Tuesday, 30 March 2010

Scenario Planning

Scenario Planning is a powerful methodology for considering the implications of your strategic analysis for the future.   Although you can't predict the future, it is possible to anticipate a range of different outcomes.

You can achieve this as follows:
  1. Identify the critical uncertainties facing your business (2 or 3).   These should follow from the threats and opportunities you've already identified.
  2. Identify discreet possible outcomes for each.
  3. Map and vividly describe the permutations of outcomes (scenarios) for all uncertainties together - they don't happen in isolation.
  4. Consider how well you would fare under each scenario?
  5. Identify the key variables to watch - these are the early warning signs that will help you understand how the critical uncertainties are playing out.
  6. Where possible, identify means to engage with and.or influence the critical uncertainties, such as industry bodies, etc.
  7. Evaluate all strategic choices against your scenarios.   Strategic choices that are robust across multiple scenarios are much more valuable than those which pay off under some scenarios only, and result in losses in others.
There are 4 additional critical success factors:
  1. Aim for realistic, plausible yet distinct possibilities.
  2. Avoid bland outcomes, such as the stock market going up by 5% versus down by 5%.
  3. Understand the causes and effects and the inter-relationships between your critical uncertainties.
  4. Ensure executive engagement, alignment and commitment around the scenarios.