How to Conduct Effective Scenario Planning: An Interview with Dr. Nardia Haigh
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In the last couple of years, companies have faced unprecedented crises from Covid-19, extreme weather events, and supply chain shocks. Many were woefully unprepared, with no strategy in place to address future scenarios they didn’t expect.
Scenario planning is a tool that helps you take a disciplined approach to anticipating and assessing future conditions and the risks and opportunities that they may present. Through identifying key future trends and drivers, you can reflect on your current strategy and resources to identify what needs to change so that you are prepared. Scenario planning can help you identify early warning signals, prepare for what might surprise you, and communicate a credible narrative to stakeholders. In short, scenario planning helps your business build resilience.
Embedding Project - You provide a framework in your book to help companies find solutions related to climate change, and you've written about scenario planning in relation to Covid-19. In addition to these issues, our partners have pressing concerns related to water, nature, and social risk. Can your framework be applied to any issue? What kind of adjustments would need to be made?
Dr. Haigh - Yes! It's applicable to any issue. The framework can also be applied to different scopes and is very scalable. For example, it is applicable to a business unit, an organization, a geographic region, or the whole globe. The framework can also be applied to different time horizons. Through these different scopes, the framework adapts itself along the way.
Embedding Project - Scenario planning is a comprehensive process, and it requires a broad range of informed voices. Who should be involved in designing the scenario planning process? Do you have any guidance around designing this team?
Dr. Haigh - The project manager is very important. They need to be able to get things done and they must be well respected in the organization. You also need a champion for the project, someone who represents the company’s leadership like a board or C-suite member. This is important because you need to make sure you've got budget and support for the project. You also need to have representation from every part of the organization within the scope of the project. This helps build a holistic view of what the organization might be faced with and how to prepare.
Embedding Project - Do you recommend including external stakeholders and rights holders, and if so, who?
Dr. Haigh - It depends. But in my experience, most of the time, it stays internal. A scenario planning project brings out a lot of sensitive content like trade secrets, intellectual property, competition and vulnerabilities.
But there might be specific pieces of research where you need to engage an external stakeholder or a key partner. This is important for community stakeholder pieces, where companies often have a liaison to understand key forces coming out of the community.
Embedding Project - Beyond your book, are there any specific tools and resources that you'd recommend for priming the people leading the scenario planning?
Dr. Haigh - The TCFD work is key in this area. It is attached to the IPCC scenarios, and TCFD-aligned scenario planning reports are becoming more common, and even mandated by some governments. Another key resource is The Art of the Long View by Peter Schwartz. It really gets you into the right mindset to approach the process. Since the book is from 1996, you can compare his examples to their results in the present, which is very useful.
Embedding Project - In your book, you recommend creating four scenarios. What qualities should those four unique scenarios share?
Dr. Haigh – The key is that they should be differentiated according to the probability we impose on those forces that are in combination most uncertain and most impactful. Once you differentiate them along those dimensions, they will naturally be differentiated in other ways as well.
Embedding Project - What is your advice for approaching a multicriteria scenario? How can companies avoid distraction and know which criteria to use?
Dr. Haigh – All scenarios are multicriteria scenarios. This is where I tend to lean back on the step-by-step method. Once you’ve got a focal question and a time horizon, you need to identify and analyze the forces the organization could plausibly face, rating and ranking those forces to learn which ones to prioritize according to uncertainty and impact. And for each of those drivers, you're trying to give a best-informed estimate of the state they could be in at the time horizon, and the uncertainty around it. This is where the bulk of work is in scenario planning. Once you've got that ranked list, you then move into developing scenarios and the scenarios shape themselves if you follow the process and embrace being surprised. The uncertainty and material impacts of the drivers differentiate one scenario from another, because the scenarios impose probability on the top-ranking forces, either being in play or not. This way, the process forces you to think about a range of scenarios rather than those you think are most plausible or likely, which helps firms prepare for whatever might unfold.
Embedding Project - Are there common mistakes and oversights you see from companies that want to use scenario planning?
Dr. Haigh – Absolutely. Project managers try to do it too quickly, and they don't appreciate the degree to which it can become complex. It's like a roller coaster, as Shell mentioned in one of its publications. In the beginning, you ascend when people are excited about the project. And then the momentum goes down as they start to get into analyzing the forces and they realize how complex it can be. This is why the scope management part of the project is key. And then when you get into the scenarios, things start to come back up again. It finishes on a positive note, because once you have the scenarios developed, then you can start to think about strategies, and managers get a lot of confidence in knowing they can put a strategy together to survive or even flourish in a worst case scenario.
Embedding Project - What advice do you have for communicating a scenario to an audience?
Dr. Haigh - Know your audience and tailor the delivery of scenarios accordingly. They will only be engaged if it’s relevant to them. Assume somebody in the audience has never heard about scenario planning before, while others will have. To ease people into it, explain the context, why the project was done, a little of the method, and the potential benefits.
Also, think about the order in which you need to present the scenarios. I would start with the one that looks most like the present, like business as usual. Starting with the least radical scenario (perhaps one that looks like business as usual) can help them accept the idea that there are potential multiple paths to the future, but they may not all bring extreme change. Then consider how to order the rest – and where to place the worst-case and best-case scenarios in the mix.
Our thanks go out to Dr. Haigh for sharing her insights on scenario planning with us. To learn more, check out Dr. Haigh’s online resources for scenario planning and our curated resources on climate scenario informed decision-making.
In our next blog, we delve further into the 8-step scenario planning process and discover how it can be applied to different issues.