Strategy

Making Sense Of Scenario Planning

Close your eyes and imagine being able to forecast future events within the business environment. Predict stocks and bonds giving you the ability to stay ahead of competition.

I once watched an advert on insurance. An employee walked into the CEO’s office and tells his boss about a fortune crystal ball he discovered and wanted the company to invest in. He presented the crystal ball to his boss and in a few minutes of conversation they were able to test the validity of the ball which enabled them to forecast future occurrence.

The CEO was so pleased believing they would make so much money as a result of the fortune crystal ball in their possession. The CEO stood up and stretched his hands out to shake the employee in excitement but suddenly the unprotected ball rolled off the table and broke into piece on the floor. The clip ended with the term ‘Get Insured’

  • What is scenario planning

Scenario planning is sometimes referred to as contingency planning. It is a strategy planning exercise which enables organisations think about a range of future possibilities and its impact to their organisation. With these to mind, organisational leaders can reduce errors in the decision making process if equipped with the right scenario plan.

An important task for organisation today irrespective of size, geographic location and finance power is the challenge of readiness for future change events. As a result scenario planning becomes inevitable.

In a dynamic world, if your strategic plans are a bet on only one specific future possibility then you’re in for a surprise when it turns out differently which may not be a pleasant surprise. Now scenario planning helps you foresee and prepare for alternatives.

The 5 step process for scenario planning

There are a few steps to consider as far as scenario planning is concerned.

  1. Collectively brainstorm future issues

When running brainstorming sessions around scenario planning, it’s important to ensure you have the right participants who can add valuable information for example someone from finance, human resources etc which represents part of your organisation’s value chain.

Brainstorming could simply start with a few questions such as ‘what possibilities could disrupt our organisation’s strategy once we go live with our products or services’.

When brainstorming, there is a need to put into consideration a time frame as it creates the awareness that your planning and outcomes are caped hence the need to work within a constrained time frame. Other areas should to be considered during brainstorming, most potentially using frameworks or concepts such as PESTLE.

In running an evaluation there is the need to reference the past five to ten years for trends and relevant information then foresee changes for the next five to ten years.

  1. Categorise shared themes and key driving forces

To identify shared themes and key driving forces, first will recommend that you conduct a stakeholder analysis. This will help identify associated stakeholders, their interest and the influence they would have.

Secondly, will recommend addressing areas of your value chain i.e. suppliers, production technology, competitors, customer demands, human resources etc

Thirdly, will recommend addressing external driving forces such as the economy, social factors, geopolitical, technological forces etc. Unique scenarios often provides insight into areas which are less obvious but dynamic such as cultural differences, currency variations, migrations configuration, political or government issues.

The concept of scenario planning relies more on imagination and creativity as you will have to utilise a number of concepts and theories i.e. PESTLE, MIND mapping, stakeholder analysis, RICH Picture, the list goes on. It is important to stretch your thinking to limits but know when to stop for example when the conversation starts leaning towards extracting resources from planet Jupiter. When you arrive at this point then its time not only to stop but to take a break. Ensure your team are able to come up with 40 to 70 categorised themes and key factors listed.

  1. Develop a scenario pattern

The objective here will be to narrow down the scenarios to just three to six which will help inform the strategic understanding and vision. The reduction can be achieved by ranking scenarios in terms of level of uncertainty and importance to the organisation, and then choosing the more important and most uncertain.

Secondly we would select themes for each scenario and consider the ‘value’ that each factor might take under each of the themes. The result from this step can be summarised in a table showing the state or value of each factor as it appears in each scenario. A description or narrative will also be included for each scenario.

  1. Develop selected scenario

Once we have narrowed down the scenarios to a manageable number between three and six scenarios, we assess the potential impact of each scenarios against the organisation. We would generate a number of possible strategic options which the organisation could pursue. A techniques known as TOWS matrix could be applied during brainstorming of strategic options.

  1. Evaluation, recommendation and implementation

We evaluate and choose between lists of strategic options generated in step four using set criteria which are important to the organisation. This will eventually lead to the choices of a set of recommended strategies to senior organisational leaders for consideration. Once these recommended strategies are approved by senior leaders, organisational strategy and associated policies are updated. Finally these strategies are implemented via portfolio delivery and monitoring.

Watch out for our next set of articles which focuses around “Resilience and Wellbeing for Organisational Leaders”. Feel free to like, comment and share

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About the Author

Ehime Enahoro is a business and digital consultant with years of experience and has provided consulting services to organisations across a number of industries such as FinTech, Healthcare, Travel, Property, Education and Government. Passionate about sustainable innovation, process re-engineering and well-being. Other interests includes writing, speaking, coaching, mentoring, long distance running, football and golf.

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