>>>Scenario Planning
Scenario Planning2017-04-07T00:23:36+00:00

What is Scenario Planning?

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What If…? What If…? What If…?

What is Scenario Planning?

The military and Royal Dutch Shell are often associated with early adoption, as well as continued use of a strategic planning tool used to create “plausible” stories about the future. This tool is called Scenario Planning.

It differs in many ways from similar sounding, and more commonly used financial forecasting tools which generate Best, Worst, and Most Likely cases (or scenarios).

The key word here is “plausible”.  In other words, scenarios are not “good” or “bad”. 

Each scenario or story has a plot with characters, settings, and outcomes that are developed and finally analyzed in an effort to see how each might play out.The story can then be shared and popularized with everyone in a company as a way to think about its alternate futures.

As an example, teams might beasked to write newspaper headlinesthat would appear 10-20 years from now(if there are still newspapers!), and then work backwards to explain what had to have happened to get there, e.g. “XYZ Company finds oil on a newly discovered planet!” or “The Euro has been officially replaced by Bitcoin!”

When to use Scenario Planning.

This process starts with a critical objective or a question needing to be addressed.

For example, what will your company look like in 10 years? What key decisions need to be made in the present that will have an impact on its future success – or even its very existence?!

Make, buy, or partner? Merge or be acquired?  Expand your global footprint?

NoteIt is very important to have buy-in from top management.  Without such support, the process may not succeed.  One must have an open mind and be willing to forego some beliefs or traditional behaviors.

How to conduct Scenario Planning.

  • A considerable amount of resources are required to properly conduct scenario planning.  Diverse corporate or divisional teams need to be created.  They need to have several training sessions and meetings consuming a few days.
  • More likely than not, it will be necessary to hire a qualified third party company capable of facilitating the entire program.
    • As a rule of thumb, a proposal should be sent for bid to at least three potential providers of such services.
  • During the process, high level drivers, or forces, will be identified.  They may then be examined and ranked in terms of their respective influence as well as level of uncertainty or risk. A few prime examples include:
    • Energy
    • Technology
    • Economic conditions
    • The Environment
    • Politics and laws
    • Competition
  • In addition, some trendswill be considered more certain to occur or continue, e.g. birth rate, life expectancy, divorce rate, growth of large cities, wealth concentration.
  • Teams should ultimately develop 3 to 4 scenarios by discussing how the various drivers, forces and other factors could possibly interact to create a particular future outcome.
    • Each scenario or story will be assigned a memorable and meaningful title…they can even be funny or portrayed as an image or picture.
  • Appropriate decision makers can then utilize these stories as an aid to formulating both short and long term actions.

Is Scenario Planning for you?

Are you or your top management thinking beyond the next fiscal quarter or year?  Are they discussing “What if…?” types of questions that extend at least 5-10 years ahead?  And are they willing to commit to a process that might cause some discomfort and alter their thinking?

If “yes” to all, then the use of this strategic tool should at least be considered.

What to expect from Scenario Planning.

A roadmap to the future…

Scenario Planning is intended to help a company to make strategic decisions. Ideally, it is an ongoing process that is revisited and updated periodically.

As part of the process, key indicators or early warning signals will have been identified.  These will be monitored, and their emergence will announce that a particular future may be about to occur.  At this point, previously agreed upon actions may be implemented.

And so, having planned for a number of different outcomes, your company will be better prepared to anticipate and react to factors and drivers in its market and navigate through them.