Scenario Planning Full

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Scenario PlanningLong Range Planningin an Uncertain World

White Pape

2009, Adayana

Steve Wilson, Vice President, Industry OperationsRobert Weaver, Director, Solution DesignHannah Brescher, Communication Specialist


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IntroductionIt seems as if the only certainty existing in any business climate today is that the future remains

uncertain. Many organizations faced more uncertainty in the 2008 & 2009 calendar years than theyhad the previous ten years combined. Could anyone have envisioned the major market shock that

altered the face of these industries? Rarely do organizations think about what events could

potentially hinder their futures. The classical strategic planning practices used by most organizations

tend to be biased towards the view that the immediate future will look much like the present. These

classical strategic planning methods (SWOT Analysis, Competitive Strategy, and Resource-Based

Strategy) use past and present performance to project forward and determine the future outcomes for

the company. In stable times, this type of strategic planning serves organizations well. But, as seen

in 2009, companies cannot afford to rely only on past performance to determine their futures. They

must begin to look at the industry landscape in an intuitive manner, becoming aware of environmental

signals that may indicate necessary change now to prepare for the future.

So how does an organization plan for the future by becoming more aware of environmental signals?

Adayana is discovering that many classical methods to strategic planning, while still effective, may not

be comprehensive enough for long-term business planning, which must be examined through a

different lens. Adayana believes that Scenario Planning is an effective instrument to stretch ones

thinking about an existing strategic planning process to more effectively envision the future.

What is Scenario Planning?

As a tool to support long-term strategic planning, Scenario Planning allows organizations to envisionpotential future marketplace scenarios, or worlds, based upon the potential realization of

unpredictable events. As a result of considering these unique scenarios, organizations are better able

to craft effective, differentiated, and sustainable business strategies for success, regardless of market

shock. It is a process that gives a company a fresh perspective on the market and on long-term

business strategy development.

In Scenario Planning, organizations gather, review, and challenge views about industry trends and

driving forces. During the process, team members are asked to create and then think deeply about

several different scenarios, or potential worlds, with equally plausible futures. Long-term business

strategies are then developed for each world. Common strategies, or those strategies that areapplicable regardless of which world ensues, are developed, and implementation plans for these

strategies are shaped to support near-term strategy execution.

Finally, leading indicator models are developed, which help organizations determine the world most

likely to emerge. These tools track key drivers in the marketplace pointing toward a specific scenario

or future market environment that is evolving. Indicators allow a company to measure and watch


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trends as they begin to develop. If a company realizes that it is in one scenario today and sees that

things are moving to another scenario, it can begin to shift its business strategy to fit market realities

before it is too late. The point of scenario building is not to pick the future scenario that best fits an

organization and hope it comes to pass. Nor is it to find the most probable future scenario and adaptthe organization to it. Rather, Scenario Planning is used to define several plausible scenarios and

develop strategies that will enable the organization to thrive and succeed regardless of which

scenario actually becomes reality.

Scenario Planning has several key benefits and outcomes. Specifically, it helps organizations:

Think differently about strategy development

Take a long-term view of the industry/market to guide critical decisions

Isolate the most critical and influential market factors driving success

Provide structure to consider and quantify the impact of these market factors

Create robust strategies or strategy options for success in an uncertain market

Establish a process to adjust strategies as needed

Take an outside-looking-in approach to strategy development

To illustrate a simple example of Scenario Planning, lets take a look at a fictitious character, Brian,

and his morning routine. Brian is the CEO of his company. He arrives to work each morning and

immediately responds to important emails and catches up on the companys activities for the day.Brian has had this routine for years, is very comfortable with it, and has it timed perfectly so he can

answer his emails and catch up on daily activities by the time his first meeting starts at 9:00 a.m. He

plans his mornings accordingly, and so far, his timing strategy has allowed him to become one of the

most efficient CEOs of competing firms. Then the unthinkable happened. Brian arrived to work one

morning to find his companys computer system had been hacked, all past emails were lost forever

and the network system reboot had erased all employee email accounts. To make things worse, the

entire Technical Team was attending an IT conference in China and could not get back until the

following week due to terrible weather conditions. This scenario may seem impossible, but the fact

that it couldhappen makes it worth taking note. Brian had not envisioned and planned for the di-

saster that took place that morning, and therefore did not know how to react or what steps to take to

make up for the lost time and efficiencies. As with any business environment today, no one knows

for certain what could happen next or what turns could appear in the road. Therefore, companies must

plan now to be ready no matter what world or scenario comes to fruition.


