Coen van Paassen - Learning Log

Learning Log

Understanding the New Global Business Environment

Rotterdam School of Management
EMBA 2005
December 14, 2005
Coen van Paassen

Introduction.
This learning log is a part of the course Understanding the new global business environment, and is complementary to the scenario of the group I am(/was) part of. Our group developed scenarios for ‘The Dutch Hospital Care in 2015’. This subject is selected as a result of our common interest in this field and by either the professional backgrounds of the team members (health insurer and pharmaceutical company) or the foreseen business potential (PWC consultancy).
This learning log reflects on the mentioned elective respectively from a professional, an academic and a personal perspective. I found that the professional and personal learning is much intertwined; the professional learning reflects more or less what I learned individually and can implement at my work (or suggest so to do).
The material is gathered from the lectures, the readings, discussions with class-mates and from the sessions with my group when working on our scenario.

1. Professional reflection
The main issue I like to reflect on in this section is the applicability of scenario planning for Merck. Based upon my experience gathered over the last few months, I tend to conclude that scenario planning is a valuable tool for Merck on at least the corporate level. Central in this reflection is the quote (D. Erasmus):’The question for an organization is not to choose which scenario to realize because by definition it cannot, but rather to ask what to do now if the scenarios materialize’.
Summarizing, I think that both scenario planning and the use of systems thinking can be a very useful tool for Merck. Besides planning on a corporate level (see example below), I believe that scenario planning also can be successfully applied in any subsidiary. Here issues like the development of (local) reimbursement and like the future of the health insurance should be approached in the structured way of scenario planning. At the other end of the spectrum there are opportunities of applying scenario planning for the pharmaceutical industry as an entity (e.g. on how to react on pandemics or how to cope with HIV). Scenario thinking is out of the box thinking, challenging old assumptions; perhaps a cure for the pharmaceutical companies.
Example: there is one area in particular where I think it can be very valuable: that of determining the best strategy in response of what I consider a major threat to the pharmaceutical industry. The most prominent environmental factor influencing this industry is the worldwide the cost containment measurements. In all (developed as well as developing) countries, governments are attempting to reduce costs /or the increase of these, of healthcare in general and of pharmacotherapy specifically. An important epidemiologic causal factor is growth of the population in the developing countries and the so-called ‘double aging’ (i.e. more people becoming old and reaching an even higher age) in the developed countries. These factors are believed to create an increasing demand for pharmaceutical care. The most common instruments used for cost containment by governments are either a lower reimbursement- /price level, or delisting of drugs. Often there is an explicit preference for the (cheaper) drugs after patent expiration (so-called generics). This development is a threat to some- and an opportunity to other firms. In general, companies conducting research and focussing on innovative drugs (such as Merck) are at a disadvantage compared to for instance the generic industry. Considering the cost containment as a threat to growth, the dilemma Merck is placed for is how to create share-holders value in the future; what business model to pursue. Historically, Merck discovers and develops drugs. Besides this ‘innovation model’, Merck also could decide to shift emphasis towards generating sales by marketing generics. This could be done with (only) own molecules but also with drugs originally developed by competitors. The latter is e.g. now the business model of Novartis. Another option is to enter the market of non-prescription drugs (over the counter; OTC). Also here the basis can exist of self developed drugs or (also) these of other companies. As an example of such a strategy, GlaxoSmithKline acts as an example.
The explicit use of systems diagrams can be used in order to find out possible flaws in the design of action-plans on a local (i.e. national) level. Too often it happens that we are surprised by the reaction of the environment (be it competition, physicians, distributors). The remaining question is whose role in the organization scenario planning should be: in my opinion top management should at least actively be involved but most preferably take the lead.

