 3.3 Data Collection 22 3.3.1 Collection methods 23 4. FINDINGS 25

4.1 Scenario Planning Process 25

4.1.1 Preliminary activity scenarios 25

4.1.2 Scenario development 26

4.1.3 Follow-up activity 31

4.1.4 Evaluation scenario planning process 34

4.2 Roadmap Process 36

4.2.1 Preliminary activity technology roadmap 36

4.2.2 Roadmap development 37

4.2.3 Follow-up activity 41

4.2.4 Evaluation technology roadmap process 42

4.3 Conclusion 43

5. DESIGN 44

5.1 The Integrated Model 44

5.1.1 Preliminary activity 45 5.1.2 Development phase 45 5.1.3 Implication phase 46 5.1.4 Follow-up activity 47 5.2 Conclusion 47 6. DISCUSSION 49

6.1 Conclusion & Recommendations 49

6.2 Scientific Contribution 50

6.3 Limitations & Further Research 51

REFERENCES 52

1. INTRODUCTION

In this first chapter a brief description will be given on the research topic. Then, the theoretical value of the research will be outlined. Next the business value of the research topic will be described. The outline of the report will be explained in the last section of this chapter.

1.1 Research Topic

Technology roadmapping has been a widely used tool to plan technologies and innovations in the business environment. The approach is one of the most used methods in supporting strategic management when it comes to technologies (Lee & Park, 2005). Several advantages can be addressed to the use of technology roadmaps. Examples of these advantages are an increase of communication, planning, coordination and partly, technology forecasting (Rinne, 2004). Furthermore, technology roadmapping is critical when the technology investment decision is not straightforward (Garcia & Bray, 1997).

Although technology roadmapping has proven its success, the method also includes some shortcomings. An important shortcoming is the focus on a predetermined set of needs. In some industries this would not be a problem because change is very unlikely or would have only minor influence. However there are several industries where change would have a huge impact on the development and investment decisions. Complementing the technology roadmap approach with a method that deals with future change would be very useful.

An approach that deals with future change is scenario planning (Schoemaker, 1993; Ogilvy & Schwartz, 1998; Strauss & Radnor, 2004). Scenario planning has been used by over 50% of the Fortune 500 companies (Hill & Jones, 2010). The scenario planning concept creates insight in important future uncertainties an organization can face. The combination of both methods has been suggested by some authors (Garcia & Bray, 1997; Strauss & Radnor, 2004), though a complete integration of both methods is still missing.

Research Technology roadmapping process Scenario planning process Integrated technology roadmapping and scenario planning process

The focus of this research will therefore be on the integration of technology roadmapping and scenario planning into one integrated method. The developed tool should give insight into the required technological capabilities that are needed to remain competitive in different plausible future scenarios.

In order to meet the aim of this research the following research question is defined:

What steps need to be included in an integrated roadmap design based on the technology roadmapping and scenario planning methods?

The answer to this question will be explored using a design-oriented research approach in the business environment. The theoretical value and business value will be further explained below.

1.2 Theoretical Value

Technology roadmapping and scenario planning have both proven their value although complete integration of both methods proven by a case study is still lacking. Some authors tried to combine both methods, for example Strauss & Radnor (2004). In their paper, they list the limitations of both individual methods and have come up with an integrated approach. But their integrated model includes very important limitations. Strauss & Radnor show sequential steps for the integration of both methods; however a case study where the integrated model is tried out is missing. Furthermore, the authors state in their paper that in actual practice micro-scenarios are used instead of the macro-level scenario planning, which is used in their research. Garcia & Bray (1997) also suggest using scenario planning in case it is hard to define needs. However, in both cases the focus is on traditional product roadmapping.

This research will focus on the integration of technology roadmapping and scenario planning, into an integrated model. By using a design-oriented approach, practical implications of the integration are tried out and evaluated. Because most examples of technology roadmaps in literature focus on product development, this report will focus on the service/capability planning (Phaal, Farrukh & Probert, 2004). It is important to note that when the term technology roadmap or roadmap is used, a corporate technology roadmap is meant.

The academic contribution of this research will be in terms of designing and testing an integrated technology roadmapping and scenario planning process using a design-oriented research approach.

1.3 Business Value

Technology roadmapping is a structured approach to come to innovations and to get insight in the evolution of markets, technologies and products (Phaal, Farrukh & Probert, 2004). Technology roadmapping is one of the most used methods for supporting strategic management with technology (Lee & Park, 2005).

In business an often heard phrase is that the only certainty is uncertainty (Keough & Shanahan, 2008). Awareness and preparation for change is the only thing that can make an organization ready for this continuously returning event, which is a big issue, especially in uncertain markets. One

method to deal with uncertainty and change is scenario planning. Today, markets are characterized by probably the highest uncertainty ever. Scenario planning is therefore a method that can be of great value for organizations to prepare themselves for uncertain times (Chermack, Lynham & Ruona, 2001).

Both planning methods, technology roadmapping and scenario planning, are often mentioned in literature as methods that can increase the success and stability of an organization’s. If the focus of technology roadmapping is broadened with several scenarios a better preparation for an uncertain future can be created. Furthermore, the integration of both methods would deliver a tool that can be used to support strategic management better than using both tools separately would do. Management through the whole organization gets insight in uncertainties the organization faces and can make decision more thoroughly without leaving important uncertainties out of scope (Daim & Oliver, 2008).

