Introduction: Scenario planning can absorb all of the time and resources that you are willing to put into it.
For example, Royal Dutch Shell spends millions each year on their scenario planning research; their planners anticipated the fall of the Soviet Union before the CIA! You may not need that level of sophisticated planning.
However, even the owner of the corner store can benefit from successfully anticipating a number of possible future business conditions and making plans for those contingencies.
Several things to keep in mind:
If you are not confident in your ability to implement this process on your own, seek help to get you started the first time you do it.
Our goal is to empower people, within their own businesses, to do what it takes to evolve their business practices to match current and future business environments. However, there are times when outside expertise---facilitation from someone who has an objective perspective---can enrich the conversations and help your company to uncover issues and assumptions.
It also is helpful to ensure that traditional perspectives are constructively challenged. One option for seeking outside assistance is using the services of SCORE (Service Corp Of Retired Executives).
If they have an office nearby, enquire if anyone there lead scenario planning in his or her former company. Another facilitation option is to find out if you have anyone within your company who did scenario planning in the military---s/he may have enough familiarity with the process from outside your company to be able to be an effective facilitator.
Strategic planning is not a budget development process. It is not an exercise to figure out how much money you’ll spend on what during the next fiscal year.
Crafting plausible scenarios is necessary for creating the foundation for budget building. By basing your budget planning on the outcomes of your scenario planning, you facilitate your own flexibility, since you are planning for likely future possibilities.
For example, you’d hate to be the last company trying to slash costs and make 8 track tapes more efficiently so that you could stay alive until the business bounces back after the introduction of cassette tapes. (How often have budgets been worked and reworked as conditions change throughout the course of the year?
Using a scenario planning process can enable you to build flexibility into your budgets, so that they don’t have to be totally reworked every time something unexpected occurs that effects your business.)
Use the guidelines presented below as a blueprint for action. Don’t turn this into a rocket science project.
It must be practical and focused on the few critical drivers of your business assumptions. Which sorts of impacts you consider will be determined by the nature of your business.
You are focusing on the possible game-changing events that could turn your industry on its ear and nail you in the process. If you have a construction materials company, a recession may affect your business much more than a prolonged drought, which in turn, would have a greater impact on an agricultural business.
There are four phases to this process:
Initially, the business leaders will be getting together to do some preliminary planning to define the scope of the process. What is the consensual wisdom about the events ahead that you’ll be facing? What technologies are relevant to your industry, and worth watching?
What are you going to try to achieve, and how much time will you devote to the process? If you’ve done this before, review the lessons learned from your last experience and consider how you can do it better/more efficiently this time around.
If you’re new to this process, consider whether you will seek outside help to get you going in the right direction most effectively, and decide on whom to use.
Also, identify the people you will involve in data gathering, analysis and etc., from within your business. Expect to spend a couple of meetings doing this preliminary planning.
The data-gathering phase is next. This may be as simple as talking to key customers and suppliers about what they’re planning and facing in their industries.
You may also be gathering statistics and information from government sources, projections from trade associations, and trends from various industry-tracking sources. This can become a never-ending process; for small to medium sized businesses, we recommend limiting this phase to 1 to 3 months.
Scenario writing. The team you’ve selected to analyze data and write scenarios will consider the research on trends and other relevant information and turn it into stories about different possible futures. This process may take up to a month.
Contingency planning. The entire team comes together to develop contingency plans regarding what the company would do to take advantage of the trends and realities that may emerge. As the future unfolds and the possibilities become realities, you are prepared and ready to take action to capitalize on opportunities, to minimize problematic affects, etc. Take whatever time it takes to achieve this step---just stay focused.