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What is Scenario Planning and How to Use It
Some pitfalls to avoid
- Don't fall into the trap is to be paralyzed by the multitude of possibilities. Keep it simple and focus on two major uncertainties.
- Don't believe that you have to choose one particular scenario and build your strategy around it. Scenario planning is not about choosing just one option for the future but rather dealing with all of the possible outcomes to develop a strategy that will stand the test of all scenarios.
- When developing your different scenarios, try to not look at the short term. Do not hesitate to look far ahead, anticipating what the market and competitors are going to be over the next years.
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Scenario planning
It aims to define your critical uncertainties and develop plausible scenarios in order to discuss the impacts and the responses to give for each one of them. If you are aware of what could happen, you are more likely to deal with what will happen.
It involves identifying a specific set of uncertainties, different “realities” of what might happen in the future of your business.
How to use scenario planning
- Identify your driving forces: the big shifts in society, economics, technology and politics in the future and see how it will affect your company.
- Identify your critical uncertainties: pick 1-2 of the driving forces (with the most impact).
- Develop a range of plausible scenarios: Form a kind of matrix with your two critical uncertainties as axis and depending on what direction each of the uncertainties will take, you are now able to draw four possible scenarios for the future.
- Discuss the implications: discuss the various implications and impacts of each scenario and start to reconsider your strategy: set your mission and your goals while taking into account every scenario.
Some pitfalls to avoid
- Don't fall into the trap is to be paralyzed by the multitude of possibilities. Keep it simple and focus on two major uncertainties.
- Don't believe that you have to choose one particular scenario and build your strategy around it. Scenario planning is not about choosing just one option for the future but rather dealing with all of the possible outcomes to develop a strategy that will stand the test of all scenarios.
- When developing your different scenarios, try to not look at the short term. Do not hesitate to look far ahead, anticipating what the market and competitors are going to be over the next years.
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