Scenario Planning

Scenario Planning is a method by which a company tries to face major unexpected and uncertain changes or upheaval in the environment.

Scenario Planning is also a process by which the company learns about the future for understanding the nature and impact of most uncertain and important driving forces that affect the world.  Exchange of knowledge is encouraged and understanding of central issues relevant to the future of the company are discussed and formulated.

Scenario planning is a military term and military strategic tool.  In 1960 and early 1970s Pierr Wack developed the scenario planning model used first by Royal Dutch/Shell.  It helped   Shell to subsequently handle the oil crisis in 1973 by improving its competitive position in the industry and later the oil glut.

Scenario Planning benefits:

• Managers are expected to go beyond the standard forecasting, accepted world view, and even looking for blind spots,
• Management is prepared to recognize and face a scenario in its early stages in case such a scenario unfolds,
• Management is made to see and understand the various disagreements which often occur when viewing different scenarios.

The Scenario Planning Process:

• Wide range of participation by people identified for this purpose is formulated,
• Participants are able to see the big changes likely to occur in society, economy, politics, technology, etc.
• All the views are made into a clusters or groups with a pattern,
• Forming of a rough picture/story based on these priorities – rough scenario,
• Drawing a detailed impact scenario – to determine how each scenario will impact the company.
• Identifying early alarm bells – things that indicate a warning signal for a particular scenario to unfold,
• Monitor, evaluate and review every scenario.

Some pitfalls to avoid:

• Scenarios are not forecasts,
• Failing to recognize simple differences are not important for scenario formation,
• Failing to understand that the scope of scenario to be broad and global,
• Missing the focus on scenarios that impacts the business,
• Without having adequate processes for engaging the executives/teams in scenario planning process,
• Failing to instill sufficient stimulus in scenario design, and
• Failing to use a specialized and experienced facilitator.

Questions:  

• Whatis the purpose of Scenario Planning?
• What are the Scenario Planning Processes?