What are the steps to effectively plan for different scenarios?

1 Identify your focal question

The first step is to define the main question or problem that you want to address with scenario planning. This should be clear, specific, and relevant to your context and objectives. For example, you might ask: How will the pandemic affect our customer demand and supply chain in the next year? Or: What are the best strategies to grow our market share in a competitive and dynamic industry?

2 Gather relevant data and trends

The next step is to collect and analyze data and information that relate to your focal question. This includes historical, current, and projected data, as well as qualitative and quantitative sources. You should also identify the key drivers and uncertainties that influence your question, such as economic, social, political, technological, environmental, and legal factors. For example, you might look at: How has the pandemic impacted our sales and operations? Or: What are the emerging customer needs and preferences in our industry?

3 Develop plausible scenarios

The third step is to use the data and trends to create different scenarios that describe possible future states or events. Scenarios are not predictions or forecasts, but rather stories that illustrate how things might unfold under different assumptions and conditions. You should aim to develop at least three scenarios that cover a range of outcomes, from optimistic to pessimistic, and from probable to improbable. For example, you might create: A scenario where the pandemic is under control and demand and supply are stable. Or: A scenario where the pandemic worsens and demand and supply are disrupted.

4 Evaluate the implications and risks

The fourth step is to assess the impact and consequences of each scenario on your focal question and your goals and projects. You should consider both the opportunities and the threats that each scenario poses, as well as the likelihood and severity of each risk. You should also identify the indicators or signals that would suggest that a scenario is becoming more or less likely to occur. For example, you might evaluate: How would each scenario affect our revenue and profitability? Or: How would each scenario affect our competitive advantage and customer loyalty?

5 Design and test your strategies

The fifth step is to design and test your strategies and actions that would help you achieve your objectives and mitigate your risks in each scenario. You should think about how you can leverage your strengths and resources, as well as how you can address your weaknesses and gaps. You should also consider how you can adapt and adjust your strategies as the situation changes and new information becomes available. For example, you might design: A strategy that focuses on innovation and differentiation in a high-demand scenario. Or: A strategy that focuses on cost-efficiency and resilience in a low-demand scenario.

6 Monitor and update your scenarios

The final step is to monitor and update your scenarios and strategies on a regular basis, as the external environment and your internal situation evolve. You should track the indicators and signals that you identified in the previous step, as well as any new data and trends that emerge. You should also review and revise your scenarios and strategies as needed, and communicate them to your stakeholders and team members. For example, you might update: A scenario that becomes more or less likely due to new developments or events. Or: A strategy that becomes more or less effective due to new feedback or results.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?