Scenario planning, a term derived from “scenario planning”, is a useful strategic planning tool for revealing the uncertainties, risks and opportunities of many potential states or situations in the future.
Scenario planning is also called “scenario thinking” or “scenario analysis”. This is largely an adaptation and generalization of methods used by US military intelligence from 1945.
By creating hypothetical views of what the future may involve, scenario planning can help businesses build resilience to changes that may arise in the international business environment, or on a smaller scale, by envisioning a path median located between two extreme conceptions: the false certainty that only one result is possible, and paralysis by analysis, which describes a situation or an over-detailed analysis can lead to an absence of scenario and decision.
The goal of scenario planning is to achieve the best immediate outcome, while preparing appropriate alternative action plans to be implemented, as the situation evolves. Agreeing on short-term operational decisions and long-term strategic plans reduces the time it takes for a business to respond to emerging risks and opportunities. This methodology can therefore help companies anticipate, rather than reactively controlling the negative effects of a major event or disruption.
How is scenario planning different from strategic planning?
Scenario planning is often used to augment strategic planning processes. Scenarios allow you to determine appropriate action plans or strategies for different possible futures, and show the way forward for responding to a specific future and determining which set of actions would make sense, regardless of the conditions that prevail. are presented. The underlying Colombia Phone Numbers List assumptions of the scenarios are themselves useful in corroborating or challenging the strategies and keeping them up to date.
Why is scenario planning important today?
The COVID-19 pandemic has triggered a wide range of planning actions that aim to pull companies out of crisis in the medium term and renew their long-term business models. Research has shown that during times of disruption, brisk, alert decision-making can lead to tremendous performance, leading to a significant competitive edge that may endure long after the initial disruption. Strategic scenario planning facilitates the definition of agile and vivid strategies, and it provides a framework and processes for considering hypothetical future situations.
What a business owner needs to know about scenario planning
Understanding how disruption affects business strategy and operations can help business leaders make changes that are sometimes tiny, but powerful enough to prepare their teams to act on the risks and opportunities that a particular economic flow can. create at some point.
A business scenario plan typically consists of five steps:
Definition of your core problem: What is the most important planning topic for you, for example: “How to perform in a world disrupted by COVID-19”?
Identify the two most important uncertainties among external factors that could affect your core problem. They must be independent of each other. This could currently be, for example, a problem such as: “the duration of the economic and health crisis and changes in consumer behavior”.
Identify the extremes of each uncertainty. To do this, draw two axes, an x axis and a y axis, which will represent each uncertainty. On the 4 dials at your disposal, write four future scenarios, plausible and distinct.
Development of strategic options for each of the four scenarios. Decide which your business should follow, weighing the risks and opportunities in each case.
How does scenario planning work differently at the functional level?
Scenario planning activities for different types of functions in an organization mirror those performed during business scenario planning, but instead of creating scenarios, leaders start by cascading scenarios down to each functional level of the business. the company. The expertise of a particular leader, executive or manager will come into play when he will have to interpret and evaluate the implications of each scenario for his own function within the company.
For example, at the enterprise level, reacting to a market downturn may mean putting in place efforts to attract new customers. But at a functional level, this can mean, for example, renegotiating work with your suppliers or increased support for occasional peaks in workload.
How do you assess the implications of the scenarios at your job level?
For each scenario, diagnose and articulate the implications for your function on two fronts:
Supply / demand and needs analysis: For each scenario, determine what your business will need from your function to meet expectations effectively. Pay particular attention to new capacities as well as changes in volumes or demand. Think about how your function may need to increase or decrease its available resources in response to the changes that will take place.
Risks and Opportunities: Identify the vulnerabilities, as well as the potential risks and opportunities associated with each scenario. Determine if these risks and opportunities are likely to significantly change the work and action your function will take to support the chosen strategy, and make plans to address them.
How do you turn scenarios into action plans for your function?
Once the implications, risks and opportunities are clear, make sure to apply the following tips:
Test existing projects, initiatives and plans against each scenario.
Identify safe options that work in all scenarios, and riskier bets, which are only relevant for one or two scenarios.
Think about new projects, initiatives, or plans needed to fully succeed in each pre-set scenario.
If necessary, adjust the strategy, objectives and projects or initiatives relating to each function for a given scenario.
Turn those adjustments into action plans for each scenario by deciding which levers (people, processes, systems, budget, etc.) you should use to achieve business goals, manage risk, and take advantage of opportunities.