With the rapid changes sweeping through the world today, your next strategic plan is only as good as what lies ahead. Organisations big or small are being impacted by complex issues like geopolitical crisis in eastern Europe and elsewhere, cost of living pressures across rich or poor countries, supply chain disruptions, and many more. Add to that, local factors like coming elections, corruption, and security challenges in some countries, and you have the perfect storm!
It is no longer globalisation, digital tech, or pandemic - it is myriads of factors that are simultaneously autonomous and intertwined. VUCA is a vicious circle, and chaos has become the new normal. Strategic planning is no longer a linear Point A to Point B plot, because an unexpected Point C can pop up in between, bringing your plans belly up. What will your response be? As Ernst & Young's Lance Mortlock puts it, creating a more flexible planning builds resilience and opens new opportunities.
Understanding the full breadth and depth of uncertainties that may not be immediately apparent comes from engaging in a systematic and robust scenario planning. Making scenario planning an integral part of your strategic planning is no longer a nice to have, but a critical success factors any business. Here is how to go about it.
What is scenario planning?
Just like strategy itself, scenario planning was originally developed in the military, and has become a tool of choice for different organisations, especially post-COVID. It is a strategic tool that helps to anticipate possible future states and mitigate potential shocks. Scenario Planning—also called Scenario Thinking or Scenario Analysis— is a method used in the strategic planning process to help businesses make flexible long-term plans in response of high levels of uncertainties everywhere.
What are the benefits of scenario planning?
If you are still wondering if scenario planning is worth the dime, here are some ways it benefits organisations that apply it.
- better assessment of uncertainties and risk management,
- better assessment of strategic options,
- better leverage of organisational learning, and
- better and more nimble strategic decision and change management
How is scenario planning done?
Articulating a company's possible future states is both an art and a science. It is a product of systematic methodologies combined with expert insights, creativity, and judgments. Here is a 6-step how-to that has worked for my clients.
- Define the scope (industry, business, or department) of the analysis and the time span (long, medium, or short term)
- Identify key drivers of change as it pertains to your business or industry (strategy frameworks are useful here)
- Determine critical axes of uncertainties
- Build plausible scenarios (future states based on identified uncertainties)
- Assess the possible impacts of the alternative scenarios created.
- Stress-test your scenarios for internal consistency and external validity
A word of caution here…
To be sure, scenario planning is not forecasting or prediction. With rapid environmental changes, it is strategically impossible - and dangerous - to develop a single view of how the future might unfold. The point is not to predict or to prefer one future scenario above others, but to be alert to the entire range of possible outcomes. Predictions are dangerous because it blinds considerations of alternative states; and preference of one scenario over the other may point to spurious probabilities and accuracies.
One last thing - consultants often bring valuable capabilities to drive the strategic conversations needed for well-reasoned scenarios. You may reach out to me to incorporate scenario planning into your next strategy session and leadership development.
Dr. Emmanuel Emielu is an executive coach, facilitator, and consultant, His specialty is at the intersection of strategy, leadership, and technology. He has led individual and corporate sessions across Africa and Middle East for almost 20 years now. Reach out here
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