A few additional observations as they came up during the sessions or while reading about the subject;
 In his article, de Geus stated: Institutional learning is much more difficult than individual learning. This is found very true for the current organization of Merck where there is in many subsidiaries an absence of robust, repeatable process for creating and nurturing new growth business. Perhaps implementing scenario planning on a broad basis can create such a platform.
 There is a lot to learn in the ‘Spot the gorilla- exercise’. In various aspects, Merck is so focussed on ‘counting the bounces’ in many occasions that very important information is neglected.

2. Academic reflection
The academic reflection is the most difficult part of this learning log for me. To be honest, I have not spent a lot of time in trying to substantiate the value of scenario planning through scientific publications. Nor did I look for more background beyond the provided background articles in the reader. Therefore my reflection is limited to the material that we all received:
 The provided articles about the process of scenario planning by Wack , de Geus , Erasmus and Kauffmann illustrate the value of developing scenarios. They describe the process itself as well as the benefits of both going through that process and the outcomes of it. It has no doubt that this literature will (further) convince ‘believers’ yet I doubt if critics will find enough evidence to become more interested in scenario planning.
 It will not be a surprise that the readings by McLuhan have been difficult to read and understand. My (perceived) understanding comes from the explanations in class, including the discussions with fellow students and the video. I regard the value of his theory and opinion mainly in pointing out the danger and risks in communication we normally are not aware of.
 I consider the Wiki website (www.scenariothinking.org) also part of the academic reflection. The system of a wiki creates an open source that enables (and stimulates) learning; by this it adds to the general knowledge.

3. Personal reflection
With the risk of making a ‘grade-limiting’ remark; this course was the one (at least in my package of electives) most mysterious to me at the beginning of the semester. Despite the title of the course, the practical name of the course soon became, even before it started, scenario thinking.
Another, also applicable, name could have been personal development. Fueled by video’s/films and literature, the course was actually more than Understanding the new global business environment. What I mean by this is that even without having to work on our scenario, the course material invited to think about the world around ourselves. How to regard information? What are the pitfalls when we absorb information and news? Are we deceived on purpose? Have misinterpretations in communication seriously impacted world history? All these questions including possible answers have a consequence far beyond the scenarios that have been a deliverable of this course and make people think based upon a critical view on the world.

More focusing on a few of the personal learnings from scenario planning; since we were involved in an increasingly intensive group process, my individual learning went parallel with that of the group.
 One factor very different from my first expectation is that it is not about developing the ‘one and only’ scenario and than prepare for it, but merely beware of multiple possible realities and prepare for prominent factors.
 There is no short cut to the scenarios: every step has to be ‘lived’. In the beginning of the process we tried to more or less work backward while beginning at a simple grid where the axis would be the most relevant driving forces.
 A critical and difficult step in the whole process is coming from the questions via the answers to these questions (thus data) to actual information. Using the cherry-tree metaphor: fruit grows neither on the trunk nor on the large boughs but rather on the small branches: it takes a long time to arrive there. It took a lot of brainstorming and discussions.
 Scenario planning can never ever be a one person job (even with unrestricted time); there is a need for cross-fertilization in order to come to creative and complete scenarios. This is even besides the issue of a learning organization.
 As D. Erasmus said: ‘Complex systems require complex representation’. However logic, my first reflex is to simplify the reality to (whenever feasible) into a model that fits on one powerpoint slide. This probably is a result of training and classic conditioning within my professional environment. Yet, it became obvious that certainly in the case of scenario planning there is no simple reality (and furthermore; ‘messy is good’).
 Regarding the subject it became evident to me that the most crucial role in the future of the hospital care is played by the government. The most relevant factor is the finance structure (as well as the amount of money).
 Perhaps also the different profiles in the group require some reflection. On one hand they provide a more rich input in the whole process; the positive effect. On the other hand however, different styles have also led to different levels of (observable) involvement in the process.
 Our ‘pizza-box’ metaphor intended to both illustrate the process coming to our scenarios (informal meetings, pizza, drinks) as well as the atmosphere in which the groups were supposed to present to each other.

   All in all: intensive, sometimes frustrating but always worthwhile!