Heerema Marine Contractors

The organization that will be used as case example is Heerema Marine Contractors (HMC). HMC brings over half a century of specialized skills to the offshore oil and gas industry. Oil and gas companies call on HMC to enable full offshore field development in the toughest of environments in all of the world’s seas. HMC builds long-term client relationships by solving seemingly impossible challenges and by delivering on their promises. Innovation and ingenuity are key to their success. HMC transports, installs and removes all types of offshore facilities. These include fixed and floating structures, subsea pipelines and infrastructures in shallow waters, deep and ultra-deep waters.

HMC thinks a technology roadmap process is an important business opportunity for the organization. HMC wants to remain competitive in the markets the organization is currently serving and therefore wants to be able to make informed choices when it comes to technology investments in continuously changing markets.

A more thorough background on HMC can be found in the methodology part of this report.

1.4 Research Outline

The focus of this research will be on the integration of technology roadmapping and scenario planning into one roadmap. The following steps will be undertaken in every chapter to come to such an integrated model. In chapter 2 the theoretical framework will be discussed to get more insight into the concepts that are used in this research. Chapter 3 includes the methodology part which will explain the outline of the research and some background information on HMC. The findings of the research will be discussed in chapter 4. The design of the integrated roadmap will be shown in chapter 5. In chapter 6 the discussion is shown, which includes the limitations of the research and recommendations for further research.

2. THEORETICAL FRAMEWORK

The theoretical framework serves as starting point for the design. First, technology roadmapping literature is discussed to get further insight on this subject. Subsequently, scenario planning literature is explored. In this part a textbox is included which shows a concise view on the importance of core competences. Lastly the connection is made between technology roadmapping and scenario planning.

Scientific journals used to design the theoretical framework were found using the databases Business Source Premier and Econlit. Journals and books from different academic and professional fields were consulted to get a better understanding on the subjects. Literature on strategic management; change and planning methods and technology and innovation management have been extremely valuable for this thesis.

2.1 Technology Roadmapping

Technology roadmapping has been used in business for more than three decades now. The method was first introduced in the late 1970s by Motorola (Willyard & McClees, 1987; Kostoff & Schaller, 2001; Fisher, 2004). Technology roadmapping is a tool for the coordination and planning of technology in a business or entire industry. A broadened view on the several definitions and functions of technology roadmapping will be given in this part of the thesis.

2.1.1 Technology roadmapping – Definitions & functions

Technology roadmap is an often used and discussed method in businesses and literature, which is proven by the great amount of search results in Google (9.970.000 hits). Literature shows a great amount of definitions and functions of technology roadmapping (table 2.1).

Definitions

In general the definitions found in are literature quite similar. Most authors define technology roadmapping as a plan that helps managing the future of technology (Bray & Garcia, 1997; Albright & Kappel, 2003; Rinne, 2003; Phaal, Farrukh & Probert, 2004). Willyard & McClees (1987) add to this definition that a roadmap is composed from the collective knowledge (of the team) and imagination of the brightest drivers of change in that certain field. This definition is a citation of the founder of the roadmap tool, Robert Galvin. Galvin means with this definition that insight is generated in crucial drivers for the chosen product or market. Phaal, Farrukh & Probert (2004) state in their definition that the tool is important for exploring and communicating dynamic linkages between technologies, organization objectives and the environment.

In this research the definition of Phaal, Farrukh & Probert (2004) will be used: “Roadmaps are a powerful technique for supporting technology management and planning, especially for exploring and communicating the dynamic linkages between technological resources, organization objectives and the changing environment.” HMC is interested in technology roadmapping as a tool for the planning of technologies, but also for communication through the organization. This shows great linkage with the definition given by Phaal, Farrukh & Probert. Furthermore, the environment is an important aspect for HMC and this is also taken into account in this definition.

Author

Willyard and McClees (1987)

Groenveld (1997)

Bray and Garcia (1997)

Kostoff and Schaller (2001)

Albright and Kappel (2003)

Rinne (2003)

Phaal, Farrukh and Probert (2004)

Definition

“Roadmapping is an extended look at the future of a chosen field of inquiry composed from the collective knowledge and imagination of the brightest drivers of change in that certain field.”

“Roadmapping is a process that contributes to the integration of business and technology and to the definition of technology strategy by displaying the interaction between products and technologies over time.”, taking into account both short- and long-term product and technology aspects.”

“Roadmapping is a needs driven technology planning process, which helps by identifying, selecting and developing technology alternatives to meet the product needs.”

“Roadmaps are a layout of paths or routes that exists in some particular geographical space.”

“Roadmapping is a plan to define the evolution of the product features and costs to the technologies needed to achieve the strategic objective. Besides, roadmaps are the base for corporate technology planning across the corporation.”

“Roadmapping is a tool for managing the future of technology.”

“Roadmaps are a powerful technique for supporting technology management and planning, especially for exploring and communicating the dynamic linkages between technological resources, organization objectives and the changing environment.”

Function

“A roadmap helps forecast how an emerging technology will be developed and commercialized and how it will impact the competitive position of the subject entity over time.”

“Roadmapping stimulates organizational learning through the encouragement of openness and ways of doing things better. It also supports people at all levels in achieving milestones and becoming committed to their role in the overall process.”

“A roadmap provides information to help make better technology investment decisions. It does this by identifying critical technologies or technology gaps that must be filled to meet product performance targets.”

“A roadmap serves as a traveler’s tool that provides essential understanding, proximity, direction, and some degree of certainty in travel planning. Besides, roadmaps can assist in filtering less promising technologies from the promising ones, which supports management in the right decision”

“Roadmaps are used to define the plan for the evolution of a product, linking business strategy to the evolution of the product features and costs to the technologies needed to achieve the strategic objective.”

“Roadmaps provide a time-directed representation of relationships between technologies and products. Smaller roadmaps serve to coordinate the efforts of departments within an organization and to align their efforts with other departments of the firm.”

