Think Alexander the Great, Napoleon, Montgomery – real-world strategists who have used anticipatory planning techniques – battle scenarios – to arm themselves for victory.
Using the same principles, scenario planning is a strategic management tool used by organisations to make flexible long-term plans for the future.
Only those businesses ready to anticipate and evolve in a rapidly changing world can hope to keep ahead of the competition and win. With this in mind, policy makers use scenario planning to predict hidden weaknesses and inflexibilities in their organisations and their business methods. With these exposed well in advance, a company’s limitations and their impact can be avoided or reduced far more easily than if they came to light in an emergency.
The process
The initial step is an environmental analysis. Is an organisation fit to cope with today’s economic climate and what factors in this environment contribute to business success? Next comes scenario planning in which possible changes in the environment and their impact are explored. Then follows decisionmaking on corporate strategy to plan the achievement of future organisational success, based on the scenarios devised.
Scenario Creation
In his book On Writing, best-selling novelist Stephen King describes his inspiration for new stories beginning with a seed question: ‘What if?’ From this, a story grows and develops. This is the basis of scenario planning.
The scenario planning technique posits a range of possible futures, varying from positive to negative; predictable to surprising. It demands that the group assembled should imagine creative responses, which in the initial stages go well beyond considering responses to business issues.
It is essential that the leader encourages both structured and innovative thinking and that this thinking is consistent with the context in which it takes place. American management writer, Peter Drucker said: “The greatest danger in times of turbulence is not the turbulence – it is to act with yesterday’s logic.”
Scenarios combine known facts about the future (demographics, geography, military, political, industrial) with plausible alternatives (social, technical, economic, political). The latter are trends or driving forces. Brainstorming known facts and the driving forces affecting the future organisation will produce the initial scenario material. Initially, several mini scenarios may be created.
Royal Dutch/Shell began a successful programme of scenario planning in response to dramatic financial changes in the 1970s when investments were shaken by the driving forces of environmentalism and the OPEC Cartel. Its formula involves boiling the mini scenarios down to between two and four complementary scenarios, and the trend among scenario planners has been to adopt this practice.
Identifying two or three ‘containers’ into which to fit the mini scenarios is a challenging process, requiring much debate. This debate, however, often highlights fundamental issues facing the organisation, and the participants come to an understanding of what the most important driving forces for change may be. With this understanding, they will be equipped to deal with those changes should they arise in the future.