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Why Scenario Planning?

In the uncertain world of today, it is more important than ever for companies to stand ready and

become more resilient in the face of change.

Scenario Planning forces organizations to shift their thinking from worlds they know

to worlds they do not. Many organizations spend too much time attempting to predict the future

based on previous performance and creating strategies for success if their prediction is correct.

However, once their predictions are proved incorrect, business strategies developed are less

effective, and the team must re-start its strategy development effort. Scenario Planning focuses on

unknown worlds and helps organizations craft strategies for a range of potential marketplace

outcomes.

Scenario Planning provides an approach to help business leaders think differently

about strategy development. As a tendency, people understand and think within their ownparadigms or belief systems. It can often be challenging to brainstorm new and effective strategies

with traditional planning approaches. For example, IBM got caught up in being the biggest technical

company of a generation, and consequently missed the concept of the desktop P.C. As Bill Gates

said, IBM was more dominant than any company will ever be in technology, and yet they missed a

few key turns in the road. That makes you wake up every day thinking, Hmm, lets try to make sure

todays not the day we miss the turn in the road. Scenario Planning can provide a forum to foster

creativity in strategy development. Specifically, scenarios, if

developed properly, can offer engaging illustrations of long-

term implications of change and provide a framework that will

help organizations identify how the industry will evolve.

Scenario Planning and Leading Indicator Tracking

provides an ongoing framework for strategy

development and adjustment. While the initial focus is on

crafting scenario-specific and common strategies, the

greatest value comes in tracking leading indicators, which

can help an organization identify trigger points that motivate proactive strategy adjustment to meet

emerging market realities. Our fictitious character, Brian, should have noted the fact that his technical

team would be in China for a week. This indicator, if it had been recognized, would have provoked

Brian to back up his files to the external hard drive he took home with him each day. Planning for this

scenario before it happened could have saved him the time he can now never recover.

.

IBM was more dominant than any

company will ever be in technology,

and yet they missed a few key turns

in the road. That makes you wake

up every day thinking, Hmm, lets

try to make sure todays not the day

we miss the turn in the road.

- Bill Gates


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Scenario Planning becomes necessary if leaders want to stay ahead of the game and ensure they

are making the right decisions at the right time. The graphic above illustrates that companies who do

not use Scenario Planning feel more pain than those who do. The dotted line on the graph portrays a

company that did not develop and track scenarios. The leaders in this company were not prepared to

look for what was coming around the corner. As a result, by the time they realized the market had

changed significantly, they overcorrected their business plan and ended up missing the goal. The blue

solid line on the graph represents a company that did develop and track scenarios, and in turn, was

able to make the right decisions at the right time to reach its goal.

A company should consider Scenario Planning if it is:

Crafting long term business strategies

Addressing broad, significant, and/or fundamental business model/business

strategy issues

Concerned that existing assumptions/views and strategies are not correct

and need to be challenged


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How Scenario Planning Supports Existing LongRange Strategic PlanningAs a result of crafting and discussing detailed scenario descriptions, an organization is better able tovisualize the marketplace that could emerge. Armed with this understanding, the planning team

begins to develop strategies for

success in each scenario and then

develop common strategies they can

implement today. The last phase of

Scenario Planning includes identifying

and tracking leading indicators that could

point towards one world or another.

Scenario Planning provides a frameworkfor long-term business strategy

development and near-term strategy

selection. At the same time, without

the addition of more rigorous decision

analysis approaches, resource allocation

methods, and detailed execution

planning, Scenario Planning by itself will

not likely suffice as a standalone method

for an organizations Long Range Strategic

Planning.

