Scenario Planning – Solve Your Future Business Problems Large and Small

Scenario planning is not exclusively a business organization tool. It can be just as effective with high-level global issues such as climate change and disease, or even smaller business units and functional issues within an organization. It is a strategic tool for problems large and small.

Strategy development and the identification and mitigation of associated risks occur at different organizational levels. At the corporate level, strategy sets the general direction of the vision, mission and strategic objectives for the entire organization. Likewise, risks at the enterprise level are broader in nature and have a potential impact and are usually captured as part of an enterprise risk management process and are the responsibility of the chief risk officer. Strategies and risks reverberate and translate within the organization into more specific business units, functional and project-related strategies, and more detailed risks, which ultimately trickle down to individual teams and employees.

Strategy and risk can be holistic at the macro level, and more focused and tactical as you dig into an organization. But the application of scenario planning is the same.

Scenario planning offers a powerful approach to test strategies, make complex decisions, improve risk management, generate innovative initiatives, create options, improve organizational learning and understand uncertainty at different levels of the organization. . It’s just the specificity and level of detail that increases as you explore the organization and the frontline employees where the work is performed.

Scenario planning can have a powerful and far-reaching impact when used at the global macro level. For example, as early as 1942, the global auto giant General Motors created policy committees that scenario-planned the geopolitical shape of the future, anticipating increased globalization and liberalization of trade; they anticipated international expansion and experienced unprecedented growth.

A more recent example of macro-level scenario planning involves the Washington-based Center for Strategic & International Studies (CSIS). In October 2019, two months before the first recorded case of COVID-19 in Wuhan, the CSIS decided to study the impact of a global health pandemic. They chose a fictional novel and a highly transmissible coronavirus similar to SARS and MERS. The team assembled a group of experts from the fields of biosciences, global health, national security, emergency response and economics to test the United States’ ability to respond to a health disaster. global.

The parallels with what unfolded were striking. Their scenario assumed that governments would try short-term measures to slow the spread, such as travel bans and border closures, which would not succeed. Like COVID-19, the fictitious virus in their scenario has spread through international air travel. Huge economic and political problems and overburdened health systems would occur. In addition, the scenario assumed that countries would use fiscal and monetary stimulus measures to support economies. This example was surprisingly real and demonstrates how scenarios and foresight can be powerful tools for imagining the future.

Nevertheless, the methodology also lends itself to tackling more specific micro issues, such as investment decisions and competitive situations such as the introduction of new products and services to the market or the creation of new organizational capacities, skills and capabilities for the future. For example, Canadian clothing company Arc’teryx quickly deployed design and manufacturing capabilities to meet national demand for PPE during COVID-19, producing medical gowns and temporarily shifting to new sources of revenue.

Another example of an investment decision influenced by scenario planning is the acquisition of Mail Boxes by UPS. The purchase gave UPS approximately 3,500 retail stores in the United States to complement its network of major centers used as mail sorting facilities.

The inputs, scope, process and resulting outputs vary at each level, but the overall goal remains the same. In addition, the stakeholders involved move from executive level leaders at the macro level to frontline employees within a business unit – or, at the micro level, of a specific investment project. In addition, scenarios at different levels can be complementary.

Organizations that start at the macro level can then progress to the industry, company or organization level, thereby gaining specificity, detail and analysis. This helps an organization to gain perspective on broader strategic issues or to focus more on particular issues, such as a specific risk or a new product, service, or investment project.

British Airways, for example, translated company-level scenarios all the way to customer service representatives. They used the scenarios to find better links between the airline and its passengers. This was not an initial intention, but a customer service agent’s interest in the planning process sparked a new opportunity for improvement.

In addition, there are areas of the company’s operations that were not originally considered in the planning process. However, they emerged when employees in these fields asked questions and tested the scenarios against their own group’s business goals.

Having frontline employees involved in developing the scenarios meant that the strategies were better validated and more in tune with the business realities that British Airways faced. In addition, the translation of scenarios into organizational tactics was made more easily.

The table below provides an overview of scenario planning at different levels with the considerations necessary for success.

In conclusion, empowering leaders to choose the right tools for the problems they are trying to solve is essential. The level of scenario planning depends on the level of risk and uncertainty involved and the organizational level considered.

Leaders should classify from the start the strategic problem they are trying to solve: is it an economic or societal problem at the macro level, focused on the industry or organization, or more narrowly on a business unit , a functional problem or a specific project?

While scenario planning is flexible enough to meet many different needs, aspects of the process must be tailored depending on the level at which leaders operate within the organizational system.

Written by Lance Mortlock, author of Disaster Proof: Scenario Planning for a Post-Pandemic Future.

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