THE CHANGING LANDSCAPE
deciding whether to introduce its products to the Indian market. The best possible market research might identify only a broad range of potential customer penetration rates—say, from 10 percent to 30 percent—and there would be no obvious scenarios within that range, making it very difficult to determine the level of latent demand. Analogous problems exist for com- panies in technologically driven fields, such as the semiconductor industry. When deciding whether to invest in a new technology, producers can often estimate only a broad range of potential cost and performance attributes for it, and the overall profitability of the investment depends on those attributes.
The analysis in level three is similar to that in level two: a set of scenarios describing alternative future outcomes must be identified, and analysis should focus on the trigger events indicating that the market is moving toward one or another scenario. Developing a meaningful set of scenarios, however, is less straightforward in level three. Scenarios that describe the extreme points in the range of possible outcomes are often relatively easy to develop but rarely provide much concrete guidance for current strategic decisions. Since there are no other natural discrete scenarios in level three, deciding which possible outcomes should be fully developed into alternative scenarios is a real art. But there are a few general rules. First, develop only a limited number of alternative scenarios—the complexity of juggling more than four or five tends to hinder decision making. Second, avoid developing redundant scenarios that have no unique implications for strategic decision making. Third, develop a set of scenarios that collectively account for the probable range of future outcomes and not necessarily the entire possible range. Establishing the range of scenarios should allow managers to decide how robust their strategies are, to identify likely winners and losers, and to determine, at least roughly, the risk of following status quo strategies.
Level four: True ambiguity
A number of dimensions of uncertainty interact to create an environment that is virtually impossible to predict at level four. In contrast to level three situations, it is impossible to identify a range of potential outcomes, let alone scenarios within a range. It might not even be possible to identify, much less predict, all the relevant variables that will define the future.
Level four situations are quite rare, and they tend to migrate toward one of the others over time. Nevertheless, they do exist. Consider a telecommunica- tions company deciding where and how to compete in the emerging consumer multimedia market. The company will confront a number of uncertainties concerning technology, demand, and relations between hardware and content providers. All of these uncertainties may interact in ways so unpredictable that no plausible range of scenarios can be identified.