To succeed in business today, you need the ability to navigate rapidly shifting currents. Traditionally, these have ranged from evolving technologies and new competitors to changing regulations and emerging geopolitical trends. These days, with the COVID-19 epidemic, you are facing even more fundamental questions about the ability for customers to pay, access to critical supply chains, and the health and safety of your workforce. Scenario planning—a process for identifying, and rehearsing strategic options for, various possible futures—was never a luxury before, and as recent events are teaching us, never will be again.
While it draws on trend analysis and forecasting, scenario planning goes beyond thinking about what the future might look like. When done well, it drives more adaptable, responsive strategy, empowering companies to take action decisively and with confidence— as in the following real-world examples:
• Anticipating a shift toward outcomes-based healthcare, a large healthcare insurer increased investment in its own provider services and added new organizational capability in consumer engagement—and dramatically gained market share.
• Realizing that its market was bifurcating into distinct, winner-take-all, high- and low-end segments, a media company doubled down on its strategy of improving profitably in high-end production.
• Anticipating a market downturn, a real estate company invested in market intelligence with the intent to make multiple acquisitions when the downturn arrived.
Scenario planning helped these organizations better identify and understand the range of possibilities for their future. They then made intelligent strategic side bets, such as a shift to emphasizing marketing or planning corporate acquisitions, using what they learned from the exercise of looking ahead. The result, in every case: a smarter, more future-proof strategy.
How scenario planning works to future-proof strategy
Scenario planning can’t predict the future. There are no data about the future, so even the best industry forecast is just a story based on one particular extrapolation of the past. In reality, the future is uncertain, and there are many plausible stories or forecasts about what it may look like.
What scenario planning can do is help your organization prepare for a range of possible futures. First, by helping leadership understand what those futures may look like and grapple with hard questions about disruption and change. Next, by providing a framework for making small, initial strategic “side bets”—and as conditions change and urgency dictates, for making bigger bets down the road.
By enabling decision-makers to explicitly acknowledge, and then rehearse responses to, a range of possible futures, scenario planning lays the groundwork for responding to change. Instead of creating painstakingly detailed roadmaps to a future that may never arrive, leadership can spend more time scouting shifting terrain and steering the organization in the direction it figures to be the most promising way forward.
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