How can scenario planning enhance your strategic planning?

You can't claim to engage in strategic planning if you don't envision two or three potential future scenarios, where one is necessarily the "worst-case" and another the "best-case," with an intermediate scenario as well. The key here is that crafting a scenario requires you to emotionally detach from the project and contemplate genuinely complex situations, evaluating the likelihood of unfavorable outcomes. To what extent should you be able to predict black swan events? It's almost impossible, but it would be wise to consider a "black swan scenario" beneath the "worst-case scenario." Additionally, envisioning a very, very favorable scenario—a "not even in my dreams scenario."

The only way to achieve this is by becoming an expert observer of tides. Fishermen know precisely when the tide is at its highest and when it's at its lowest, when the wind is blowing in one direction and when it shifts to another. They know this because they observe it, and they share this information with fellow fishermen. If you want to align your IT strategy with the "tides" of the market and technology, you must learn to observe technology, its trends, its currents, its rationales, its dynamics, and also delve into a bit of history. You need to grapple with this question: What costs in my industry can technology reduce or eliminate? How challenging is it to adopt this technology? Is it just a new IT, or is it a new business model?

A. Avoid creating an excessive number of scenarios. B. The first one should be the scenario you hope doesn't happen. The unfavorable one. C. Another should be an "overly favorable" scenario, and D. The "status quo" scenario. Assign a likelihood to each one, but always add an extra 15% to the worst-case scenario. We often don't want it to happen, and that's why we tend to think it's unlikely. The sum of all probability occurrences should equal 1.

Scenario planning is a great tool to enhance strategic planning. It allows organizations to anticipate and prepare for potential changes in the future. This helps organizations create flexible strategies that can be adapted to changing environments. Scenario planning also encourages organizations to think outside the box and consider alternatives that may not have been previously considered. By considering different scenarios, organizations can be better prepared for the future and make better decisions.

Scenario planning involves a great deal of stakeholder collaboration and communication and understanding how to use the tool to think critically about the future. But scenarios alone do not determine positive business outcomes; a key to successful scenario planning is making it pragmatic. A strategy needs to be developed and existing strategies tested based on the scenarios to provide strategic options, build resilience, and achieve business agility. Recent geopolitical risks show how critical it is to prepare for even the most unlikely scenarios. For instance, consider the rapid shifts in global trade dynamics and regulations, prompting companies to adjust their strategies. This is why this is a must-have tool for a strategic architect.

It's better to contemplate dreadful scenarios that don't occur than to envision optimistic scenarios that get tarnished by neglecting the risks outlined in pessimistic scenarios. The best approach is to plan while considering the worst-case scenario, but execute with the worst in mind, always armed with tools. This is how man reached the Moon; the President of the United States had a statement prepared about "the heroes" we "lose" on this "adventure," as well as a greeting salute for the astronauts who would step onto the natural satellite for the first time.