Scenario Planning serves as an input into an

organizations Long Range Strategic Planning

Process. While the specific integration of Scenario Planning into Long Range Strategic Planning will

vary based upon specific approaches utilized, Adayana recognizes the following comparisons

between Scenario Planning and Long Range Strategic Planning, which drive integration efforts.

Scenario Planning looks at a longer planning horizon than most Strategic Planning.

Scenario Planning focuses on discussing major driving forces and themes and identifying

the major uncertainties influencing a market, whereas Strategic Planning seeks to

translate driving forces into planning assumptions.

Scenario Planning results in the development of a number of common and scenario

specific strategies that can drive success in an uncertain market, whereas Strategic

Planning more clearly prioritizes strategy selection based on a combination of market

and internal factors.

As a result of crafting and discussing detailed scenario descriptions,

an organization is better able to visualize the marketplace that couldemerge as a result of the convergence of the two key uncertainties.

This graphic illustrates indicator tracking, showing a move from one

scenario to another.


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Scenario Planning utilizes indicator tracking to support the adjustment of strategies to

meet market realities, whereas most Strategic Plans include the development of risk

management strategies to consider when core strategies are no longer effective.

Detailed below is a visual that illustrates Adayanas view regarding the connectivity of Scenario

Planning to Strategic Planning. Scenario Planning and the resulting Common Strategies or carefully

selected Scenario Specific Strategies are fed directly into the Strategic Planning process. Over time,

indicators are tracked, strategies are considered, and strategic plans are updated. After several

years of implementation, it may become necessary to conduct an updated Scenario Planning exercise

to develop a new framework, strategies, and leading indicators.


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ConclusionThe outcomes of Scenario Planning are abundant. Scenario Planning allows an organization to:

Better understand the driving forces shaping a market

Consider futures that otherwise might not be evaluated

Develop new and effective business strategies

Clearly see emerging trends as they occur in the market

Proactively adjust business strategy consistent with these trends

In the end, Scenario Planning is not about predicting the future or shaping strategies for the scenario

we most desire. Rather, it is about understanding what could happen and proactively preparing for

those potential outcomes.

Adayana recognizes that Scenario Planning is not the complete answer to an organizations business

strategy development and execution model. At the same time, given the uncertainties and volatility

facing most industries, Adayana believes Scenario Planning is an especially effective tool in support

of Long Range Strategic Planning.

Why AdayanaAdayana has nearly 30 years of experience meeting the unique needs of clients. A focus on the

healthcare, agriculture, automotive, government, and food & beverage industries has providedAdayana an excellent understanding of issues facing multiple levels of the marketplace. Adayana

develops solutions for clients in an informed, timely, and customized manner.

Clients have expressed that Adayana is the industry leader in strategic consulting designed to deliver

performance-improvement for business, non-profit, industry, and government entities in areas ranging

from product/service development to go-to-market strategies to new venture development to Strategic

Planning and Scenario Planning.

Adayana understands that strong strategy built upon sound research/intelligence, logical analysis,

and the right balance of creativity and practicality guides success. Adayana has a diverse team of

strategy consultants who offer deep industry and functional expertise. Its consultants come from

relevant industry backgrounds, and many having strong executive leadership experience. Adayanas

approach is hypothesis driven, fact-based, analytical, and iterative. The result is relevant

strategy and solutions clients can implement, resulting in performance improvement for those entities.


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Adayana is uniquely qualified to support your organization in Scenario Planning as it possesses:

A proven and structured Scenario Planning and Leading Indicator Tracking process that

supports effective strategy selection

Significant experience and expertise in the area of Long Range Strategic Planning and its

connection to Scenario Planning

A team of professionals with deep understanding of multiple industries and their specific

needs

A collaborative approach that enables our team to understand your business objectives

and design a specific solution to your needs

A mindset that supports and enables the linkage of business strategy to implementation

and measureable results

For more information on this topic, contact:

Steve Wilson

Vice President, Industry Operations

[email protected]

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Scenario Planning Full