“Roadmaps provides a structured (and often graphical) means for exploring and communicating the relationships between evolving and developing markets, products and technologies over time.”

Functions

Functions described by the various authors do not really differ (table 2.1). According to the cited authors, the function of a technology roadmap is a method that shows the development of technologies, products and markets over time. This will also be the function used in this research. The advantage the roadmap has for HMC is to get insight in the required capabilities. Furthermore HMC wants to know when these capabilities are needed. The most important factor for HMC is to gain insight in the development of her chosen markets over time to create a better response to potential change of needs and requirements in those markets.

2.1.2 Technology roadmapping – Process

There are several approaches shown in the literature to create a technology roadmap (Groenveld, 1997; Phaal, Farrukh & Probert, 2004; Strauss, Radnor & Peterson, 1998). The models shown in literature have only minor differences. The process that will be described in this research is that of Garcia & Bray (1997). This process (table 2.2) consists of three phases. Every phase includes a couple of crucial steps that need to be undertaken before one can move to the next phase. Garcia & Bray’s roadmap process is chosen because this approach gives a good opportunity for integration with the method of scenario planning. Furthermore, the approach by Garcia & Bray shows extensive phases which improve the quality of the roadmap. The phases of Garcia & Bray’s roadmap process are further explained below.

Phase I: Preliminary activity

There are a couple of factors which are crucial before the start of the development of the roadmap. These factors are included in the preliminary activity of the roadmap. The first step is to satisfy essential conditions. There should be a perceived need for the roadmap and there is participation

Phase Steps

I. Preliminary activity

1. Satisfy essential conditions 2. Provide leadership/sponsorship

3. Define the scope and boundaries for the technology roadmap II. Development of the technology roadmap

1. Identify the “product” that will be the focus of the roadmap 2. Identify the critical system requirements and their targets 3. Specify the major technology areas

4. Specify the technology drivers and their targets 5. Identify technology alternatives and their time lines

6. Recommend the technology alternatives that should be pursued 7. Create the technology roadmap report

III. Follow-up activity

1. Critique and validate the roadmap 2. Develop an implementation plan 3. Review and update

required from various parts of the organization (Garcia & Bray, 1997). In this first step it is also important to involve people from different departments of the organization in the process.

Furthermore, the leadership of the roadmap is important. Commitment from people involved in the developing process will increase the chance on success of the roadmap (Garcia & Bray, 1997). The third and last step of the preliminary activity is to define the scope and boundaries. The scope should make clear what the set of needs are and the intended use of the roadmap. According to Albright & Kappel (2003) it is important to carefully choose the time and place of initiation in this third step. Literature shows numerous examples where roadmapping has failed due to starting in the wrong place or without a scope. These examples show that even experienced companies in roadmapping try to initiate the roadmap everywhere at once, instead of choosing a demarcated scope. This third step also includes the time horizon of the roadmap. Because the roadmap in this research will be integrated with scenario planning the time horizon should be matched with the scenario development.

Phase II: Development of the technology roadmap

The first step in the development phase includes the identification of the ‘subject’ of the roadmap. In case the needs are common participants need to identify those needs and agree if those identified needs are the right set of needs. Garcia & Bray (1997) propose the possibility of using scenarios as starting point in this stage. The authors state that when there is a lot uncertainty about the future, scenario planning can act as tool to identify the common needs that are applied across the scenarios. According to Strauss & Radnor (2004) scenario planning is a good way to enhance the flexibility and vision of roadmapping. The advantage scenario planning brings to roadmapping is the fact that some sort of strategy is integrated in the planning process. However, when scenario planning is integrated in the roadmap process, as is proposed in this research, all the steps of the roadmap need to be checked and might need revision.

The second step is to identify the critical system requirements and their targets. In other words, the parameters that should be included in the roadmap have to be identified to make sure that the needs of the first step will be met. The system requirements can differ in different scenarios, which is an important advantage, because a broader vision is developed. For HMC the critical system requirements are important to gain knowledge which capabilities are required.

The third step is to specify the major technology areas that can help to achieve the critical system requirements. Examples for a product based roadmap are materials, sensors, modeling and simulation. Because major technology areas can differ across scenarios it is important to look for general technology areas and scenario specific areas. This makes it easier to focus on the right technology development in the scenario that will be the most likely to occur.

In step four, the technology drivers and targets will be generated for the specific technology areas (Garcia & Bray, 1997). These drivers are critical variables that will determine which technology alternatives are selected. Furthermore, Garcia & Bray (1997) state that these technology drivers and targets specify how well a viable technology alternative must be able to perform by a certain date in the timespan.

Identify technology alternatives and their time lines is the fifth step in the development of the roadmap. Garcia & Bray (1997) state that a difficult target may require breakthroughs in several technologies or a technology may be related to several targets. When using scenarios, technology

alternatives could be found in different plausible scenarios. This is an important step to take into account when integrating roadmapping and scenario planning.

The sixth step is to recommend the technology alternatives that should be pursued. In this step the subset of technology alternatives are selected. These alternatives vary in terms of cost, schedule or performance, according to Garcia & Bray (1997). There are some analytical and modeling tools on the market to help determine which alternative to pursue and when to shift from technology. However, in a lot of cases these decisions are determined by the judgment of experts. In the end determining what technological area will be the focus is the responsibility of strategic management. The last step in the development phase is to create the actual technology roadmap report. The actual development of the roadmap is finished and should be included in the report. Furthermore, the report should include: identification and description of each technology area and its status, critical factors which are crucial for the success of the roadmap, areas not addressed in the roadmap and technical recommendations and guidelines for implementation of these recommendations (Garcia & Bray, 1997).

