Scenario Planning
Scenario planning is a structured, creative and shared process for to make sense of an uncertain future.
What is scenario planning?
Scenario planning is a structured, creative and shared process for organisations to think about and make sense of an uncertain future and not an end in itself. It is about foresight – getting an idea about what plausible futures might look like. An approach to thinking about the future which lets you free up your thinking about the here and now; explore plausible futures (always more than one because the future is not pre-determined); and, think about implications for decision-making today. The goal: to act with wisdom in the present informed from a perspective from the future not only the past. It is about attempting to better understand the future so that we are not derailed by uncertainty.
By combining perspectives of the future and the past organisations benefit from increased responsiveness and flexibility. Essentially, they become more agile, increasing their competitive advantage.
Scenarios provide a common language for strategic conversations; can operate as a risk assessment tool for specific decision(s); provide a platform for the evaluation of existing strategy or the development of new strategy. They allow for the development of a shared view of the future and for the organisation, through its leaders, to consider how it wants to position itself in that possible future.
The purpose/focus of this methodology is not to absolutely define a strategy for the organisation or define the future with certainty. It is about, through a process of thinking and exploration, equipping the organisation to make better decisions in the event the scenario they envisage unfolds. This is done by broadening the boundaries of our perceptions:
·Assessing the implications of present actions/decisions
·Detecting and avoiding problems before they start (early warning indicators)
·Considering the present implications of possible future events (proactive strategy formulation)
·Envisioning aspects of desired futures (normative scenarios)
The role of foresight in scenario planning
Before we engage in scenario planning we need to understand what is happening in our environment:
Analysis – what seems to be happening
Interpretation – what is really happening
Prospection – what might happen
The output of the foresight process is to ask what might we need to do. All of this is a precursor to detailed scenario planning and strategy: what will we do and how will we do it.
Types of futures
Possible – what MIGHT happen (future knowledge)
Plausible – what COULD happen (current knowledge)
Probable – what is LIKELY to happen (current trends)
Preferred – what we WANT to happen (value judgments)
Strategy and scenario planning
Strategic thinking: exploration, intuitive, synthesizing, creative, inductive, disruptive, incomplete/ambiguous information, generating options
Strategy development: assessing options, making choices, making decisions and/or setting a destination or direction
Strategic Planning: implementation, analytical, deductive, making it happen, getting things done, pragmatic, can do, actions
Scenario planning therefore is not strategic planning. It is a strategic thinking process. It is an opportunity about exploring options not taking actions. The key question is: what might we need to do not what will we do or how will we do it.
What are scenarios?
Scenarios are possible views of the world, described in a narrative form (stories) that provide a context in which a manager can make decisions.
By seeing a range of possible worlds, decisions will be better informed, and a strategy based on this knowledge and insight will be more likely to succeed.
Scenarios do not predict the future, but they do illuminate the drivers of change: understanding these drivers will assist managers to take greater control of the situation
The scenario planning process
1. Identify the focal questionSomething that is critical to the future of your unit – now. Often emerge from the current challenges. May be the answer to the question: What one question would you ask a real psychic? Create the opportunity for suspension of belief by choosing a horizon year – the distance into the future the scenarios will extend.
2. Undertake environmental scanning – internal and externalLook beneath the events, news items, themes and trends for the deep drivers of change. Consider major drivers of change under the headings of social, technological, economic, environmental, political.
3. Select and rank the drivers of changeClassify the drivers using a two-by two grid examining impact and uncertainty. Low uncertainty means that we are reasonably certain that this driver will play out or continue in ways that are well understood. High uncertainty means that we have no clear idea which of a number of plausible ways it might play out.
4. Build the scenario matrix
High impact, low uncertainty: predetermined element or trends should be present in every scenario.
High Impact, high uncertainty: critical uncertainty – choose the two most uncertain of these to include in the scenario matrix.
Only include the blue drivers in your scenarios if you like and if it makes sense to do so – particularly if you think they will be significant in the future.
Choose the two drivers that are the most uncertain and the most critical in terms of impact on your organisation.
5. Develop the scenarios
In the workshop break into small groups and get each group to work on fleshing out one of the worlds. The requirements for this step are to suspend disbelief, trust your intuition, look for plausibility, surprises and novel elementsScenarios must be internally consistent and plausible – they have to make sense to the people creating them and to the people in the organisation who will read them
6. Present the scenarios
7. Consider the strategic implicationsThe actual scenarios are the only or the main purpose of the exercise, the resulting “freeing up of thinking” while creating them is the big win. The scenarios also allow for the expansion of understanding of what options may be available in the long-term (shifts frame of reference, examine the implications for the services provided by your unit in each scenario world, examine what your unit would need to do to remain viable in each world
Scenarios provide clues about what might be important drivers of change in the future and how these drivers might interact and affect the organisation. The aim, once you have the scenarios, is to develop strategies that are robust across all scenarios – given what we know about how the future might develop. They also allow for the identification of early warning indicators that events in the scenarios are happening and if we see these – how will we respond.
The scenarios allow you to help imagine the consequences of different choices of decision strategies in each of the worlds without having to live with the consequences of a wrong decision or strategy for the rest of your life.
There is one more consideration: the world changes suddenly and in a totally unpredictable way. Wild cards are low probability very high impact events that are:
Wide in scope and directly affect the human condition
Intrinsically beyond the control of any single institution, group or individual
Rapidly moving
If you do not think about wild cards before they happen then all of the value in thinking about them is lost. (Think of this as the horse having bolted and it then being too late to close the stable door.) If we accept the possibility of a wild card occurring in our future, the only effective defence is to begin to systematically think about them now and at least explore their implications.
Using scenario outputs
Does your organisation’s existing strategy stand up to all the future worlds presented in the scenarios?
What rationale would you have for pursuing various strategic options within each scenario?
What early indicators will we monitor?
After considering the strategic implications of the scenarios, what actions might we recommend?
Deciding on an implementation plan.
When would you use scenario planning
When the power of the external environment is great – when the forces at work on the organisation require “outside-in” rather than inside-out thinking
When the organisation needs a shared context, shared vision and shared forward view.
When functional teams need to collaborate – working together on scenarios may help strengthen current working relationships.
How to implement
STAGE 1: Clarify your aims – why are you doing this?
STAGE 2: Engage stakeholders – spend time on this until you have buy-in.Who will drive the process? Who needs to be consulted internally and externally? Ensure all these players are familiar with the process, its aims and expected outcomes. Address concerns about the value of scenarios and how they will be used in decision-making or planning.
STAGE 3: Understand the organisation.Can the project be resourced? Who might oppose the project and why? Who needs to be convinced of the value of the project? Who can you work with to apply the scenarios in the organisation?
STAGE 4: Timing of scenario projects.Is the organisation seeking input on future directions or the development of a shared vision/understanding to underpin decisions? Is the organisation facing specific challenges: a chaotic external environment; critical decisions to be made, business plans not being met, changes in traditional markets threatening services or supply chains…..
STAGE 5: Developing scenarios.
STAGE 6: Communicating the scenarios.Who is the target audience? Who are the decision makers and who are the influencers? Who will benefit and who will lose under each scenario? How can their needs/concerns be met?
STAGE 7: Using the scenarios in planning and policy development
Scenarios are only valuable if they are used by the organisation – it is the use of the scenarios, not their mere existence, which is important. Use the scenarios to identify emerging trends and discontinuities - the early indicators of change. Use the scenarios to develop awareness of the challenges the organisation faces.