Scenario planning is rapidly on the rise as one of the most important strategic tools. This awakening have slowly been going on for a while but the global uncertainties caused by the financial crisis and global economic recession have been speeding up the process.
Since the 1960:s the value of scenario planning have been that of a tool for the long term strategic thinking process. A value that most managers have been able to ignore since operations have had a very strong focus in the vast majority of organizations. Because of this I usually argue for scenario planning along the lines that
- many of the important decisions organizations actually have to take have more far reaching ramifications and consequently is taking place in a more uncertain future than usually is understood – scenario planning can help in mapping and understanding this longer term perspective
- peoples perceptions of a situation are almost always flawed due to a range of biases that comes from how we as humans are hardwired – scenario planning is here used to assist organizations to see through and beyond their own unconscious blinds
Since October of 2008 a lot of people have suddenly become painfully aware that we live in a time of fundamental uncertainty. In such a situation planning is not just a process of organizing long lists of actions that leads towards a goal. When uncertainty blurs the horizon and an uncertain environment calls for real action, people abruptly come to understand that they have forgotten the process of assessing and interpreting what is happening in the environment in order to evaluate their own capabilities of adapting and identify realistic and relevant goals.
Hugh Courtney, who is quoted below, is known for a simple but powerful model of explaining different levels of uncertainty we perceive that we can see for the future:
The change we have seen since October of 2008 is that many more of us now perceive our situation to be on uncertainty levels 3 and 4 rather than on levels 1 and 2 which was the common view before.
One of the few structured ways to understand the situation of an organization in the longer and more uncertain perspective is to use scenario planning. And today when uncertainty even permeates the shorter perspective scenario planning is basically the only strategic management tool that is left.
This awakening can be followed by the increasing in referrals to scenario planning in management magazines articles. Here are some examples from the last couple of months.
- In August Economist published two relevant articles in their online section of management ideas about Scenario planning and one the real gurus behind the modern scenario planning Pierre Wack
- CFO Magazine notes that 41% of senior financial officers have “strengtened their scenario-planning procedures” – Future Tense – CFO Magazine – December 2008 Issue – CFO.com
- Hugh Courtney, author of 20/20 foresight is interviewed in McKinsey Quarterly and advices strategy officers to start with scenario planning because it is more important than ever that we think forward even if we don’t get any exact answers, because any clues to what might unfold is valuable in these levels of uncertainty – A fresh look at strategy under uncertainty: An interview
- In the same issue of McKinsey Quarterly there is another article basically following the same line of thought – Leading through uncertainty
Even in other places scenario planning is suggested as a tool for managing uncertainty:
- In www.livemint.com a WSJ on line publication there is an article about Coming to grips with turbulence where scenario planning is the suggested tool
If you want to read more about scenario planning visit my page: scenario planning resources