Phase III: Follow-up activity

The third phase includes the follow-up activity. The follow-up activity consists of three steps. The first step is to critique and validate the technology roadmap. This means the roadmap is exposed to a larger group than the development group. In this step the validation of the roadmap will be ensured. Reason for this is to ensure that the roadmap is approved and that people who were not involved in the development process understand the roadmap. Besides, to make sure the roadmap is successfully implemented in the organization a broad group that supports the roadmap is important (Garcia & Bray, 1997).

Next step is to develop an implementation plan of the roadmap. Enough information should be available to make a better technology selection and an investment decision according to Garcia & Bray (1997). The implementation plan may consist of one or more project plans, based on the selected technology alternatives.

The third and last step of the follow-up activity is review and update. The roadmaps and plans should be routinely reviewed and updated (Garcia & Bray, 1997). A formal iterative process occurs by doing this. Over time some scenarios could be refined or even eliminated, this is all part of the review and update process. The explanation in this step shows the importance of continuously reviewing and updating the roadmap.

2.2 Scenario Planning

After reviewing technology roadmapping and its process steps it is important to gain insight on the scenario planning method. Scenario planning is a tool which can be used to deal with future changes. In the last few years the method has received increased attention in practitioner and academic journals, according to Bradfield et al. (2005). The same authors state that the method is overlapping with terms like scenario thinking, scenario analysis and scenario learning. Thinking in scenarios helps to understand the logic of developments, clarify driving forces, key factors, key players and the potential of the organization to create influence (Lindgren & Bandhold, 2003). In this part scenario planning will be explained and further explored.

2.2.1 Scenario planning – Definitions

The definitions shown in literature of scenario planning show minor differences (table 2.3). The term was first introduced by Herman Kahn, member of a group which was working on the concept. Kahn is seen as the initiator of the method in the late 1950s at a military-strategic think tank (Schnaars, 1987). According to Chermack, Lynham & Ruona (2001) scenario planning is a method of telling multiple stories that cover a variety of plausible future events.

Scenario planning forces organizational leaders to review their current thinking, and by doing this prepare them for future uncertainties. Scenario planning has proven to be effective in identifying the uncertainties that future brings and showing the blind spots in an organization (Kahane, 1999). TABLE 2.3 - DEFINITIONS OF SCENARIO PLANNING

FIGURE 2.1 - FORECAST TECHNIQUE VERSUS SCENARIO PLANNING (CORNELIUS, VAN DER PUTTE AND ROMANI, 2005)

Author Definition

Porter (1985) “Scenario planning is an internally consistent view of what the future might turn out to be” Schwartz (1991) “Scenario planning is a tool for ordering one’s perceptions about alternative future

environments in which one’s decisions might be played out”

Schoemaker (1995) “Scenario planning is a methodology for imagining possible futures in which organizational decisions may be played out”

Ringland (1998) “Scenario planning is that part of strategic planning which relates to the tools and technologies for managing the uncertainties of the future.”

O’Brien (2004) “A scenario is a story about how the future might turn out.”

Current Realities (mental maps) The Present The Path Multiple Paths The Future Alternative Future Images Forecasts Scenarios

These descriptions show that scenario planning creates a mindset in the organization about dealing with possible futures, which is shown in figure 2.1.

In this thesis the definition of Schoemaker (1995) is used. Schoemaker’s definition is chosen because it best covers the broad scope of scenario planning shown in literature. The definition covers the development part as well as implementation part. Furthermore this definition best matches with the purpose of scenario planning at HMC. There are several purposes scenario planning offers (figure 2.2). The aim of scenario planning at HMC is to get insight in which possible future environment decisions might be played out. In terms of Lindgren & Bandhold (2003) the purpose is strategy/planning, which might eventually lead to innovations.

Scenario planning Scenario learning Strategy/ planning Evaluation Innovation Purpose: Action Focus: Old business Focus: New business Purpose: Prerequisite for change Business development/ Concept development New thinking/ Paradigm shift Risk-consciousness/ Need for renewal Strategy development/ Organizational development

FIGURE 2.3 - WIND TUNNEL EFFECT (VAN DER HEIJDEN, 1997)

2.2.2 Scenario planning – Functions & benefits

To find out whether or not scenario planning is a good tool to combine with technology roadmapping, it is important to discover its functions and the benefits that come with those functions. According to Bood & Postma (1997) there are six main functions of scenario planning, which have grown out of practice and have been further developed by managers and consultants. The functions Bood & Postma (1997) have listed are: evaluation and selection of strategies; integration of various kinds of future-oriented data; exploration of the future and identification of future possibilities; making managers aware of environmental uncertainties; stretching of managers’ mental models and lastly, triggering and accelerating processes of organizational learning.

Other authors (Schwartz, 1991; Cornelius, van der Putte & Romani, 2005; Schoemaker & van der Heijden, 1992) show a selection of these six main functions of scenario planning. It is crucial to get more insight in the six functions that are given by Bood & Postma, because these functions are concrete and often visible. Furthermore these functions will create a better understanding why scenario planning would be a good method to integrate with technology roadmapping.

The first function is evaluation and selection of strategies. Because scenario planning is a method which does not forecast a single future but shows varying futures, different strategies can be tried out and evaluated beforehand. Using scenario planning the right way gives management the opportunity to test their organization in several plausible futures and evaluate strategies before they actually have been chosen. This first function, according to van den Bosch (2010), has a close relation with Schwartz’s (1996) definition of ‘rehearsing the future’.

Integration of various kinds of future-oriented data is the second function. The second function of scenario planning is the ability to integrate different data that can be used as input for the scenario development. Scenario planning is better in integrating quantitative data, as well as qualitative input than any other future-oriented tool, according to Bood & Postma (1997).

