Among the many tools, managers use for strategic planning, scenario planning encompasses a whole range of potential and (un)likely possibilities and compensates for common mistakes when making strategic decisions – for example, overconfidence or, on the other hand, excessive pessimism.
Leaders can spot warning signs and react promptly by building organizational awareness of what might happen. Scenario planning documents provide enormous value by showing multiple possible outcomes and specifying concrete steps to mitigate damage.
Plans are also equally valuable for “best-case scenarios”. Managers who can see a broader range of the future are undoubtedly in a much better position to take advantage of unexpected opportunities and minimize potential risks.
What if your product goes viral and demand increases by 500% overnight? What if an acquisition opportunity suddenly arises? Will you be ready?
Ahead of the Scenario planning workshop, a part of the Experience EMBA event, we spoke with our professor Mr Anthony J. Evans, about the importance of scenario planning for business success and personal development while dealing with uncertainty.
Read the entire interview below!
If you want to join the workshop that takes place on February 3 and 4, 2023 register here.
Scenario planning is a structured approach considering a range of potential future contexts. They are an act of imagination that helps us think about how things might change. It differs from forecasting, which is about quantifiable outcomes instead of a rich and engaging narrative. Also, forecasts tend to have a predictive element which coordinates activity around a specific outcome. Scenarios, by contrast, involve a difference between multiple, different outcomes.
There are different levels of scenario planning. The simplest is to read an article that explains the concept and follow instructions. This gives everyone a good starting point and a little familiarity. The complete approach is to hire a scenario planner to work alongside a company and build a set of rich scenarios that utilize extensive research and multiple meetings with various insightful experts (inside and outside the organisation). The middle approach is to attend a short program covering the primary process and delivering critical insights as a form of team building and creative thinking exercise.
No, we cannot predict the future despite a natural and innate desire to do so. Scenario planning is a tool that allows us to confront uncertainty confidently and recognize our cognitive capabilities’ limits. That said, a structured approach to considering how existing trends will pass through into the future, and a profound reflection on the role of critical uncertainties, provide guidance that can allow us to recognize the future as it emerges.
Humanity’s three significant threats are climate change, nuclear terrorism, and technological-based disruption, such as artificial general intelligence. Governments, policymakers and NGOs should use various tools to devise strategies to cope with these challenges, and scenario planning can play an important role. However, for most organisations, the more significant challenges will be more mundane and more local, such as the threats of increased competition or changes in consumer demands. Scenario planning is adaptable to the relevant challenges that businesses will face and does an excellent job at re-framing the perspective of business leaders to establish the specific challenges that face their organisation. If all enterprises build resilience to the same challenges, then we have a problem – leaders need to focus on the areas that are being neglected by everyone else.
Scenario planning has been used extensively in military strategy, but the most famous corporate example is Shell, which pioneered the concept as an internal source of competitive advantage. The conditions within the energy industry are particularly relevant for the scenario method, but there are good examples across all sectors.
Some managers and senior executives can find the scenario method uncomfortable because it forces them to confront their implicit assumptions and expectations. If someone has a rigid concept of their situation, scenario planning will not work. It is vital to be open-minded and recognize the benefits of collaboration, challenging preconceived assumptions, and creative thinking.
Scenario planning is a team-based activity, so people need to be able to listen to others and utilize their combined experiences and expertise. The primary skill is seeking information in unconventional ways – to be aware and vigilant of future trends and proactively look for evidence of the future.
Scenario planning helps personal development because it provides a technique for shifting perspective, which can be one of the most important qualities of leaders. Having the self-awareness necessary to reconsider assumptions, actively looking for novel and contradictory evidence, and developing a vast pool of insightful people are highly beneficial. There’s also a strong link between scenario planning and basic decision-making skills. Sometimes we can be intimidated by the future and struggle to deal with uncertain situations. Scenario planning shows how to cope in such cases, reducing anxiety and providing reassurance.