If your company or agency is concerned about how the future will unfold, more specifically, how your current strategy(s) may become irrelevant if the future doesn’t pan out quite the way you expect, then you may want to consider some level of scenario planning.
Scenario planning is quite different from strategic planning. With strategic planning, you have certain expectations about the future environment in which you operate. You develop a series of strategic goals (all aligned with your optimized operation), and with mission in hand, you move toward your vision. A bit oversimplified, but you get the point.
In contrast, scenario planning is a process that forces your planning teams to look at a series of possible futures. More commonly, four scenarios are selected. A couple of the scenarios might seem, based on history, more likely to occur. And, at least one will appear, on the surface, to be right out of a science fiction movie.
Years ago there was an energy-based employee credit union in Texas. Their far-reaching scenario addressed what the future would look like if their sponsor company ceased to exist. A bit unrealistic, wouldn’t you say? But, we all know what happened to that energy giant. More frightening than any science fiction scenario!
Your available planning and monitoring resources will determine the complexity of the scenario planning exercise. After you have identified a set of possible future scenarios, you will identify a series of metrics and/or indicators that will help you determine which future scenario is more likely to unfold. (Don’t expect an exact match, at best you will see a hybrid.)
The next step is the most crucial, and will provide you with the insight, tools, and pre-thinking necessary to be successful in any future scenario. We need to identify the customers, systems, processes, strategic relationships, product and service lines, facilities, and human resources that might be required if any of the scenarios come to fruition. Let’s look at an example:
If you rely heavily on regional distribution and physical delivery of your products (say a regional baker) and one of your future scenarios identify near-permanent gas shortages and rationing, how would you expect to deliver baked goods throughout Southern California?
Your scenario planning might drive you to consider a distributed network of bakeries – possibly developing strategic partnerships to access the resources of existing restaurants, cooking schools, et al with excess or off-hour capacity?
Now, if this crisis were to actually unfold, you may have already flushed out the strategies necessary to implement a plan more effectively and timely than your unprepared competition. Our baker in this example may or may not ever face a fuel crisis lasting long enough to make this type of change. Only time will tell. However, the outcome of this boardroom exercise may reveal a competitive strategy the baker could deploy today; which is to develop strategic partnerships with regional companies to provide additional baking facilities. They may even co-brand their goods with their new partners. This strategy may not have surfaced in a normal strategic planning exercise.
Some of the basic steps of scenario planning are:
1. Determine a set of possible future scenarios. (The key word here is possible, not just likely.) Remember the old adage about how the passenger railroad companies were overrun by the automobile industry because they failed to recognize they were in the transportation business. How might scenario planning have changed the outcome?
2. Identify the indicators and metrics to help determine which way the future is leaning. A simple quarterly dashboard is all you need. If you attempt to overanalyze the information you will get sidetracked. Look for the obvious trends as well as weak signals in the data.
3. Develop an inventory of resources you will need to thrive in each of these future scenarios. Do you have current strategic goals that incorporate some of the same resources? If so, factor this into your resource allocation/prioritization models.
4. Use your scenario planning data as an input to your external environmental analysis during your regular strategic planning exercises.
Remember, we are not predicting the future. We are developing a systematic process to monitor what the future may look like, with the intent of becoming more action oriented when the time arises, while our competition is wondering what happened.