The third function is exploration of the future and identification of future possibilities. The third function is related to the wind tunnel effect of van der Heijden (figure 2.3). The wind tunnel effect means that through scenarios planning strategies can be tried out in various business environments in which the strategy has to perform. Figure 2.3 shows a platform that is built, tested and revised to ensure the quality. Bood & Postma (1997) describe the wind tunnel effect as a method to explore the future and identify what might possibly happen and how an organization can act or react upon future developments.

The fourth function is creating awareness of environmental uncertainties for managers. Management is confronted with different future states, and thus aware

of the fact that there are multiple plausible futures. If management is aware of this reasoning, they will be better able to deal with these uncertainties and overcome possible negative consequences. Stretching managers’ mental models is the fifth function. Mental models are personal descriptions of situations formulated in abstract terms as opposed to concrete descriptions of specific situations (Bood & Postma, 1997). According to de Geus (1997) stretching peoples’ mental model will lead to an actual new language that is created amongst the people involved. Bood & Postma (1997) add to this that mental models are stretched by confronting managers with their own biased viewpoints. The sixth function is triggering and accelerating processes of organizational learning. This sixth function is closely related to the former one. Scenarios can, by showing different representations of the world, trigger organizational learning (Bood & Postma, 1997). This means that scenarios will create a better understanding not only on the individual level, but through all levels in the organization. Furthermore, because scenarios need involvement of people from several levels organizational learning will be accelerated.

It is important to mention that the first three extracted functions are the result of the actual product of scenario planning: the scenarios. The last three functions are result of the route towards the scenarios: the process. It is important to further elaborate on the process of scenario planning to see what steps need to be undertaken. Therefore the scenario planning process is further explained below.

2.2.3 Scenario planning – Process

As shown in the previous part, the process of scenario planning is important for several functions. When integrating the process into the roadmap process, crucial elements of both methods have to be included. It is therefore important to choose a good process. Literature shows various models that can be used to implement scenario planning in the organization (e.g. Godet & Roubelat, 1996; Schoemaker, 1993; Schwartz, 1996; Avin, 2004, Bood & Postma, 1997). Although various models are shown in literature, they have all the same structure in broad outline (Bood & Postma, 1997). An often used scenario building model is that of Schwartz (1996). This 8-step model is shown in figure 2.4. The functions which Bood & Postma (1997) describe are also based on the process by Schwartz (1996).

The first step in Schwartz’s model is to identify the focal issue or decision, on which the scenario needs to be developed. In this step the reason for the planning process should be made clear. Further, this step includes the identification of the managers likely to be involved and the time

Step Item

1. Identify focal issue

2. Identify key factors in the local environment which influence the decision 3. Identify driving forces that influence key factors in local environment 4. Rank by importance and uncertainty

5. Select scenario logics 6. Flesh out scenarios 7. Consider implications

8. Selection of leading indicators and signposts

horizon of the study (Bood & Postma, 1997). The next step is to discuss the key factors in the local environment that influence the decision (step one). These factors are unique for the organization and influence the success or failure of the issue or decision. The third step in Schwartz’s model is to identify the driving forces that influence the key factors in step two. Identifying the driving forces is a crucial step in the process because the uncertainties determine the differences between the scenarios while the predetermined factors are the same in all scenarios, according to Bood & Postma (1997). The fourth step is to rank the different factors stated in the previous step. In this step all scenarios will be ranked based on their degree of uncertainty and importance, using a certainty matrix. The logics of scenarios are selected in the fifth step. In this step it is, according to Schwartz (1996), a matter of regrouping the different factors until a story becomes visible. In the sixth step the scenarios are fleshed out. Each scenario will have a different story and outcome which will be described in this sixth step.

Next the implications will be considered. These implications are very important for the integration with roadmapping. Because of this integration with roadmapping it is crucial to gain insight in the technical implications of the scenarios. In the case of HMC implications will focus on the core competences of the organization. The textbox below further elaborates on the meaning of core competences for the organization.

Core competences – ‘The critical capabilities’

Cooper (2011) underlines the importance of exploiting the existing capabilities to reduce the risk of failure. Core competences are the most important strengths an organization has (Prahalad and Hamel, 1990). The core competences of an organization according to Irvin and Michaels (1989) are ‘the critical capabilities that an organization as a whole has’ – as distinct from the capabilities of individuals in the organization. These competences, according to both, are the bridges that link strategy and implementation. Irvin and Michaels give three reasons why it is crucial for an organization to understand its core skills. The first is that structural barriers which used to protect industries collapse. The second reason is that companies in the same market seem to imitate strategies and thirdly, competitive advantage is moving from capital to ‘human capital’. By using the core competences with these three factors in mind an organization can create a better fundament for organizational success.

Technological capabilities

The most important core competences rely on technological capabilities, because these capabilities are able to cross market boundaries (Gallon, Stillman and Coates, 1995). The same writers state that a core technical competence needs to be carefully looked for through the organization and it needs to pass the core competence qualification criteria. Tampoe (1994) adds in his article that the true core competence of an organization lies in its technical subsystem. The technical subsystem comprises both the creative and implementation capability of the organization, according to Tampoe (1994).

Qualification criteria

There are several lists of qualification criteria shown in literature when it comes to core competences of an organization. Because this study will focus on the core competences of HMC, which lie obviously in the technical grounds, the criteria of Gallon, Stillman and Coates (1995) are used and listed below.

Number Criterion

1. Does it harmonize streams of critical technological capabilities to competitive advantage? 2. Does it translate into customer-perceived value?

