Scenario planning is a method of looking towards the future with respect to all possible future worlds. It is not concerned about which environments actually come to fruition, but rather about creating a strategy that deals with uncertainty by forcing rational decisions based on all possibilities of tomorrow. It seeks to identify early indicators of each scenario and the key factors of success to succeed therein.
Step 1: Synthesize Facts
Study the general facts concerning your industry, including the major macro-environmental forces. Research, read, and hypothesize. Choose the most critical forces driving change and synthesize trends and issues of significance into several major axes of uncertainty.
Step 2: Describe Scenarios
From the pertinent facts, construct potential scenarios and assign specific descriptive properties. Consider possible variations in the main axes of change. Identify likely scenarios by shifting variables within axes driving change. Make certain that the scenarios are coherent and logically consistent. Describe key characteristics for each scenario in as much detail as possible.
Step 3: Identify Key Events
For each scenario, write a storyline and characterize potential events or trends that would lead to them, plotting them as illustrated below. List a number of events or trends that might occur in the future. Establish early indicators for the development of each scenario. Determine the key success factors for each scenario.
Step 4: Rate Potential Strategies
Finally, weight potential strategies with respect to the different scenarios. Consider each strategic alternative in terms of cost/benefit associated with each scenario. Assign probabilities to scenarios to compare how strategies rate with respect to each other.
- Scenario planning is not intended to predict the future, like forecasting, but to be prepared for it by identifying key variables driving change
- Scenario planning attempts to clarify all possibilities and accepts uncertainty
- Asks not “Will it happen?” but “What to do if it happens?”
- Forces issues that are of undetermined consequence to be considered in defining strategy
- Forces rational decision-making today about circumstances beyond control
- Allows diverging view to be reconciled
- Difficult to perform usefully and therefore requires significant investment of time in research