Scenario Planning allows business executives to explore, test and anticipate possible alternative futures. It investigates the outcomes a company might get under a wide range of economic conditions and strategies.
“If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue.”
- Jeff Bezos (Amazon)
The purpose of scenario planning is not to predict the future but to evaluate decisions to be made today based on a number of plausible futures.
This approach can help executives to deal with uncertainty, to challenge present mindset, to uncover hidden assumptions such to enforce or re-direct present plans and actions. The outcome of a scenario planning exercise should be seen as a starting point for discussion, for having strategic conversations and to take actions.
“A study of more than 300 global senior executives found that 80% felt that their organization has less capacity for peripheral vision than they would need.”
Day and Schoemaker (2006). Peripheral Vision: Detecting the weak signals that will make or break your company. Harvard Business School Press, Boston.
“In a 2002 global survey conducted by the Fuld-Gilad-Herring Academy of Competitive Intelligence, fully two-thirds of 140 corporate strategists polled admitted that their organizations had been surprised by as many as 3 high-impact events in the past 5 years. Moreover, the vast majority—a staggering 97%—stated that their companies have no early warning system in place.”
Fuld, L. (2003). Be prepared. Harvard Business Review. November 2003.
Schoemaker et al. (2013). Integrating organizational networks, weak signals, strategic radars and scenario planning. Technological Forecasting & Social Change 80(4), 815-824.
Companies use Scenario Planning to:
- Anticipate the unexpected
- Anticipate change and develop a matching strategy & actions
- Uncover hidden assumptions
- Widen the view on business
- Think and explore the unthinkable
- Identify the current beliefs, assumptions, ideas, thought processes of key decision makers
- Challenge present beliefs and assumptions about the business and current strategy
- Turn a long-range planning in a strategic learning exercise
Three Parallel Rivers & Company offers Scenario Planning as strategic insight tool