14
HR
West
®
Scenario Planning
Strategic foresight can be gained through more
than one lens. Beyond the microscope of simple
budgeting and the macroscope of geopolitics lie still
other tools for probing the future.
My specialty is multiple scenarios, or scenario
planning, as it is best known. Scenarios are alternate
futures in which today’s decisions may play out.
They are stories with beginnings, middles and ends.
Good scenarios have twists and turns that show
how the environment might change over time.
GOOD SCENARIOS
A good set of scenarios will contain two to five
different narratives. More than five scenarios tend
to get confused with one another. Three scenarios
run the danger that people will try to pick the most
moderate or most apparently plausible and forget
about the other two. Four is a good number —
neither too many nor too few.
Each scenario should contain enough detail to
assess the likelihood of success or failure of different
strategic options. Will there be sufficient demand for
a new product? Are supply chains likely to remain
intact? How much competition can we anticipate?
Have new technologies rendered a product
obsolete? Will political instability put those oil fields
beyond our reach?
A good set of scenarios should always be
customized to a particular context. The scenarios
that Royal Dutch/Shell used to anticipate the drop
in oil prices in 1986 were far different from the
scenarios a major computer manufacturer used to
navigate its transition from products to services. The
scenarios Xerox used to anticipate the convergence
of the copier and printer were far different from the
scenarios American Express used to deal with the
replacement of traveler’s checks by credit cards.
Each organization needs its own scenarios to face
its own challenges.
Purpose is also important. Sometimes the point
of a scenario is to pry attention away from the
ordinary. The very process of thinking about a range
of possible futures can be a useful opportunity
for addressing issues that might otherwise be
neglected. Think about the rising power of China
and India or the creeping onset of climate change.
Each industry will have its own examples: for
education, the spread of massive online open
courses; for energy, new technologies for
decarbonization or extraction; for entertainment,
oscillating paradigms between big screen
blockbusters and fare that fits on mobile screens.
Alternate scenarios can serve as relatively low
-cost insurance policies. You are less likely to be
blindsided if you’ve taken the trouble to imagine
some unwelcomed surprises. And on the upside,
scenarios can identify whitespace opportunities
that remain unfilled until a first mover occupies the
space that less imaginative competitors never knew
existed.
THE PROCESS
The scenario planning process usually unfolds
according to an orderly, methodical eight-step
process. The process has two major parts: first,
choosing which scenario logics to flesh out, a task
that comprises the first five steps, and second,
telling the actual story, its implications and early
indicators, which comprise the remaining steps. A
full-blown scenario planning project usually takes
three or four months, starting with interviews and an
initial workshop, then at least a month of research
and writing, then a second workshop to draw
implications from the ramified and refined scenarios,
and then some time to summarize the results of the
second workshop into a presentation.
STEP 1: FOCAL ISSUE
The process begins with identifying what a person or
organization will focus on. Scenarios for the future of
the galaxy will not be useful to a company trying to
decide whether it should build a new factory outside
Sao Paulo. Sometimes the focal issue is a very
specific question: Should we invest in technology
X? Should we buy company Y? Sometimes the
focal issue is more open-ended: Are there potential
surprises that could disrupt our current strategy?
And other times the focal issue is geopolitical: What
will the future of country Z look like as a market for
our several different product lines?
STEP 2: KEY FACTORS
Once the focal issue has been determined, a
scenario team will brainstorm a long list of factors
that could affect the focal issue. Many of the key
factors will be fairly obvious. They are the sorts of
things that would be addressed in a typical business
plan: customer demand, suppliers, competitors,
production technologies, human resources, etc.
Once the team has listed 30 or 40 different key
factors, though, the process will reach out to less
obvious possibilities: What if there is a new entrant
on the competitive landscape? What if there is a
new disruptive technology?
SCENARIO PLANNING AND
STRATEGIC FORECASTING
by Jay Ogilvy
