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How to master scenario planning in a seemingly chaotic world
By Mary Larson
Leader, Consulting – Organizational Renewal
No one can predict the future. That shouldn't stop you from thinking about what could happen next, and what it means for your organization.
When done right, scenario planning can help you uncover new opportunities, identify the potential pitfalls that lie ahead, and instill a feeling of calm as you know that whatever tomorrow brings, you have the ability to react and adapt.
[insights]
- Scenario planning is an exercise where organizations examine potential events and what it means to their operations.
- Having an idea of what your organization would do in certain scenarios can help you react faster and make decisions with an understanding of the consequences.
- Utilizing scenario planning exercises can help identify how macro-level trends could impact or benefit your business.
Most corporate leaders would agree that we’re living through a time of upheaval that will fundamentally change the way we live, interact, and do business. Somewhat ironically, to describe the current situation as “unprecedented” has now become mainstream. Rampant inflation, supply chain pressures, and rising interest rates are just some trends that business leaders are paying attention to, that regularly get described as “unprecedented.”
With so much upheaval going on in the world, business leaders and executives may ask themselves if investing time and energy to plan out their company’s future is a fool’s errand. How do you future-proof an organization when the future is so uncertain? Why bother trying when situations can change so dramatically overnight?
These are valid questions that should be addressed, but they should not prevent you from doing the beneficial and vital work of scenario planning. There are two predominant reasons why scenario planning is still valuable in turbulent times.
Adjusting is easier than starting from scratch
Scenario planning is not about predicting the future with exact accuracy. No one can tell you what is happening next, and setting that goal is positioning yourself for failure.
Scenario planning is about identifying critical trends, assessing how each one could impact you, envisioning multiple possible futures for your organization, and deciding which ones are the most likely — i.e. the ones that your organization should be prepared for. Once you have an idea of what trends to keep an eye on, and where you fit within each one, it becomes easier to draw a roadmap of mid- and long-term strategies that will help you meet corporate objectives.
Scenario Planning
01. ➔
Identify critical trends
Identify the most important trends that could impact the company
02. ➔
Develop metrics and dashboard
Develop measures for each trend and create a dashboard for future use
03. ➔
Define impact by trend
Which side of the trend is the company on?
04. ➔
Develop a set of scenarios by trend
Think through and document potential outcomes
05. ➔
Define implications
For important scenarios, evaluate the implications for the organization
06. ➔
Develop mid- and long-term strategies
Define responses, but continue to track dashboard to ensure rapid response
Yes, the world is constantly changing; but having a plan to respond to likely risks and opportunities, even if that plan needs regular adjusting, will always allow you to be more agile than if you never had a plan to begin with.
The primary tool that will help you adjust your response plans efficiently is a well-constructed dashboard. In the early stages of scenario planning, you should:
- Determine which priority trends to focus on
- Define qualitative and quantitative metrics to track these trends over time
- Articulate a process for monitoring and adjusting these metrics, as well as who will be responsible for it
Trends transcend the news of the day
A common human frailty, that we see appear in organizations as well, is to spend the vast majority of time in “survival mode,” putting out fires and reacting to immediate needs instead of thinking critically about the future. What makes scenario planning especially hard is the necessity to think creatively — to move beyond the safety of the familiar.
The most immediate and pressing threats to your business could be inflation, difficulties recruiting and retaining top talent, supply chain bottlenecks, etc. What dominates your news headlines could be the ever-present threat of COVID or the war in Ukraine, both of which could intensify the previously mentioned threats to your business.
While you should pay attention to these short-term threats and monitor current events, keep in mind that most of the trends that threaten the future of your business transcend what’s happening in the moment. They run deep — they manifest themselves in your customers’ and employees’ shifting needs, demands, and mentalities.
Some examples include:
- Consumers’ demand for increased transparency, both in government and in business
- An increased focus on ESG and consumers aligning themselves with brands that share their values
- The data revolution and the adoption of technologies that help drive decision-making and improve customer experience
- Climate change and increasing concerns about the sustainability of projects and companies
- The ever-present threat of cyber attacks and data breaches
No pandemic will make consumers change their minds about wanting to buy from companies that use ethical and sustainable practices. No war will make consumers stop caring about the privacy and security of their personal data. If anything, the events of the day will only reinforce these trends.
This is why scenario planning is so key, even in a world that seems ever-changing and chaotic. People’s habits and mindsets don’t change overnight like our external circumstances do. Understanding the trends that underpin consumer behaviour and public sentiment will always be beneficial. Scenario planning leads you to think bigger and broaden your vision. While it may happen slowly, your business will be dramatically impacted by these macro-level trends. The fundamentals of scenario planning remain the same even in times of upheaval.
Don’t put it off
No organization will arrive at a point where planning in advance to respond to crises, risks, and opportunities, is no longer needed. The benefit of scenario planning is found in the journey, not the destination.
You don’t have to go through the journey alone.
An unbiased third party can help you remove the blinders that come with running a company and make a more objective assessment of what your future holds. MNP’s Consulting team brings the experience and subject matter expertise you need to plan for diverse scenarios, no matter what industry you operate in.