Scenario Based Planning

“The business environment is uncertain. Business is about taking risks. Strategic management is about exploiting opportunities within a context of uncertainty about the future.” (Heijden)

Scenario planning functions as a strategic management tool, often as a part of decisions making. A definition is offered by Schwartz: “The scenario process provides a context for thinking clearly about the impossible complex array of factors that affect any decision”.

Working with scenarios creates a common language in the organization which gives management and employees an opportunity to talk about all the influencing factors and the “what-if” stories of the future. What if this and that happened, what would we do then and how can we prepare for such an event?

Scenario Based Planning (SBP) is a strategic management tool that can guide the decision makers to elicit the right choices for strategic planning. This is a thinking concept where the planner looks for the cause behind the events occurring in the business environment, recognizes a system and thereafter frames those systems into scenarios.

A primary factor is to keep the costumer in mind, when creating the framework and executing the scenario work. This means that what is important strategically to the costumer must be the centre of the entire scenario exercise. Another principle is the principle of systems and structure. An analysis of structures usually involves a process of:

• ·     Specifying important events
• ·     Discover trends
• ·     See the patterns of the variables
• ·     Develop the structure
• ·  Use the structures to project future behaviour with multiple structures leading to multiple scenarios

Scenario planning is all about viewing the business and environment differently from what a company normally does. Normally a company practises an inside-out focus. The focus is usually on the day to day business and when considering strategy the company begins by looking at its own organisation and then outwards to the competitors and customers within their own near environment. This approach suffices for when the company wants to make changes or new strategy in a stable business environment. In a complex and developing environment this will not be enough.

There are some steps or parts of scenario planning that are very common or basic, often taking place in any scenario process:

 Phase 1: Preparation

• Qualitative interviews
• Research from existing reports
• Media scanning
• Porter’s five forces model
• Generic forces
• RP consulting
• Clustering

Phase 2: Trend analysis

• Environmental scanning incl. media, news, magazine and news paper, existing trade analysis
• Qualitative interviews
• RP consulting
• Cause and impact analysis
• Influence diagram or causal loop diagram

Phase 3: Scenario analysis

• The matrix
• Strategic decisions implications