Scenario Planning
In his book, A Brief History of Time, Stephen Hawking the celebrated physicist conclusively argues the arrow of time points only in the forward direction. That explains why we can remember the past, but cannot predict the future. This existentialist dilemma is exacerbated by the fact that all our knowledge is about the past, and all our decisions are about the future (Ian Wilson).
Scenario Planning provides a robust methodology for preparing the organisation for the uncertainties and unknowns beyond the horizon.
What is Scenario Planning?
Peter Schwartz once said that scenarios are a tool for helping us to take a long view in a world of great uncertainty.
It is a process by which we can consider uncertainties ahead. By asking what tomorrow might bring, how others may respond to our actions and to the changes in the environment, we can prepare ourselves to meet the challenges and opportunities that we may come upon.
The process of scenario (the word comes from theatre) building usually begins with creating stories about the future as we see them. These stories should talk about relevant factors that affect a company’s business environment, its customers, substitutes and others. If changes in politics, media, technology, macroeconomics of the society, or geopolitics are likely to impact the future, they must be woven in. These alternatives of tomorrow should describe how they might affect the customer, intermediaries, suppliers, employees and other players in the game.
A selection of these imagined futures is then used to uncover decisions an organisation must make. It is best to choose no more than three alternatives; fewer may simplify the assumptions while more than three might make planning complex and difficult.
How does one prepare?
Scenarios are then used to determine how a company must transform itself in order to leverage the future – cope with challenges and reap opportunities. In reaching these decisions, the company should strive to prepare itself for more than one scenario, preferably all three. Preparation itself begins with key decisions on all relevant parameters of an organisations functioning. Decisions should cover target customer groups, organisation structure, distribution channels, skills and capabilities, technology, etc.
Even as implementation of decisions follows, the company periodically revisits the scenarios, modifying and course correcting as necessary. This is a continuous process.
Scanning the future.
It is wise to constantly look ahead to try and foresee changes that may impact the future. This exercise should be carried out periodically by either an internal team or external assistance. It involves research, knowledge and information collection, sifting and interpreting them.
Where to begin?
It is always better to begin the process from inside. Start with a key decision that has to be made. Should we build a new plant close to a new market? Which communication technology should we back? How should we build the distribution channel for the customer of tomorrow?
Beginning outside in can lead to loss of focus. Arriving at meaningful decisions may also be difficult and time consuming.
Caution!
All of us are comfortable with our own views of the future. This often leads us to deny perspectives we do not share. Denial makes us blind to situations for which we have no enthusiasm. This is not conducive to preparation for tomorrow. The process of scenario planning, therefore, involves introspection and challenging existing mindsets.
Once decisions have been identified and agreed upon, they must be implemented. It requires commitment from the highest policy making body in the organization. Participation of the top management at appropriate junctures is imperative.
Often, information gathering and research takes considerable time and effort. The organization should be committed to deploy such resources as necessary. And persist.
It may bear repeating that scenario planning is not crystal ball gazing. It does not attempt to predict the future. Its primary task is to try and foresee changes in the environment and how they might affect the corporation. By so doing, the organization uncovers decisions it must make today to shape its tomorrow. Scenario Planning is a strategy formulation process for building sustainable competitive advantage.