3. Is it difficult to imitate (are there substantial barriers to competitors)? 4. Is it extendable to new markets (does it provide market mobility)? QUALIFICATION CRITERIA TECHNICAL CORE COMPETENCES (GALLON, STILLMAN AND COATES (1995)

When looking at the implications for the organization it is important to realize that the focus of the integration will be on core competences because this best suits HMC’s requirements. However, focus on these core competences is also useful for other technical organizations because it strives to look at the required capabilities for coming to innovations and new technologies. This counts for service-based as well as for product-based organizations. When considering the implications, the best option according to Schwartz is to choose those factors that are ‘best choice’ in as many scenarios as possible. In step eight, the final step, leading indicators and signposts are selected. The function of these indicators and signposts is to recognize developments and movements towards one specific scenario. This step is very important for the organization to react on an uncertain future and make decisions before competition does.

2.3 State of Technology Roadmapping & Scenario Planning

This paragraph will underline the importance of integrating technology roadmapping and scenario planning based on the literature discussed in this chapter.

Most roadmaps in literature are product-based roadmaps where specific product specifications are outlined over a certain period of time. However, in this thesis a service-technology roadmap is part of discussion instead of a product roadmap. Instead of focusing on specific ‘product’ requirements focus will be on required capabilities to fulfill needs.

Garcia & Bray (1997) are the first that propose the use of scenario planning for creating insight he required needs when developing a roadmap. This view is supported by Strauss & Radnor (2004), who state that roadmapping is mostly viewed as a stand-alone deliverable which focuses on a specific perceived need. Scenario planning could be of great value when the needs in an industry are very likely to change over time and it is uncertain in what direction these needs will change (Strauss and Radnor, 2004).

In this design study crucial steps will be discovered when combining scenario planning with technology roadmapping. The steps undertaken in this thesis are compared to the steps shown in literature and will result in an integration of technology roadmapping with scenario planning.

3. METHODOLOGY

In the methodology section of this report the research procedure will be discussed. Furthermore the organization where the research is conducted is discussed. Lastly, the methods for data collection are shown.

3.1 Research Design

The research approach that will be used in this report is the design oriented approach. The research aims to develop an integrated model, which will be of value for future use, by designing an integrated technology roadmap and scenario planning method in practice. Figure 3.1 shows the research process that is undertaken in this report. Because it is a design oriented research, this research process is a three step approach. When a desired object or system is required a design oriented approach is the right approach to undertake (van Aken, Berends & van der Bij, 2007). Because HMC’s need for this research is a useful technology roadmap process for the organization, the design oriented approach is chosen.

Academic interest + Identifying business opportunity

The first step in the research process is to identify the academic interest of the research and the business opportunity. The academic interest of this research will be discovered using literature on the stream of technology roadmapping and scenario planning. Furthermore the business opportunity will be discovered. The business opportunity will be discovered by conducting several interviews with people across the organization. Furthermore expert interviews will be conducted to gain insight in the view of experts on the business opportunity.

Design

The design will be developed through interviews with experts and research that is conducted at HMC. Scenarios will be developed in a focusgroup setting. This focusgroup will be involved in a workshop for scenario development. Based on the developed scenarios technical implications are considered, which should result in plausible futures with technical implications. These technical implications are generated by interviews with people within the organization. The considered technical implications should give insight in the required capabilities per scenario. These required capabilities per scenario will be the specific outcome of the scenarios.

FIGURE 3.1 - RESEARCH PROCESS

Design Academic + Business reflection Identifying academic interest + Business opportunity

Academic + Business reflection

After the design has been developed the last step will be executed. This last step includes an academic reflection and business reflection. In this step the discussion will be outlined which includes the conclusion, the scientific contribution of this report and some limitations on the research.

3.2 Research Environment

A short explanation has been given on the research environment in the introduction. In this part some more specific elaboration on the research environment will be given. As explained before, the research will be executed at Heerema Marine Contracts (HMC). The specific focus of the roadmap development will be on the removal market of HMC. The removal market of HMC has been chosen as an ideal case for developing method which combines technology roadmapping and scenario planning because the industry HMC finds itself in is often characterized as highly uncertain (Schoemaker, 1995). Furthermore, innovation in terms of discovering and using new technologies is of great importance to the organization.

3.2.1 Organization Analysis

HMC is a world-leading marine contractor in the international offshore O&G industry. HMC’s competitive advantage relies on the reputation to get the job done, by solving seemingly impossible challenges and by delivering their promises. Innovation and ingenuity are key to their success (HMC, 2012).

HMC serves four different markets: deepwater, heavy lift, float-over and decommissioning and removal. The focus of this research will be on the decommissioning and removal market, abbreviated to the removal market.

Removal market

HMC offers turnkey platform decommissioning and removal services. Reverse installation has been the method for executing all the platform decommissioning & removal projects.

Typical activities that are included in removal projects are:

 Lifting: Topsides, jackets and structures.

 Cutting: Pile cutting, soil plug removal and conductor removal.

 Cleaning: Gas freeing and cleaning.

 Transportation: Topside, jacket and structure transportation and offloading. The removal market of HMC has been chosen as case study because of several reasons:

 Complete decommissioning and removal is a relatively new type of work for HMC;

 The huge amount of potential work in this segment;

 Different methods are used for removing;

 The high degree of uncertainty in the expansion of the market;

 The internal know-how on the topic is available.

Complete ‘decommissioning and removal’ relatively new type of work

HMC has been removing platforms since the 1980s. However, in the early years HMC’s responsibility consisted mostly of removal based on the reversed installation technique and transportation. The responsibility for the decommissioning and removal of a whole oil field is something that only has been done since a couple of years. The complete responsibility of those projects requires different capabilities.

