The Importance of Scenarios when Dealing with Uncertainty
By Denise Harrison, Senior Consultant
How can we better deal with uncertainty when we develop our strategic plan? Many strategic planning teams struggle with this issue. While it is important to understand what you know as facts and what your assumptions for the future are, I have found that some good scenario planning helps a team prepare for a wider range of possibilities that might occur in the future. By looking at different scenarios, the team can assess what will work in each scenario and then select the approach that will benefit the company in the most likely scenario, but still balance that approach by not closing out options that will work if another scenario unfolds.
Generating different scenarios
Some teams generate a probable scenario and then move to generate an upside and downside. For example, the probable scenario is that we achieve 10% growth and the upside is 12.5% and downside in 8%. While this works, I find that high performing teams that discuss actual events/trends and then develop scenarios corresponding to possible outcomes is a better way of generating scenarios. Some examples of trends and events include:
- Product launch is delayed by 12 months.
- Oil prices plummet and stay down longer than our probable scenario (this could be good or bad depending on what your company does and who your customers are).
- Acquisition has unexpected fall-out and customers leave and go to competitors.
- Customers’ preferences change faster than we anticipate (Blackberry).
You should have your team members come up with ideas for different scenarios. Generate what these environments will look like out 5-10 years. Ask the question: What will we need to do to be successful if this is the competitive landscape? You will notice before you start working, that several of the outcomes will have similar results. Select scenarios that will generate different actions.
Once you have generated different “success” strategies, then evaluate which scenario is most probable, and then look to see what you can do to accommodate other “success” strategies so that you maintain your flexibility moving forward. While you may not be able to keep all options open, you may be able to keep some avenues open until time passes and you have a better view of what the future has in store for your company.
Another benefit of this exercise is it allows the team to think more broadly and be more aware of the external factors that impact your business. This will help the team deal with the changes that will inevitably happen during the planning horizon. As you start to see movement that makes another scenario unfold, bring the team back together and recast your strategy. If you anticipate this movement faster than your competition, it will help position your company to gain market share or weather an industry downturn better than your competitors.
If you are interested in discussing more about how to generate scenarios that will enhance your team’s flexibility, please give me a call at: 910-763-5194 or email me at email@example.com. For more information about how to enhance your team’s strategic planning process please listen to our webinar: Why My Strategic Planning Is Not Working?
Denise Harrison is a senior consultant for the Center for Simplified Strategic Planning, Inc. She can be reached at firstname.lastname@example.org.
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