By Christian Visdomini, Associate Fellow of Green Templeton College
Scenario planning is a strategy fit for the post-covid era.
The Covid-19 pandemic has thrust to the fore the importance of scenario planning, the strategic process of thinking through futures that may unfold and considering how to prepare more wisely in the present for what may plausibly be on the horizon. Yet there remains resistance and misunderstanding about scenario planning, even if its application can help inform response to even bigger future crises such as climate change.
My research has identified six ways in which scenario planning can be adapted to midsized businesses to unlock competitive advantage and promote value co-creation. To be successful, you need to ensure that both scope and extent of your work is well communicated to the people responsible for the development and the implementation of the scenarios. Qualified practitioners will prompt the parties engaged in the process to shift their thought process from probability to plausibility; this is a challenge in itself, and if you want to succeed you need to be an agent of change.
Get your skills up to par
Scenario planning is becoming a popular practice in business, but many scenario planners lack specific competence in this discipline, and use scenarios for predicting the future rather than coping with uncertainties. Poorly done scenario planning is excessively disruptive and wastes stakeholders’ time, thus money.
If you wish to become a scenario planner, you need to go through the lengthy process of mastering the discipline: scenarios are not different versions of the same financial model, and scenario planning is neither sensitivity analysis nor contingency planning. Your goal is to drive value to the companies you advise; if you wing it, the next client will be your last – at least for this discipline.
Improve your domain knowledge
Scenario planning, like mathematics, is applicable across many domains, but you need to acquire knowledge and understanding of fundamental aspects that are specific to your clients and their respective industries. If you do not have substantial experience with the discipline, you may want to start by focusing on one industry. Don’t bite off more than you can chew.
Do not replace financial models
Scenario planning does not foretell the future, and does not replace financial statements or forecasting models. If you propose to replace traditional forecasting methods, you will not win your interlocutor and, most importantly, you will not correctly practice the discipline of scenario planning. Your objective is to identify elements of surprise and disruptions that unexpected events may cause, and help your client develop an appropriate strategy. At one point in the process, quantitative analysis will complement your work, and vice-versa.
Adapt but do not depart
The Oxford Scenario Planning Approach (OSPA) laid out in Strategic Reframing (Ramirez-Wilkinson 2016) is focused on being practical, useful, rigorous and collaborative. It involves individuals and groups from across an organisation or from different organisations coming together to examine factors that contribute to the future and by doing so enable a more insightful collective understanding of the present to guide more effective action.
The Oxford Scenario Planning Approach is concerned with helping to develop better leadership judgement. By considering future scenarios regularly, the approach enables greater awareness of present issues and opportunities, clarifying strategic choices for leaders and assisting them to identify and take the most appropriate actions.
Nonetheless, in applying The Oxford Scenario Planning Approach at times, we have adapted to the dynamics of the various organisations we have helped; however, adapting does not mean departing from the Oxford Approach. For example, creating shortcuts or altogether skipping parts of the process will likely lead to disastrous results. It is dangerous to reduce the work to one week, and it is preposterous to believe that good scenarios can be created without involving all stakeholders in the process. Since there is no professional organisation enforcing deontology on scenario planners, perhaps it is well to remember the Weberian qualities of passion, judgment, responsibility.
Clearly define horizon and timeline
Unless you work with large enterprises, you will likely have to address timeline and horizon. A very lengthy process creates fatigue and may be too onerous, and some companies cannot afford to look at 30 years in the future. Here is where our comment about adapting without departing becomes particularly important: do not compromise the foundations and integrity of the OSPA.
We have found that decision-makers respond positively when they clearly understand the resources they need to commit – from people to time and funds – and feel comfortable with a time horizon that is in line with their need to promptly act.
Communicate effectively
Information is a key component in scenario planning, and you must be mindful of the mechanisms through which information is created and spread, namely through communication. You should assess endogenous and exogenous communication, and promote co-creation of meaning and rhizomatic open dialogues. You should also be prepared to adopt different communication methods throughout the process.
Your ability to produce optimal scenarios is impacted by the value of the information you receive from the various stakeholders, thus effective communication is critical to producing optimal scenarios. Be a communication chameleon.
Be a team player
It is fair to say that a portion of the staff will not feel at ease with you – at least at first – and this may be especially true for the finance group and the strategy team. However, your success depends upon them or, more broadly, upon your ability to create a collaborative environment; you want to be perceived as a colleague.
Some may see you as a reviewer and their work under examination, which is one of the main obstacles to gather valuable information and honest, reasoned perspectives. Understanding your colleagues’ mentality, mindset and psychological perception is extremely important to promote value co-creation.
Comments are welcome via email to christian.visdomini@gtc.ox.ac.uk.
Many thanks to Rafael Ramirez for his continued guidance. Rafael is the Director of the Oxford Scenarios Programme and Professor of Practice at Saïd Business School, University of Oxford.
