The United States next year: Have you done your scenario planning?

Depending on the industry you’re in, and where you’re based in the world, the economic and political health of the USA could certainly matter to your business. That means that the outcome of America’s upcoming presidential elections could affect you, as could the ongoing pandemic situation there. Here’s how a #ScenarioPlanning approach might foresee the USA in 2021.

The presidential election in the United States is about five weeks away as I write this article. Of course, other factors besides the election will also affect the way 2021 unfolds in America (and the world), but the November vote, and all its possible consequences, loom large.

I thought I would share with my LinkedIn friends a simple example of the logic of scenario planning, my area of expertise, to demonstrate how this structured foresight methodology can help you visualize different potential landscapes that could plausibly evolve there next year. 

From today’s viewpoint, the elections on November 3rd present a classic case of what scenario planners call critical uncertainties. A “critical uncertainty” is something that could potentially have a big impact on your future, but whose actual outcome is not known at this point. Things could go one way, but they might also go in the opposite direction: In other words, you have a hard-to-predict “either/or” situation.

In the US election, it’s easy to see this: either President Trump will win or Joe Biden. There is no “gray area” in between. And depending on which way the vote goes, what will follow for the country (and countless companies active there) will potentially be very different: different policies, different tax rates, different legislative and regulatory agendas, different appointees in key government positions, different ways the president will react to events, and so on.

So this “either/or” – Trump or Biden? – is hugely important. But at the same time, and this is key: it’s completely uncertain. Sure, there are lots of opinions out there, but the truth is that right now, nobody knows with 100% certainty who is going to win. 

A second critical uncertainty facing the country concerns the pandemic. This is a big, complex topic, but to boil it down to an “either/or” for our purposes, in 2021 it is either going to end, or it is still going to be with us. Are these opposite outcomes both plausible? Yes. Is it uncertain which outcome will prove correct for 2021? Also yes. 

Bottom line: You won’t find better examples of “critical uncertainties” than these two!

What we scenario planners do next is draw up a matrix based on these two critical uncertainties, which you can see in the accompanying graphic. The matrix defines four quadrants, each of which represents a different scenario, i.e. a possible business landscape that the US could experience next year, depending on how the uncertainties resolve themselves.

What could these scenarios be like as actual business terrains in which you have to operate and succeed? Well, here are some possible characteristics they might have. Nota bene! These are not predictions – they are just meant to be quick’n’dirty notions of how they could turn out.

1. “Roaring 20’s”: Trump wins, the pandemic ends, and a whirlwind economic recovery gets underway: one of legendary proportions, with unheard of growth rates. How long will it go on? Maybe a good two or three years. Companies get back on their feet, rehire staff, and contribute to/take advantage of the boom. The unemployment rate heads back toward the 6-7% range. Travel resumes – flights for the summer of 2021 are sold out by March. Although business travel is slower to pick back up, thanks to our getting used to Zoom & co. Assuming no change in the control of the House and Senate, Trump manages to roll back more regulations, pinpointing help for sectors that were especially hurt by the lockdowns. Financial markets soar.
2. “Shelter in Place”: The pandemic isn’t over yet – no vaccine has proved successful – and certain second wave effects have meant that the economy is still in the doldrums. Travel is still restricted, which has finally led to the closure of hundreds of smaller companies – especially individual hotels and restaurants – despite attempts to help them via financial assistance. However, most schools are open, as the nature of the virus is better understood and more reasonable and targeted protective measures are in place, rather than the blanket measures of the early days of the pandemic. Nevertheless, House Democrats impeach the President again, citing “mismanagement of the crisis”. This goes nowhere, but it does lead to weeks of massive nationwide anti-Trump demonstrations and violent unrest.
3. “Adieu, Greenback”: Biden’s victory does not seem to change the trajectory of the pandemic, which drags on. In an attempt to stop it once and for all, a very strict lockdown goes into effect, and to mitigate its economic impact, he and fellow Democrats push through a massive “Covid tax” and record stimulus spending. Much of this money is diverted to labor unions and to shoring up the pension funds and deficits of state governments, which had not been well managed during the previous decade. The stock market, unimpressed, plunges and the US dollar sinks to all-time lows against other currencies. 
4. “The ‘Old One-Two’”: With the pandemic over, a recovery phase was picking up steam, but then the economy is hit by President Biden’s new tax increases and a wave of zealous re-regulation following the Trump years. Consumer confidence falls. On the streets, unrest flares up as the ever more vocal wing of the political left demands that Biden must raise taxes even more and redistribute the country’s wealth to assure greater social justice. (Or else!)

At this point, the objective of the scenario generation exercise (I emphasize again that they’re not predictions, just food for thought) is to assess how well positioned your company would be for success in these different landscapes. What impact would your company feel if one of these scenarios materialized? What strategy would allow you to benefit from the emergence of these scenarios, or at least be well prepared for the downside risks? 

There will be winners and losers in each scenario. There always are. What can you do to increase your chances of being a winner – in all four landscapes?

Scenario planning is about identifying the uncertainties that could have a big impact on the future, and anticipating the changes they might bring about. Key word here is “anticipate”. It’s no use sitting around and waiting for such big changes to take you by surprise. Ideally, you would have already been thinking about 2021 some time ago. But better late than never! Let me know if I can help you.

Good luck with your scenarios – whatever they turn out to be!