Scenario Planning– Thinking Future-Uncertainity-Unexpected: Strategic Playbook-Plans to Navigate Tomorrow and Beyond…

Scenario planning is discipline for discovering the entrepreneurial power of creative foresight in contexts of accelerated change, greater complexity, and genuine uncertainty. ~Pierre Wack…

In preparing for battle, I have always found that plans are useless, but planning is indispensable. ~Dwight D. Eisenhower…

Scenario Planning, in simple terms, is a strategic planning method expressly developed to test the viability of alternative strategies… a process that stimulates imaginative, creative thinking to better prepare an organization for the future. To flourish in today’s volatile business environment, decision-makers must have vision to evaluate what may lie ahead and identify the best course of action.

Scenario planning allow organizations not only to avoid dead-ends but, more important; ensure equilibrium in off-balance economy, think through change, choose the way forward with quicker, more complete, accurate decision-making for success.

According to Caspar van Rijnbach; scenario thinking is not primarily about planning, it’s about learning (that’s why I refer to scenario thinking instead of scenario planning). It’s about teams working together, discussing, sharing… It’s about connecting with experts that are able to provide insights about economic, social-political trends, raising questions and provoking insights. Also, it helps to mitigate the dogmatic ‘true view’ group thinking by the management team… Instead, it instills a fresh strategic thinking awareness for creating new innovative insights…

According to Kay Sargent and Peyton Pond; through scenario planning, a firm’s stance is proactive-optimistic, yet also defensive and even preemptive. Scenario planning takes into account the many forces driving change in the current business environment… According to Rob Willey; scenario planning is described as a way of rehearsing the future to avoid surprises by breaking through the ‘illusion of certainty’.

However, unlike traditional strategic planning, which assumes that there is usually just one best answer to strategic question; whereas, scenario planning entertains multiple possibilities. Also, unlike contingency planning that normally focuses on a single uncertainty, scenario planning investigates several simultaneously. According to Ross Dawson; the greater the uncertainty, the greater the value of scenario planning– and, in most industries today uncertainty is increasing. In fact, engendering scenario thinking among executives is far more important than scenario planning itself; however, scenario planning is often the best route to that outcome.

According to Global Business Network; scenarios are not predictions; rather, they are plausible accounts of how relevant external forces might interact and evolve in future. In scenario planning, typically, organizations create three-four scenarios that capture a range of possibilities; examines the opportunities and threats that each may bring; then makes short- and long-term strategic decisions based on these analyses.

Although scenario planning has gained much adherence in industry, its subjective and heuristic nature leaves many academics uncomfortable, for example: How to know what are the right scenarios? How to go from scenarios to decisions? Furthermore, significant misconceptions remain about its intent and claim… but, to take the scenarios too literally as though they are static beacons that map out fixed future is a mistake. However, scenario planning is important tool for examining  uncertainties, framing perceptions, collective learning… In actuality the aim is to bind the future, in a flexible way– such that it permits learning and adjustments as the future unfolds…

In the article Secret Of Successful Scenario Planning by David Niles writes: In business, as in life, real outcomes often don’t follow the averages. Yet much of corporate strategy is planned as if they always did. Far too many companies make strategic planning a routine exercise. They take last year’s budgets and results, and assume some modest variation from last year’s mean (average).

By relying on simple variations on the mean, companies effectively homogenize data and miss crucial key information. When you average-out the customers’ demand, you lose sight of the customers’ key decision thresholds. For example; Which ones will buy tomorrow and why? What does that say about their changing needs? Similarly, when thinking about competition, you just can’t model where the competitors were last year; in terms of pricing, service…

You must discern where they’ll be in future… These ideas may not sound revolutionary, but very few businesses show discipline to create scenarios and measure probabilities for unexpected market changes. However when you do, you can better evaluate possible outcomes, probabilities, underlying drivers… and greatly improve the company’s ability to see around corners and prepare for the future.

In the article How to Build Scenarios by Lawrence Wilkinson writes: Scenarios are specifically constructed stories about the future, each one modeling a distinct, plausible world in which we might someday have to live and work. Yet, the purpose of scenario planning is not to pinpoint future events but to highlight large-scale forces that push the future in different directions.

It’s about making these forces visible, so that if they do happen, the planner will at least recognize them. It’s about helping make better decisions today. This all sounds rather esoteric, but according to Peter Schwartz; scenario making isn’t rocket science… scenario planning begins by identifying the focal issues or decision factors… Ultimately, the power of scenario planning helps us understand the uncertainties that lie before us and what they might mean… It helps us ‘rehearse’ our responses to those possible futures… it helps us spot them as they begin to unfold.