Huge amount of potential work

The removal segment offers a great amount of potential work. There are already over 600 platforms over 19 years old in the North Sea alone (Decom North Sea, 2012). In the Gulf of Mexico there are somewhere between the 4.000 and 5.000 platforms over 19 years old (Furlow, 2002). The removal market is therefore a very attractive market to become a key player in.

Different methods are used for removing

In the removal market different methods are being used to complete the task. These different methods require different capabilities and techniques which makes it an interesting market to use as case study. The methods differ in terms of lifting, cutting and transporting. Conventional methods remain the best option for deepwater platforms at this stage although it is very likely that this will change in the near future (Furlow, 2002).

High degree of uncertainty in terms of market expansion

There is a lot of potential work for HMC in the removal market. However, it is very uncertain when this huge amount of platforms will be removed. The designed life time of oil and gas platforms is twenty years, which is often extended through maintenance and upgrades. As mentioned before, there are 4.000 platforms older than 19 years in the Gulf of Mexico. Still the expected amount of work has not been started yet.

Internal know-how on the topic

The removal market will be used as case study in this research. Therefore it is useful that there is internal know-how on the market which increases the chance of developing plausible scenarios. When know-how internally is lacking on the subject discovering problems would be harder.

3.3 Data Collection

Before answering the research question data needs to be gathered. Insight on the business requirements for the roadmap is gained by conducting nine in depth interviews with managers across the organization. Interviewing managers from different departments will give a complete view on the roadmap requirements. Information gathered through the interviews will be complemented using documentation in the organization, which is available on intranet.

After the internal interviews some expert input on the topic is required. Therefore three in depth interviews will be held with experts from outside the organization. Two of the three experts have a lot of experience in combining technology roadmapping and scenario planning in practice. One of the experts has written several articles on the scenario planning subject.

More input is required to actually develop the integrated model. The first step of the development will consist of a focusgroup. In this focusgroup the involvement of eight people from different departments of the organization is required.

Four more interviews will be held to complete the design. These interviews should complete the technical aspects of the model. All the interview lists can be found in the appendices.

3.3.1 Collection methods

The data collection methods that will be used in this thesis are qualitative methods. According to van Aken, Berends & van der Bij (2007) qualitative methods are those that are oriented at the discovery of qualities of things. The data sources are outlined in table 3.1. The methods that will be used in this research are further explained below.

TABLE 3.1 - DATA SOURCES

Subject Function/Type of information Data method

Business requirements Chief Financial Officer Internal expert interviews Manager Innovation Department I (Semi-structured interviews) Manager innovation Department II

Manager Business Planning & Development Manager Technology

Manager Tender & Contract Senior Project Engineer Asset Manager

Engineering Manager EPIC

Concept requirements US DOE – Management Analyst External expert interviews

FairSights – Director (Open interviews)

Postma and Associates – Director

Case core competences Senior Specialist Engineer Internal interviews

Senior Vice President (Semi-structured interviews)

Case specific information Organizational information Document analysis Segment information

Conference papers Conference presentations

Scenario development Manager Business Planning & Development Focus group

workshop Manager Innovation Department

Manager Technology

Product Development Manager Senior Business Development Analyst Senior Specialist Engineer

Senior Engineer Engineer

Technological implications Asset Manager Internal interviews

scenarios Engineering Manager (Semi-structured interviews)

Technology Advisor Project Director

In depth interviews

In this research in depth interviews are used as one of the research tools. The interviews conducted in this research are semi-structured with open questions (appendices). Semi-structured interviews help to gain a better understanding of relations because the interviewer gets the opportunity to discover reasons behind given answers (van Aken, Berends & van der Bij, 2007).

The interviews are structured by main topics and underlying sub-topics. These topics are the same for the group of interviewees. Some minor changes on sub-topics can be done to get a better understanding on the issue.

Document analysis

Data gathering through document analysis is used to get a better understanding of current processes in the organization. Document analysis in this study is most useful in the first stage of the research because this first stage includes the orientation on processes used in the organization. Some examples of the documentation that will be used are quarterly reports and intranet for procedures and mission statements and objective information about projects. According to van Aken, Berends & van der Bij (2007) documentation can be a very useful source because it gives a reliable view of the organization whereas organization members ventilate their opinions. Yin (2003) defines document analysis as exact information. With exact information is meant information that contains exact names, references and details of events and procedures.

Focusgroup

The focusgroup method is used to develop the scenarios, which are part of the design. The focusgroup tool is chosen because of several reasons. The first reason is that by using a focus group social interaction is ensured. Because various type of people are involved in the process support throughout the organization is created, which is crucial when using scenario planning (Schoemaker, 1993). Secondly, organizing a focusgroup with a varying group of people will lead to more insight in differences and similarities amongst the opinions of the people involved (van Aken, Berends & van der Bij, 2007). People will stretch each other’s view on the different subjects and thus increase the knowledge of the people involved. Therefore the process of the development of scenarios is just as important as the end product (Lindgren and Bandhold, 2003).

The focusgroup session at HMC will be held in a workshop setting. The workshop setting is a powerful method because it will challenge existing paradigms and create shared perspectives on the future (Lindgren and Bandhold 2003). The workshop approach is divided in two parts. The first part is an educational part in which the participants will get a deeper explanation on the subject and the expectation of the workshop. The second part is the development part in which participants will come to the development of scenarios by following sequential steps. These steps are based on the approach proposed by Schwartz (1995).

