Managing your future through scenario planning

Managing your future through scenario planning

As we embark on our future planning journey, it’s important that we take time to pick and analyse certain emerging trends which might impact adversely on our business although their occurrence might look very remote.
We need to start “thinking about the unthinkable.” Some events, though their occurrence is remote, can result in catastrophic consequences if not considered by strategic planners. For instance, those defence planners who thought the possibility of nuclear war was remote during the First/Second World Wars would have been irresponsible not to think of a possibility of the abuse of nuclear power.

In business or in life we tend to shy away from those things that might sound unrealistic but that might prove catastrophic to our businesses or lives. Business leaders should not regard certain future predictions as nonsensical, incredulous or impossible to the extent that they ignore them.
No one can predict the future with certainty, but at least we should take time to analyse the likely occurrence of these events and be prepared to tackle them in these challenging, complex, uncertain and very turbulent environment businesses or governments operate in. To remain above the storms, we need to think about those things we might not necessarily think about.
It is probably pretty difficult for us to assess the impact over the next decades of multimedia, biotechnological advancements, organ transplants, space colonization, space tourism or a myriad of other developments especially on the digital side. Our business leaders or political leaders have made wrong assumptions about the future but it’s not their fault to a certain extent. It’s difficult to predict the future.

To avoid being caught unawares by unthought-of developments, leaders need to think outside the box by expanding their imaginations to see a wider range of possible futures which when taken advantage of will result in an organization reaping the unexpected opportunities that will come along.
Today’s leaders have access to a technique called “scenario planning” which they can use in strategic planning. If some of the major companies had used scenario planning they would not have suffered serious setbacks in their businesses.

IBM and Digital Equipment Corporation in the eighties, did not anticipate the full impact of the personal computer, which literally decimated the mainframe computer, or the giant Philips’s setback in electronic markets despite its leading-edge technologies, because it had not foreseen the rise of Japanese electronics companies or Nokia in the 2000s did not foresee the impact of the smartphone on its mobile phone business. Recently there are companies like Uber, AirBnB and Whatsapp which have come up with a revolutionary technology that has literally disrupted their industries resulting in a number of some companies’ products being rendered obsolete.

The adoption of scenario planning can assist a lot of business leaders. Scenario planning is a method for imagining possible futures. The giant oil company Shell has used scenarios since the early 1970s as part of a process for generating and evaluating its strategic options. As a result Shell has been consistently better in its oil forecasts than other major oil companies and reaped massive profits as a result.

Scenario planning has stood above other planning methods such as contingency planning, sensitivity analysis, and computer simulations because these other methods examine only one uncertainty, such as “What if we don’t get such and such?” whereas scenario planning explores the joint impact of various uncertainties.

Sensitivity analysis examines the effect of a change in one variable, keeping all other variables constant. This would work if the change in the variable is small. However once the change is large, other variables will not remain constant. Scenario planning, however, will change several variables at a time and assess the impact of those changes.
Scenarios go beyond objective analysis done by computers, to subjective interpretation of data by looking at patterns and clusters in the data.

Scenario planning challenges the prevailing mind-set by looking at a number of future possibilities. It is very useful in anticipating future changes in a particular industry or discipline.
If there are too many surprises that are costing the organization too much or if an organization is running out of new opportunities, if the quality of strategic thinking is low or if the industry has experienced significant changes or is about to experience significant changes, it would be very helpful for such an organization to start using and benefit from scenario planning
Once the top executives have generated scenarios it can disseminate these to managers to generate thinking or to use in evaluating proposals.

When carrying out strategic planning, organisations should now start thinking of issues that would not normally be considered.

l Stewart Jakarasi is a business and financial strategist and a lecturer in business strategy (ACCA P3), advanced performance management (P5) and entrepreneurship.
He is the Managing Consultant of Shekina Consulting (Pty) Ltd and provides advisory and guidance on leadership, strategy and execution, corporate governance, preparation of business plans, tender documents and on how to build and sustain high-performing organisations.
For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts: sjakarasi@gmail.com, call on +266 58881062 or WhatsApp +266 62110062 .

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