Scenario planning is a technique that helps you explore and prepare for different possible futures in a complex and uncertain environment. It can help you identify opportunities and risks, test your assumptions, and adapt your strategy to changing conditions. In this article, you will learn how to use scenario planning in strategy in six steps.
The first step is to define the scope and purpose of your scenario planning exercise. What are the main questions or challenges that you want to address? What are the time horizon and the geographic scope of your scenarios? How will you use the scenarios to inform your strategy? Clarifying these aspects will help you focus your efforts and communicate your goals to your stakeholders.
The scope and purpose of any strategic lever where intent is making them coherent and interdependent. This can be easily explained with game of chess, where scope is how quickly address moves to reach end result and prove better than competition. The game of chess or scenarios planning is by very nature complex and requires creation & planning of alternatives on understanding and advancing on competition. The information repository addressing and understanding consumer better than competition helps for clarity on communication and efforts to culminate this into effective purpose.
The next step is to identify the key drivers and uncertainties that will shape the future of your context. Drivers are the forces or factors that influence the direction and magnitude of change, such as technological trends, social values, or economic conditions. Uncertainties are the unknowns or variables that create ambiguity or unpredictability, such as political events, consumer preferences, or environmental shocks. You can use different methods to identify and prioritize the drivers and uncertainties, such as brainstorming, interviews, surveys, or analysis of historical data.
Market anticipation remains a key that will help you to increase probability of success. Customers are like magnetic compass they always direct you by clues for tapping in winning competitive moves products and customer satisfaction. Re-orientation to variables that defines and allocates segment wise distribution of product making it more user-friendly and ambidextrous. Teams involving methodical and collaborative approach helps to acknowledge structured methods by developing forecast and analytical predictions from historical data.
The third step is to develop a scenario framework and narratives based on the key drivers and uncertainties. A scenario framework is a matrix that plots the most important and uncertain drivers on two axes, creating four quadrants that represent different combinations of outcomes. A scenario narrative is a story that describes how each quadrant could evolve over time, highlighting the main events, actors, and implications. You can use different tools to develop and visualize your scenarios, such as diagrams, timelines, or maps.
The fourth step is to assess the implications and challenges of each scenario for your strategy. How would each scenario affect your goals, resources, capabilities, and stakeholders? What are the opportunities and threats that each scenario presents? What are the common or divergent themes across the scenarios? How robust or resilient is your current strategy in each scenario? You can use different techniques to assess and compare your scenarios, such as SWOT analysis, gap analysis, or sensitivity analysis.
The fifth step is to identify the strategic options and actions that you can take to respond to each scenario. What are the possible ways that you can adapt, innovate, or transform your strategy in each scenario? What are the benefits and costs of each option? What are the trade-offs or synergies between the options? How flexible or feasible are the options in different scenarios? You can use different frameworks to identify and evaluate your options, such as TOWS matrix, portfolio analysis, or decision trees.
I think it is very important in this process not to overthink and get lost in details of many possible changes and options. Best strategies work on strong understanding of constants (time, land) and tectonic processes that are so massive and have such inertia that for our limited human perspectives they seem everlasting. If our strategy is well based on those there isn't much substantial that can change and interrupt us. Scenario planing is, in my opinion, more to do with resource allocation and strategy execution, for example somewhere we will have to commit more than initially thought, or it'll take longer to get from A to B. Main strategic outline stays the same because it's solid from the get-go.
The final step is to monitor and update the scenarios as the situation evolves. How accurate or relevant are your scenarios over time? What are the indicators or signals that suggest a scenario is becoming more or less likely? How do new events or information affect your assumptions or drivers? How do you incorporate feedback or learning from your actions? You can use different methods to monitor and update your scenarios, such as scenario dashboards, scenario workshops, or scenario audits.
Once the owner of the company that I worked in told me "We must closely follow the competition" to which I replied "Wouldn't it be better they follow us, that way we make sure they stay behind". When setting the strategy it has to depend the least from competition and transient whims of the market. We have to have our clear direction based as much as possible on solid foundations, on things that do not or can not change easily on a whim. Once we have such a strategy, possible scenarios have more to do with the execution of the strategy, rather than with overall rethinking of the strategy.