| Is scenario planning the next
“hot”
strategy tool? Maybe not but after nearly 30 years of use in
business,
it's popularity is on the rise. An enthusiastic group of
practitioners
gathered at the IIR/SLF conference on “Effective Scenario Planning”
held
in New York City on February 23. Here are some of the new,
exciting
and best ideas they generated.
Range
of
Applications: Scenario
planning is a highly flexible, scalable tool for understanding the wide
range of plausible future conditions you many face in your business
environment.
By testing your strategies in each of these possible futures you are
better
prepared for whatever happens. Given the profound changes taking
place in nearly every industry, many practitioners now believe scenario
planning should be the front end of any strategy process.
Scenario
planning is never the same process twice; it can and should be
adapted
to the issues, the planning horizon, the culture within the
organization
and the constraints including time and funding. Scenario planning
applies
across industries and is equally suitable for operational issues (such
as extending a product line, entering a new market or forming an
alliance)
or capital investment decisions (investments in new plant, equipment or
facilities). I had the opportunity to describe the results of several
healthcare
projects that used scenario planning to assess investments in
hospitals,
clinics and equipment to best position these healthcare systems for an
uncertain future.
Systems
Thinking and
Simulation:
By integrating systems thinking with scenario planning, scenarios can
be
understood as part of a complex dynamic system. In the healthcare
examples, key leverage points were identified and the impact of
potential
interventions by regulators, providers, patients or insurers could be
traced
throughout the system. Bob Pearce described NASA’s use of
system
dynamic models to describe the market more precisely. Baxter Healthcare
also uses computer simulation for continuous refinement of market
dynamics
and to track long-term implications of strategic decisions.
Certainties
vs.
Unknowables:
One of the key benefits of a scenario planning process is the potential
to become more aware of predetermined elements or “facts” that can be
held
constant in any scenario. Strategists at AT&T have coined the
term “freight train” for an unpleasant fact that is looming in the near
distance that you would prefer to ignore. An example would be a
continuing
and permanent drop in product price as it becomes a commodity. When
dealing
with uncertainties, Garrett Brauer, a senior analyst at Eastman Kodak,
cautions that we need to distinguish between those things that are
truly
unknowable and those things we don't know simply because we haven't
made
the effort to find out. Disciplined attention to predetermined
elements
as well as uncertainty can improve any decision making process.
Methodology:
Scenarios
can
be either generative [applied to situations in which you can control or
influence] or adaptive [for managing in situations you don't control or
influence]. The participants in this conference favored the driving
forces
or ‘weak signal’ approach to scenario planning. Using this
approach,
the process starts with a list of forces in the external environment
that
could have a substantial impact on your business in the planning
period.
This list is either generated in brainstorming sessions or by using a
one-on-one
interview technique with key decision makers. The common
denominator
of the driving forces approach is a set of steps that you have to go
through
religiously; but how you go through them can vary tremendously. The
process
moves from scenario development into implications, strategy generation
and assessment of the strategic alternatives across the scenarios to
identify
robust solutions.
Outside
Expertise:
Many
practitioners
had experience using consultants to guide their process, particularly
the
first time through. A few had chosen to go it alone. After
several
facilitated projects, NASA now does smaller scenario planning projects
in-house but would bring in expertise for larger projects, believing
that
consultants keeps the process on track, particularly when things bog
down.
Paul Justison of Flad & Associates suggests that you should always
ask yourself the question of whether you need an outsider -- you may
not,
but he feels they can add a lot of value.
Decision
Makers:
Participants
stressed the need to get senior management involved. Some suggest
that simulation modeling is one way to do that. Another way is to
compress the time of the overall process so that the senior team can be
involved throughout. As Brauer expressed it, “no one gets excited
by reading someone else's scenarios.”
Scenario
Lite:
A
popular
theme
throughout the conference was how to reduce the amount of time and
money
invested in a scenario project without sacrificing the integrity of the
process or diminishing the value of the results. Scenario
planning
projects span the gamut from 1/2 day to 6 months. It is
possible
to achieve meaningful outcomes with full involvement of senior managers
for relatively short, intense periods of times. Brauer gave an
example
of how Kodak has used scenario planning to produce results in a single
day.
The Future of Scenario Planning
Justison
told of
the ancient
Greeks
who “walked backwards into the future with their eyes firmly fixed on
the
past.” Scenario planning is one of the few planning tools that
recognizes
that the future is not predictable. It doesn't try to minimize
uncertainty
by projecting historic trends into the future. Scenarios are a natural
part of how we think; we are constantly integrating information and
visualizing
alternative responses to possible future conditions. This group of
practitioners
feels that scenarios can add real value over the long term and should
be
an integral part of management thinking and every strategic assessment
process. However, there is a recognition that business people
tend
to dislike and, therefore, avoid any issues that don't have clear
solutions
and that are out of their control. This feeling creates a
resistance
to the introduction of scenario techniques in many organizations.
If your management team isn't ready to commit to scenario planning,
Justison
suggests “stealth scenario planning;” do it covertly to stay one step
ahead
of them. And, remember to make scenarios fun.
Act
them out and give them vivid names to create a mental image.
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