3 ways you can use scenario planning
The old adage ‘if you fail to plan, you plan to fail’ may seem cliché, but the logic behind the saying is perhaps some of the best advice you can give to anyone starting out on a new project or enterprise. This is no less true when it comes to your innovation strategy, as without planning you can easily find yourself floating from one seemingly good idea to the next, without any indication as to the progress or potential success of your efforts.
WHAT IS SCENARIO PLANNING?
There are many ways you can plan effectively, but one useful method is scenario planning. Scenario planning encompasses a number of facets, and is defined by SME Strategy as ‘making assumptions on what the future is going to be and how your business environment will change overtime in light of that future.’
The article argues that while most organisations would prefer to make decisions based on solid data and analysis, this is substantially more difficult when planning for a future, which, by its very definition, is unknown and subject to multiple changes. Scenario planning seeks to deal with this uncertainty by identifying ‘different “realities” of what might happen in the future of your business’ and limits the ‘risk of opening the door to increased costs, increased risks, and missed opportunities.’
Here are three ways you can make scenario planning useful for your organisation when carrying out your innovation strategy.
ASK THE RIGHT QUESTIONS
Writing for Forbes, Jay Ogilvy explains scenario planning as involving multiple ‘scenarios [which] are alternate futures in which today's decisions may play out. They are stories with beginnings, middles and ends. Good scenarios have twists and turns that show how the environment might change over time.’
Ogilvy suggests working with a set of four or five scenarios, as this allows for some moderate and some seemingly far-fetched scenarios to be explored, without having so many scenarios that it becomes confusing and impossible to discuss. He suggests that ‘each scenario should contain enough detail to assess the likelihood of success or failure of different strategic options,’ with some of the key questions to ask including:
Will there be sufficient demand for a new product?
How much competition can we anticipate?
Have new technologies rendered a product obsolete?
Will political instability or geographical change put these plans beyond our reach?
STRESS TESTING LEADS TO AGILITY
One of the benefits of using scenario planning is the ability to put your strategy to the test. Inc.com uses a relatable analogy to explain this value, arguing that ‘it is the equivalent of putting an airplane wing in a wind tunnel to see at what point it fails as pressure builds up.’ It continues by saying that ‘many organizations use scenario planning to test the robustness of their current strategic plans against a wide range of alternative scenarios,’ thereby helping them to minimise potential negative consequences or unforeseen challenges.
Such stress testing can help to ensure your organisation is agile and able to deal with challenges quickly and seamlessly. Inc.com argues that when put under stress ‘some initiatives in this portfolio will prove robust across scenarios; others will be highly scenario dependent and therefore fragile.’ Knowing this in advance contribute greatly to agility and adaptiveness, and ensures that your organisation can thrive under pressure.
CHALLENGE GROUP THINK AND CONVENTIONAL WISDOM
A final way scenario planning can be used is to combat group think and conventional wisdom. Often in organisations which have been salient and successful for some time, it is difficult to maintain the entrepreneurial thinking and culture of innovation that comes with being a new business. Because of this it is easy to fall into the trap of group think and conventional wisdom, rarely thinking outside the box and struggling to generate new ideas.
Scenario planning can help to move away from this, as it requires you to think outside of the reality that currently exists. A report by McKinsey into the value of scenario planning argued that in many companies a hierarchy of thinking can occur, whereby employees require validation from senior members of the team before expressing their ideas and opinions. Yet this habit can be limiting, and McKinsey argues that ‘scenarios allow companies to break out of this trap by providing a political “safe haven” for contrarian thinking.’
By moving away from status quo thinking and core assumptions,
organisations can begin to push the boundaries of idea generation and innovation and build a secure future for their brand.
Don’t know where to start with scenario planning? Take a look at our Shell Scenarios workshop to see how you can get started.