Tuesday, 26 September 2023 IMS HomepageHome

Scenario Planning

We live in uncertain times, in times of great change, in times of intense competition. Organisations understandably find it difficult to plan far ahead. If they do, the external environment or the technology might have changed around them. They know they have to include the changes in their preparations for the future, but are not sure how.

A number of them have turned to the technique of scenario planning; a device for exploring different possible futures where firm forecasts are not possible, because the rate of change is too fast, the nature of change is unpredictable, or the planning horizon is very long. It is particularly apt for situations where the goalposts might move because of a revolutionary or discontinuous change in the environment such as technology.

The aim is not to carry out typical 3 or 5 year strategic planning. It is based on the premise that we can't accurately forecast or predict. Thus, we know that the organisation must be flexible and responsive. Scenario planning aims to sensitise key players to the uncertainty, to create an awareness of possibilities and potential responses and to make the organisation fit for this uncertain world.

One way to begin the process is to carry out a reality check or 'uncertainty audit' by asking the key players within the organisation to identify the areas where key uncertainties exist, especially those areas where a greater degree of certainty would be especially useful. In what ways are we uncertain? What are the possible outcomes? What are the most probable?

Similarly, we need to identify the things that are unlikely to change; those factors that will persist under any of the future scenarios. We can simply accept and largely ignore these.

Once this initial set of unknowns and givens has been explored, a team is given the task of drawing up some plausible pictures of what the world would look under a number of different outcomes. Again, the aim is not to predict the future in detail, but to focus on possible changes to the business environment and their likely effects. There is no simple mechanistic way to build scenarios. They are assembled from the basic research and analysis, combined with some hard, creative thinking using real imagination. The scenario writer needs the skills of the story teller as well as the strategist.

Of course the scenarios are targeted and focused on the issues that the organisation wants to address. They are not simple daydreams about the future but a look at those factors which affect the specific future of the organisation.

These scenarios are then presented to a wider group for comment and discussion. In a strategic planning setting, this may be the senior management group of the organisation. They can be presented in a meeting or series of meetings, or via electronic discussion groups. The aim is to get a shared understanding of these possible outcomes and, more importantly, an understanding of likely company actions and responses. This works best when the senior group have already started to explore possible future strategies and can use the scenarios to test the robustness of the decisions they might make and the resulting directions for the organisation.

Moving backwards from the uncertainties, the aim is to identify the warning signs and the trigger points that will signal the kinds of important changes discussed. This will give the organisation more time to respond, with an understanding and early evaluation of the possible responses. Some of these warning points are relatively weak signals so if we are not looking for them, we probably won't see them!

If done even moderately well, the technique works on the level of team-building and sharing ideas. If done effectively, individuals become more alert to the warning signs, more flexible, more aware of the opinions and interests of others and thus more ready to act decisively and work as a team when they see the changes coming.

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