Want to make a strategic plan for the future of your business? Looking for a tool that can tell you about the uncertainties of the future? Then Scenario Planning is the best option for you.
The concept of scenario planning belongs to strategic management that deals primarily with the strategies to combat the uncertainties about the future.
How Scenario Planning came into existence?
But how is a business supposed to have a strategy when there is no idea about the future for the company?
Having an idea what is to happen in the future is something which can be considered as the grounds upon which the foundation for the house is laid. So, there is no doubt about this fact that having certainty about the future is one of the most important things for sure.
However, the reality of the matter is that there is a certain uncertainty when it comes to each and every single decision that you are trying to make about the company of yours.
In real life as well, the actions that we are taking are based on the predictions that we make about the future and how things are going to be when the time comes.
However, we can all agree to the fact that making decisions when it comes to the business should be done on the basis of analysis and data rather than just gut feelings and intuition.
But then there are some problems which might occur in such cases. The data might be a bit difficult to gather in the first place. Also, the other problem here is that the data will provide you with all the details in the past but will probably give you no idea about the company’s future.
So, what does one do in such cases? How does one create the data that is going to help in the prediction of the future and what is yet to come?
Well, there is a tool that is going to help in the strategic planning and prediction of the future so that you can make some better choices in the long as well as the short run.
The method that we are going to state here is known as Scenario Planning. Here we shall discuss more the method and how it works for the company.
Defining The Term Scenario Planning
The process of making plans and assumptions on the future of the business and keeping in mind the changes occurring in the work environment is known to be scenario planning.
To be a bit more precise in this matter, we can say that it is the basic method which the businesses these days use to find out the certain uncertainties and the ‘realities’ which might take place in the business’s future.
Now the concept might sound very simple to you, and then it might also seem like you don’t have to make any effort in knowing how to do scenario planning, building the scenario based on the assumption is not really an easy task.
However, it can also be said that this technique is something that is going to be great for the business in making sure that it can meet all the long-term goals that the business has.
Example of Scenario Planning
Let us provide you with an example to make you understand in the best ways.
The farmers are currently using the method of scenario planning in order to make sure that their harvest will be better or worse on the basis of the weather.
This will help them in forecasting the sales as well as the future investments that they are making.
Apart from that, military institutions are also using this amazing method in order to make sure that their operations are properly able to cope with different situations which might seem unlikely.
By doing this, they are able to determine all the consequences of the events that take place. So, in a way, it can be said that scenario planning doesn’t just help the business industry but the other sectors too.
While you might think that scenario planning is not that important for the businesses, but then it is sure that if you don’t practice it, then there might be a chance that your business might suffer from issues such as increased costs, risks, as well as some missed opportunities.
The Process Of Scenario Planning
There is a certain process to scenario planning that most people need to know about in order to make sure that they are able to focus on the process without any risks or difficulties.
This process is a very important one, and we are going to provide you with some details of the process so that you can use it properly for the business that you have.
Now, who wouldn’t want to try it out, right? So, without wasting any more of your precious time, let us focus more on the scenario planning process and what you need to do.
#1. Focal Issue
The main part that we are going to discuss right here is the one which is known as the focal issue, which means that the organization will find out the things that they need to focus on. The scenarios with the future in mind will not be useful if you are not specific at this point.
Buying a company or investing in a particular technology will bring the results or not is the main concern right here. Also, the focal issues could be a bit more open-ended, as well.
The main thing to put importance here is that the company needs to find out the essential factors upon which they will be able to create a particular scenario for the future.
#2. Key Factors
After the determination of the focal issue is completed successfully, the company needs to brainstorm some of the important factors which could have an effect on the issue of focus right here. There are some key factors which are pretty obvious, to be honest.
Some of them could be the ones which are easily addressable in the business plan. The demand of the customers as well as the suppliers, the competitors, the technologies used for the production and the human resources are some of the most common examples.
After the listing of about 30 or 40 factors in total, the process will then be able to reach out and look into the other possibilities, which are a bit less obvious to the team. So, there is no doubt that it is going to be one of the most important steps for sure.
#3. External Forces
Now that the identification of the key factors is completed in the best way, it is now time to focus on the remote forces which might be operating in a larger perspective.
The examples of such forces include the economic factors, geographical factors, technological and social forces which the team often leaves out in the plan. However, these are very important for sure.
There are so many different strategic plans which don’t have the regard for these forces, war being the primary example. These are the projects which are not able to achieve success.
#4. Critical Uncertainties
Here is the next thing that the scenario team needs to put more emphasis on. With the help of the proper process, the team will be able to achieve a particular balance, which is essential between wild creativity and just imagination. When it comes to this, there are some very important criteria.
With the counting of the votes which are in close relation to the items which are clustered together, there will be a formation of the critical uncertainties.
Let us provide you with an example. The falling and the rising of energy prices can actually be a critical uncertainty when it comes to considering the values of the customers.
#5. Scenario Logics
So, how does one get to decide the right future upon which the scenario should be developed? Now that is a real challenge for the team, which is the selection of the particular future from the infinite number of possibilities which might happen.
So, this is where the scenario logics come to help them out. With the help of this step, the team will be able to narrow down their choices and then select just a few options which are worth considering.
Now that the scenario has been chosen, it is time to tell the story of the scenario, and that requires some skills and talents for sure.
To be a good scenario, there needs to be a proper story which is backing it up in the best sense. This is one of the most important things that people need to take care of for sure.
So, that is all we have got for you here, people.
There are also some implementations and other important things that people need to do after the finalizing of the scenarios. This will help in deciding for the business in the best way.
Scenario planning, no doubt, helps a lot when it comes to decision making, and we hope that you were able to understand a whole lot of it from the article right here.
Have you also used Scenario Planning for making a future-oriented business strategy? How important do you consider analyzing future scenarios for a business? Share your views in the comments below.