4. FINDINGS

In this part of the report the findings will be presented. The structure of this chapter is based on the scenario planning process by Schwartz (1996) and the roadmap process by Garcia & Bray (1997). The scenario planning process has been divided in three phases, similar to the ones in the roadmap process. Dividing the scenario process in these three phases makes it easier to compare the steps with the roadmap process. The scenario process is first explained followed by an explanation of the roadmap process. Note that the developed final design is presented in the next chapter.

4.1 Scenario Planning Process

The conclusions of the scenario planning process are presented in this first part of the findings. As stated before, the scenario process is divided into three phases similar to the phases of the roadmap process by Garcia & Bray (1997). These phases are preliminary activity, development of the scenarios and the follow-up activity.

4.1.1 Preliminary activity scenarios

Preliminary activity 1. Satisfy essential conditions 2. Provide leadership/sponsorship 3. Define the scope and boundaries Preliminary activity

1. Identify focal issue or decision

Development of the roadmap

1. Identify the product that will be the focus of the roadmap 2. Identify the critical system requirements and their targets

3. Specify the major technology areas 4. Specify the technology drivers and their targets 5. Identify technology alternatives and their time lines 6. Recommend the technology alternatives that should be pursued

7. Create the technology roadmap report Development of the scenarios

1. Identify key factors in local environment which influence decision 2. Identify driving forces that influence key factors in local environment

3. Rank by importance and uncertainty 4. Select scenario logics

5. Flesh out scenarios

Follow-up activity 1. Critique and validate the roadmap

2. Develop an implementation plan 3. Review and update Follow-up activity

1. Consider implications

2. Selection of leading indicators and signposts

Technology roadmapping process

Scenario planning process

The first phase, the preliminary activity, consists of the focal issue. This step includes multiple elements, which are outlined below.

1. Focal issue

The focal issue of Schwartz (1996) starts with identifying the focus of the scenarios. Because scenario planning will be used in combination with technology roadmapping the focus of scenarios must be aligned with the focus of the technology roadmap. Furthermore, Schwartz adds that in this step the identification of the people involved in the process as well as the time horizon of the scenarios should be decided.

Literature and interviews were used to determine the focus of the scenarios. The focus of the scenarios should always be built around a relevant question to ensure internal consistency according to Ogilvy & Schwartz (1998). The focus of the roadmap is the removal market, which is stated in the methodology part of this report. It is crucial that the focus of the scenario development has a close link with the focus of the technology roadmap because the outcome of the scenario planning process will be used as input for the roadmap process. After several interviews it is decided that the focus of the scenario planning process will be ‘future uncertainties for HMC in the removal market‘.

The time horizon for the scenarios was set on 10-15 years from now. Bentham (2008) states in Shell’s scenario guide that if the time horizon is too short (<5 years) scenarios will not be more than a creative description of the present. Whereas on the other side the focus of scenario planning is too long (>20 years), the relevance of the scenarios will be lost. Furthermore it is again important to realize that scenario planning will be integrated with technology roadmapping. Therefore it is crucial to choose a time horizon that is aligned with that of the technology roadmap. In other words, the developed scenarios should be of value for the technology roadmap. Garcia & Bray (1997) state a 10-15 year period is a common time horizon in roadmapping. Furthermore, from the interviews we can derive that technologies used by HMC have a long minimal lead time (>10 years), which supports the choice for a 10-15 year period for the scenario development.

The last step of the focal issue is to decide what managers need to be involved in the scenario planning process (Schwartz, 1996). It is important to involve varying people in the scenario development process, who have a thorough knowledge of the organization and the focal issue, according to Ogilvy & Schwartz (1998).

A mix of different managers throughout the organization was invited for the scenario development at HMC. Table 3.1 shows the people involved in the scenario development. The eight people that attended the workshop session met the criteria proposed by Ogilvy & Schwartz.

4.1.2 Scenario development

The development phase is the second phase and includes five steps, derived from Schwartz’s (1996) scenario planning model. The steps that are discovered in this phase were gained by a focusgroup in a workshop session. This approach is recommended by several authors (Ogilvy & Schwartz, 1998; JISC, 2007; Bentham, 2008; Delta Lloyd, 2010). Three hours were allocated for the workshop session

to develop plausible scenarios. The focus of the scenario development was: Future uncertainties for HMC in the removal market over a 10-15 year period.

1. Key factors in environment

The key factors in the environment were discovered using five dimensions: social, political, environmental, economic and technological. These dimensions are proposed by several authors (Ogilvy & Schwartz, 1998; Lizaso & Reger, 2004; Mietzer & Reger, 2005; Axson, 2011). All participants had to think of factors that could influence HMC per dimension. The factors mentioned had to meet two requirements:

Direct impact

The proposed factors have to be of direct impact. This direct impact is important to ensure that useful scenarios are developed. When factors with only minor and indirect influence are listed, the scenarios will not be very useful because they are indirectly of influence on the focal issue.

Realistic

The second requirement is that the factors have to be likely to occur. It should be perceived as realistic that the proposed factors have impact on the focal issue. In other words, the direct impact of the factors should be realistic.

The key factors that were listed per category during the workshop are listed in appendix IV. The table shows that most key factors which are perceived as uncertain can be found under the political dimension. To discover the key factors which are most likely to influence HMC’s work in the removal market a matrix was used with on one axis the degree of impact and on the other axis the degree of reality (figure 4.2).

High Impact

Realistic Unrealistic

Political funding regulations Total env footprint requirement Reeving options

Development of Europe Government regulations Sharpening env regulations Competition alliances Removal as last resort Alternative methods Transfer responsibilities Margin of field development Economic crises other areas

Content (for removal) NIMBY Aging workforce Regulation renewable energy Deep-sea removal Steel scarcity Increase prosperity Financing projects Influence global warming Government involvement IOC’s as part of government Impact social media Low-wage countries WO III