In the article Ways to Apply Scenario Planning by Paul Schoemaker writes: Whenever you face high uncertainty, you need to be creative as you navigate uncharted waters. But you also need a prepared mind. Many organizations use scenario planning to test robustness of their current strategic plans against a wide range of alternative scenarios. Its equivalent of putting an airplane wing in a wind tunnel to see at what point it fails as pressure builds up. Stress-testing helps companies minimize potential negative consequences and be better positioned to seize opportunities.

Companies on the move often use scenario analysis to expand their geographic footprint, explore adjacent markets, invest in new technologies, reach beyond their industry boundaries… considering a wider range of futures that might bring new opportunities… However, don’t think of scenario planning as just a corporate activity conducted by futurists and staff people.

Savvy organizations translate and adapt the scenarios to multiple management levels to connect with those managing functional and business strategies… Agility requires that your strategic intent is flexibly combined with actions that will make your strategy happen, which requires adaptive leadership as well as a good strategic radar… sharing views, discussing trade-offs and building support for key strategic initiatives. Use scenarios to explain strategic choices and build support inside the company, and well beyond.

Planning is all about getting to where you want to go, while scenarios are about getting there on the best available road. Making decisions based on prior events can be dangerous and counterproductive for thriving-surviving in these uncertain times. Scenario planning answers: ‘What if’ questions– that involve important issues and large external influences.

Unlike strategic planning that postulates single anticipated future, scenario planning looks at alternative versions of the future without trying to predict it. The goal is to work laterally and consider unexpected surprises that undo most extrapolations…

According to King Whitney; we all adapt to change in a variety of ways. The most detrimental is getting stuck in the past. It’s easy to fall into the trap of running your business while looking in the ‘rear-view mirror’... However, despite the growing popularity of scenario planning a number of misconceptions remain, for example; all too often, scenario approaches deteriorate into little more than a conventional forecasting effort that involves assigning explicit probabilities to potential outcomes.

Or, at the other extreme, scenario planning devolves into loosely grounded futurist musings with little if any relevance to current circumstances. Another common mistake is casting scenario planning as an abstract exercise that may provide value in the distant future but has little or no practical application for immediate decision-making. But, on the contrary, scenario planning provides leaders with a better understanding of the world and the macro drivers of change that are at work…

The art of scenario-based strategic planning is to connect the world of ‘what ifs’ with down-to-earth decision-making process. Necessarily, that suggests the requirement to translate 50,000-foot concepts into clear-compelling implications for markets, companies… When done effectively– creative, rigorous manner with engaged, open-minded stakeholders– scenario planning is invaluable tool for gaining immediate impact and longer-term advantage…

According to Peter Drucker; most common source of mistakes in management decisions is emphasis on finding the ‘right answer rather than right question’. This highlights one of the challenges that business leaders face; an overriding desire for greater certainty and precision at time when certainty and precision are increasingly elusive. In practice, as we know, the future is never certain: Consider, for example, the long list of ‘unknown unknowns’…

According to Michael Litchfield; the value that a properly executed scenario planning exercise delivers is not to predict best or most likely future, but to uncover wide range of possible situations and develop range of associated strategic responses. Perhaps even more valuable, however, is the development of a sense of risk awareness and disaster readiness within an organization…

However, despite widespread use of scenario planning there are those who criticize the method, and mostly challenge the subjective nature of the process, and inability to quantitatively measure its effectiveness…

According to Pierre Wack; the future is no longer stable; it’s a moving target. No single ‘right’ projection can be deduced from past behavior. The better approach is to accept uncertainty and try to understand it, and make it part of our reasoning. Uncertainty today is not an occasional, temporary deviation from a reasonable predictability; it’s a basic structural feature of the business environment.

The methods used to think-plan about the future must be appropriate for a changed business environment. Scenarios planning starts by dividing our knowledge into two broad domains: (1) things we believe we know something about, and (2) elements we consider uncertain or unknowable…

The art of scenario planning lies in blending the ‘known and unknown’ into a limited number of consistent views of the future that span a very wide range of possibilities. The real value of scenario planning is that it allows policy-makers the opportunity to ‘rehearse the future’ and, in this sense scenario planning is much about– the journey as the destination.