Scenario Planning Simplified
Scenarios are as simple as ‘Plan B’ strategies with early sign indicators.
The events of recent years have brought scenario planning back to the table for senior management. Like many business tools, it is often overcomplicated by practitioners. Let’s explore why and discuss a more practical approach.
I wrote about scenario planning for BSC Designer, exploring all the nuances. We can categorize scenarios by their urgency, such as business continuity scenarios, high-priority scenarios that require developing a response plan now, and scenarios for monitoring; tell stories to make scenarios more sticky; and quantify them to be sure we have some solid base for planning.
In Essence, What is a Scenario in Strategic Planning?
In the official definition, you will find the words ‘plausible’ and ‘future’ (actually AI is good at generating such stories).
In simple words, a scenario is a Plan B for our strategy.
Here, we have our main strategy, and we also need a Plan B (C, D, E,…) to provide us with a sense of readiness for future challenges and to demonstrate to stakeholders the increasing resilience of the business.
Ideally, we should identify early sign indicators of the scenario coming and shortlist the scenarios with the highest value of the impact * probability metric.
Why are Scenarios are Overcomplicated?
I think the root cause is the use of a monolithic strategy architecture.
Let me explain: a scenario is an alternative strategy. In this sense, monolithic strategy architecture doesn’t support the double strategy paradox.
We cannot incorporate a scenario there, as this architecture accepts only one version of the strategy that can be replaced with version 2.0 via an annual planning ceremony.
Respectively, we see rebranding of the ‘alternative strategy’ into ‘scenario’.
When working in an architecture based on aligned strategy and functional scorecards, there is no double strategy paradox.
In a strategy workspace, we can simply create a new branch called “Scenarios” or “Alternative Strategies” and articulate all the nuances of the possible scenarios there.
Employing Early Sign Indicators
The mentioned early sign indicators can be used to connect the main strategy with the alternative scenarios.
I can add a KPI in my main strategy scorecard and simply add to the description something like:
“If you see this KPI in the red zone, here is the link to the alternative strategy.”
Simple Scenario Planning: Stakeholders + PESTEL Analysis
A final thought on simplifying scenario planning: a good starting point for considering scenarios and alternative strategies is to:
(a) Update the latest PESTEL analysis with upcoming trends.
(b) Reflect on the overlap between these trends and the expectations of your stakeholders.
The Strategy Implementation System is an article on Medium where I connect the dots about strategic planning, featuring scenario planning as one of the frameworks for value-based strategy decomposition.
