The 6 Ways Scenario Planning can Improve Your Strategy
Too many companies, non-government organizations (NGOs), government agencies and communities still fall into the trap of creating strategies for the future based on what has happened in the past. Scenario planning helps organizations create growth strategies by finding ways to prepare for an increasingly unpredictable future, and can even shape the direction of things to come.
The objective isn’t to predict the future, but to prepare for it and even create it. Scenario planning brings together cross-functional groups of leaders and key stakeholders to imagine several possible scenarios and ways to prepare for and capitalize on each. The traditional form known as adaptive scenario planning, considers which forces might impact an organization, what that impact might be and how to anticipate and manage this impact.
Royal Dutch Shell began using scenario planning over 40 years ago as a way to understand how key forces might impact its company and the entire industry. This practice helped the company emerge as an industry leader during the 1973 global gas shortage. It also helped the company anticipate and prepare for the 1979 global energy crisis, the 1986 energy market collapse, the fall of the Soviet Union, rising terrorism in the Middle East and global pressure for greater environmental and social responsibility.
Adam Kahane once worked for Shell’s scenario planning function. In his book, Transformative Scenario Planning: Working Together to Change the Future, Kahane makes the case for going beyond preparing for the future, by looking for ways to influence it. Many organizations are doing just that. U.K. based Marks and Spencer is on a quest to redefine retail. Unilever wants to double its business while cutting the environmental footprint of its products in half and improving the well being of one billion people. Aluminum leader Novelis has become an “above ground miner” as it strives to make most of its products from recycled sources. A much smaller Georgia-based carpet company, Interface, redefined how carpets are made and helped define green standards throughout the entire building industry.
Consider the challenges of childhood obesity, population growth in developing nations, water shortages, and climate change. Adaptive scenario planning helps you anticipate and deal with potential issues arising from each. Transformative scenario planning puts you in the mindset of shaping a new and better direction. How do we eliminate childhood obesity? What are the ways we can cut or eliminate our environmental impact? How would we enter new markets where we bring prosperity to communities while growing our business? Use both adaptive and transformative scenario planning in creating your vision and strategy to achieve these key benefits:
- You can look at the “whole system” rather than isolated parts. Everything in this world is connected to something else. Inviting in stakeholders from throughout the organization taps into different talent sources and perspectives. Bringing in external stakeholders such as suppliers, customers, partners, community leaders, advocates, NGOs and experts takes leaders out of isolation and opens up new possibilities.
- You are in a better position to anticipate and prepare for what the future may bring. It’s certainly prudent to consider forces such as resource shortages, economic uncertainty, disruptive innovations, political power shifts and competitive threats. UPS uses a scenario it calls “Oil 200” which considers the impact to its business if oil was to reach $200 a barrel. Today’s efforts help the logistics giant to reduce its reliance on fossil fuels and integrate alternative forms of transportation.
- New possibilities and innovations emerge. Achieving enduring success requires more than reactionary planning. It also calls on leaders to imagine new possibilities for the future. People at Nike aren’t sitting around wait for the next Greenpeace campaign to react to. Their design teams, supply chain partners, and technical experts are busy finding ways to re-invent processes and products for a better future.
- People begin to question and change their mindsets. Minds shift and there’s an opportunity for building respectful relationships. Dealing with NGOs was once considered heresy. Today Coca-Cola, Nike, Timberland and other responsible organizations regularly work with advocacy groups such as Greenpeace and the WWF. Marks & Spencer, Unilever, Novelis and the Virgin Group are among those working to turn the industrial age model on its head and find better ways to operate.
- Relationships strengthen and networks grow. Bringing together people who ordinarily don’t deal with each other provides an opportunity for building relationships and broadening stakeholder networks in and out of the organization. Change has a greater chance of success and longevity when implemented by people with strong relationships.
- It guides decisions on strategic investments. Strategy isn’t about chasing quarterly numbers. Organizations should constantly be looking at strategic opportunities over three phases, and across the short, mid and longer term. Scenario planning helps organizations make better decisions on where to invest to achieve the greatest returns in the future.
Every strategy requires innovative, expansive thinking in this fast-paced, complex and inter-connected world. Scenario planning provides opportunities for learning, leadership development and perspective shifting to create better and more prosperous organizations.
Contact me at firstname.lastname@example.org to learn more about how scenario planning can help your organization prepare for and shape a more prosperous future. Read my new book, The New Corporate Facts of Life: Rethink Your Business to Transform Today’s Challenges into Tomorrow’s Profits, for examples of organizations large and small, across sectors and around the world who are changing the course of how we work and live.