FUTURES RESEARCH

7215 MEG93 - On a Clear Day You Can See the Future

ON A CLEAR DAY YOU CAN SEE THE FUTURE

D. S.  Mercer

Head of the Centre for Strategy and Policy, Open University School of Management,

Address for correspondence:

David Mercer, School of Management, Open University,

Walton Hall, Milton Keynes, MK7 6AA

Tel: 0908 655888 Fax:0908 655898

ABSTRACT

The paper investigates what are managers perceptions of change in the external environment and the impact of the main environmental factors on future developments. A study of responses from 167 School of Management (OBS) students found that there was seen to have been a very high rate of change in the overall environment over the past five years (a mean of 5.8 on a scale from 1 - 7); and that the most important impacts came from the fields of politics (5.9) and economics (5.7). At the same time managers tended only to take into account short and medium term events expected to occur in the near and medium distant environments.

1. INTRODUCTION

It has long been accepted that an important adjunct to marketing, if not taught as a key part within it, has been the wider external environment. In much the same way, it has been accepted that strategy should take account of the long term as well as the short term. To cover the wider environment, the STEP (Sociology, Technology, Economics, Politics) factors have most frequently been used within business school teaching and, to cover the longer term, long-range planning has been developed. In recognition of the importance of these areas, the OBS developed its MBA course 'The Challenge of the External Environment' (B885) to address both issues.

What has been little investigated, however, is what are reasonable baseline facts which managers may be expected to encounter in these areas. Accordingly, we decided to use the students' own work on the B885 course to provide an initial indication of what 'facts' could be deduced about the current and (especially) future state of opinion.

2. METHODOLOGY

Permission was sought from students taking this course in 1993 (typically practising managers - who made up 67% of those responding) to use their major project, which they worked on during the course, as the basis for research into future trends. Their project, undertaken towards the end of the course, requires students to write two complementary scenarios describing the long-term future of the 'industry sector' within which their organisation operates.

Permission was received from 172 students (a high, 30%, response rate when the confidential nature of the material is taken into account). Of the accompanying projects, 145 were found to be suitable for further (content) analysis; which will form the basis for the second stage of the research.

Accompanying each project was a (single page) questionnaire, and it is analysis of the answers recorded on the 167 valid responses to this which forms the basis for this first phase of the research.

3. RESULTS

It was to be expected that these students would be more aware of changes in the external environment; since they had chosen to study a course on this topic and, at the time of the project, had spent a number of months working on the subject. Even so, the high levels of change reported - and the details which emerge from the comparisons between the data - do seem likely to relate to real, and significant, trends.

3.2) OVERALL CHANGE

On the seven point scale (from, say, 1 = stable to 7 = unstable - with a median value of 4) which was used for the main questions, the change in the 'instability' of the overall external environment over the previous five years (1988-1993) was reported to be very high indeed (nearly reaching the 6 level):

As can be seen from the above table, the less distant (market) elements of the external environment are not seen to have become dramatically more unstable (though they have still increased in unpredictability). Competitive, industry and innovation unpredictability all rate change factors clustered around 5. The predictability of consumers tastes has changed little, and (on a different scale) competitive hostility is - if anything - below the mean level.

All of these levels of change were, however, much lower than the overall level for the whole of the external environment; where, as we will see in the next section, it is the far environment (especially economic and political factors) which probably features most prominently in this context.

3.2) 'STEP' FACTORS

Of the three factors investigated, two of them - economics and politics - rated much the same levels (albeit on a slightly different scale - measuring current importance) as the change in the overall environment. Hence, it is perhaps not unreasonable to suggest that these were the most influential factors in the respondents' view of the overall environment:

As can be seen, social changes rated a significantly lower level of importance (indeed, almost of 'neutrality' (where 4 is the median). This might not have been surprising for uninformed managers, who possibly might fail to recognise the potential impact of such slow-moving changes. It was, though, surprising for a group who had been introduced, as a central feature of an earlier part of the course, to the dramatic changes which such social changes can wreak!

3.3) INDUSTRY DIFFERENCES

The major differences, such as they were, emerged in terms of industry sector. It is, indeed, not surprising, given the developments over the past five years, that those in the health-care market (and especially those in the NHS within it) recorded high levels in almost every category; with a rating of 6.4 for the rate of change for the overall environment, 6.2 for the importance of economic factors and an almost perfect score of  6.9 for political impacts! A similar picture was also recorded for the related pharmaceutical sector. It is also unsurprising that consumer services (and to a lesser extent consumer goods) also were seen to have become less predictable in these areas (recording an overall rate of environmental change of 6.0 and an especially high level, of 6.7, for politics).

Construction and government also recorded high overall levels (at, once more, 6.0); but the former was impacted by both economics (6.3) and politics (6.2), whereas the latter was - perhaps not surprisingly - dominated by politics (at 6.5). Financial services also recorded a high (again 6.0) level overall, but - in the circumstances rather strangely -  not in any of the individual categories; and, in the reverse direction, the industrial goods sector was average overall (at 5.7) but high on politics (6.2).

At the other end of the spectrum, it is also not surprising perhaps that the energy/raw materials recorded lower levels of change (where the events of the 1970s might have already set existing levels much higher than in other industries). What was surprising, however, were the generally lower levels recorded for retail (5.2 on overall change, with 5.4 for both economic and political factors) and in particular (considering the massive changes actually taking place) the education sector, which recorded 5.5 overall and 5.3 for economic developments; but, as might be more to be expected, a high 6.3 for politics and a relatively very high 5.1 for social changes.

In terms of the size of organisation, the only discernible differences seemed to be that the much larger organisations (those with more than 10,000 organisations) were perhaps slightly more impacted by the rate of change (6.0 for the environment overall, for instance); or might perhaps have been more aware of this (when you might have expected smaller organisations to 'suffer' more!).

In terms of the departments within which the students worked, paradoxically (in terms of their supposed time horizons but perhaps not in terms of their exposure to the realities of life)  those in sales recorded higher rates of change (6.1 for the overall environment) than those in marketing (5.5)!

3.4) SCENARIO PERSPECTIVES

It may be  possible to detect similar trends in terms of the perspectives behind the scenarios adopted by the students. On average, their scenarios were a mix of outward looking and inward looking, and revolved around the medium term future:

It is significant, however, that only 21% adopted the genuinely external view and 20% that of the long term (beyond 10 years); both of which are (in the theory taught on the course) demanded for such scenarios.

4. CONCLUSIONS

Managers, at least 'informed' ones, clearly recognise the dramatic impact of those parts of the external environment which lie beyond immediate market trends. In particular, they recognise the ways that economic and political forces impact upon the futures of their organisations; though not, even when made aware of them, the arguably more powerful (but slower moving) social forces which are changing the structures of society.

Most significantly, and perhaps depressingly, of all is that - even when taught how to approach these issues - they tend to avoid fully addressing the issues in the wider environment and the longer term; only a fifth of them genuinely face up to the challenge from these directions.

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