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Scenario planning


How to develop planning scenarios
to use in strategic planning.


By Ruth Tearle

The dictionary definition of a scenario is "the setting within which a story unfolds."

In organizations, the story being told is one of leaders who are able to imagine and communicate the type of environment that their organization will be operating within the future.

From their scenario of the future, the leaders are able to determine the role that their organization will need to play to be successful within that future environment.

What is a scenario?

A scenario is a picture or collage of the future environment within which we will live and work.

What is scenario planning?

scenario planning

Scenario planning, (which is also known as scenario thinking and scenario analysis) is a tool used by leaders as part of a strategic planning process.

A scenario is a trend analysis - fast forwarded to a particular point of time in the future. It shows the trends in the economic, political, technological, social, business and industry environments that will be defining the way our organization operates at a given point of time in the future. For example a scenario will show the trends that will be occurring in our external environment at say, 2020.


Why leaders develop planning scenarios of the future.

A leader's most important role is to provide direction and focus to the organization. But if there are many paths into the future, how does he/she choose the right path to follow?

Leaders use scenarios in the following ways.

leader-focus
  1. The first thing a leader needs to do, is to construct a clear picture of the environment their organization is likely to be operating in, in the future. This is known as a planning scenario. Some leaders keep their options open and develop many scenarios with different plans attached to each scenario. So they have a plan A, a plan B and a plan C that they can follow, depending on which scenario pans out.

  2. Then the leader defines what will be the new rules that organizations of the future in his/her industry, will need to follow, in order to be successful within that future environment. These rules are often called "Key Success Factors."

  3. From there the leader plots the path the organization will follow, to be successful within the future environment. This is often called a strategy or strategic plan.

See the CEO's step by step guide to strategic planning-for a guide on the entire strategic planning process.


How to develop a planning scenario.

 

Step 1. Choose a scenario planning period.

Choose a period you want to plan for. For example 5 years into the future. Give it a date. (e.g. 2021)

  • Your planning time frame will be determined by the industry you work in. Organizations such as electricity utilities take decades to build power stations, so their planning horizon will be longer than a retail company that has to change fashions each year.
  • The longer the planning horizon is, the more likely it is for a group to think creatively. So many organizations and leaders plan for a horizon of 5 or more years into the future.

Step 2. Identify strategic trends that may continue into the future.

Begin by identifying strategic trends occurring today - in the political, social, economic, technology, business and industry environments surrounding your organization. Make sure you use up to date trend research, as the quality of your scenario depends on the quality of your trend research.

Once you have identified these trends, you can use these trends to:

  1. Create new opportunities for your organization
  2. Develop a view of the future environment within which your organization will operate.
  3. Identify new key success factors for being successful within that future environment.
  4. trends-scenarios

Step 3. How to identify new opportunities

Think about each trend you have chosen. What opportunities or threats will each trend pose to your organization? For example think of how each trend will impact on:

  • Your existing customers.
  • New customers who may need your products and services.
  • The disposable income your customers will have in the future.
  • What your future customers will expect from your organization.
  • Who your future stakeholders will be and what they will expect from your organization.
  • Your organization and the type of products and services it produces.
  • How your organization distributes its products and services or communicates to its stakeholders.
  • Your workforce. The type of jobs they do.

If you'd like to identify opportunities as part of a participative workshop, then use the OD intervention on how to create opportunities in a group session or workshop.

Step 4. Select the trends you think are likely to continue into the future.

Imagine the future 5 years out.

  • Which of today's trendsd are likely tol be important?
  • Show how each trend may have developed between now and the year you have chosen in the future. For example, will it have increased, decreased, or continued at the same level?

Step 5. Imagine the future. Draft your scenario plan.

Imagine you are at the date you have chosen for your future scenario. You are describing the world at this point in time. Answer these questions with a statement written in the present tense. Begin with: "It is now 2021."

new-technologies
  • How will new technologies be used in organizations to save costs or increase efficiencies, create new distribution channels, or new products and services. Consider for example the role of robots, drones, 3D printers, gene splicing and artificial intelligence.
  • What other technologies will people be using to communicate with each other, get and share information, or buy products and services?
  • What new competitors could enter your markets as a result of new technologies?
  • How will different regions of the world be growing economically? Which will be growing more and why? Which areas will be cooperating with one another economically?
  • What will different governments focus their spending on?
  • Where will investors be investing their funds?
  • Which areas will spend more on infrastructure?
  • trends
  • What social issues will different areas of the world be grappling with? Consider demographics such as aging and youthful populations, employment and unemployment, immigration, urbanization, rise in middle class, pollution, climate change, water, health, housing and infrastructure.
  • What will be happening politically? Which nations will be working together? Which nations will have the most power? Which nations will be in conflict? Where will there be stability? Where will there be power changes? What social issues will governments be focusing on?
  • trends
  • Who will be the most innovative companies? What are they doing that is delighting their customers?
  • What will be happening within the sector your organization operates? e.g.
    • How will your industry be structured? Who will dominate? Where will there be alliances?
    • Who will be competing in your industry? Consider new players that may enter your industry from other industries.
    • What new products and services will these new competitors be offering?
    • How will they package these products and services?
    • What new technologies are being used in your industry? How are they being used?
    • What new channels are being used to distribute products and services in your industry?
    • What new jobs or careers are being created?
    • What new business models could be used to delight stakeholders in your industry?

Step 6. Group your answers into themes.

Group your answers to the questions above themes. e.g. group them under the following headings:

  • Technology.
  • Politics.
  • Economics.
  • Societal issues.
  • Business.
  • Our own industry.

Step 7. Write your planning scenario as a story.

  1. Begin with the date. It is now 2021, or 2030....
  2. Describe what is happening in the world at this time under each of your themes.

Step 8. Check the logic of your planning scenario.

Can all the statements you have made - occur at the same point in time? For example: Lets assume that you are predicting:

  • A low level of economic growth in your country.
  • Increased use of robots replacing humans at work.
  • Reduced unemployment and increased jobs for low skilled workers.

We know that low economic growth and robots replacing humans will increase unemployment - so we may need to change the statement about reduced unemployment.

If some of your statements contradict other statements, decide which statement you need to change to ensure your story is credible.

Step 9. Add to your scenario - impact analysis.

Think about how each statement you have made (or future trend) may impact on other future trends and add this into your story. e.g.

  • An aging population may result in governments taking actions to increase their working populations. e.g. by increasing immigration of young people into their countries
  • Increased use of robots in factories and hotels may result in unemployment, which in turn may affect the disposable income of your customers, or create social unrest.

Step 10. Edit your scenario

Go through your scenario, and improve the quality of your writing. Check that you have written full sentences. Check that every sentence contains a verb or doing word. Check that similar topics are grouped in the same area.

Step 11. End your scenario powerfully.

End your scenario with something that gets the reader thinking. For example, include a description of the role your organisation will play to make it successful within its future context.

if you are running a participative workshop, you can also use a right brain creative scenario activity in our OD interventions library, to get a group to create a scenario of the future.



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