Scenario Planning Made Simple: An 8-Step Method
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There is no question that for corporate strategists, anticipating the future is an increasingly complex task. As the effects of intersecting systemic risks such as climate change, ecosystem erosion, economic inequity, social unrest, and more, expand and intensify, strategists are under pressure to ask and answer a growing number of intersecting “what if?” questions. Scenario planning can help you to better understand the key forces that may influence your strategy and impact your business and can also help ensure that you contribute to the sustainability of the social and ecological systems on which your business depends.
And while many recognise the potential value of scenario planning, the prospect of starting a scenario planning project can be daunting. Where does one begin?
In our last blog, we interviewed Dr. Nardia Haigh to learn more about how to conduct effective scenario planning. She explained the versatility of scenario planning, provided insights on the planning team’s composition, identified common mistakes and oversights, and more. In this blog, we will take a step-by-step journey through Dr. Haigh’s scenario planning framework; breaking the four steps she lays out into eight smaller steps.
Setting the agenda and identifying key internal stakeholders
One way to begin scenario planning is to ask and answer early questions about the rationale for undertaking such a project. What outcomes will the project set out to achieve? Who should champion the project? Who will be managing it? What will be the project’s duration and budget? Will it be a standalone project, or will scenario planning be integrated into broader organisational strategy?
When identifying key internal stakeholders, it is important to have representation from an inclusive range of departments, functions, and subject matter expertise. It’s also important to seek out open-minded and imaginative people to help develop the scenarios.
Define the focal question
The focal question is the raison d’être for your scenario planning project. It will help clarify the desired learning outcomes of your project; anchor many of the decisions that your scenario planning team makes; and will help to determine how you carry out your scenario planning method.
The key thing to remember when selecting a question is that it needs to help you focus on the uncertainty for which you want to prepare. For example, you could ask “How may the decline in global biodiversity plausibly affect our organisation, what should we do, and when?” This type of question will help your scenario planning team to look for evidence pointing to particular ecosystem drivers, and to develop plausible outcome scenarios based on those drivers.
Define the time horizon
Once you have defined the “what?”, it is time to define the “when?” You need to select the year in which your scenarios will be set. It is important to choose a horizon that won’t be so short that it discourages research and preparation for potential surprises, nor so long that it produces vague, unrelatable scenarios.
Identify key external stakeholders
Identify key stakeholders and rights holders, and particularly those that are important to your focal question. These may include suppliers, insurers, investors, industry or business associations, community representatives, scientists and researchers, public sector planners, and more. It may also be especially useful to identify any positions, incentives, or motivations that these parties may have in relation to the issue you want to examine in your scenarios – whether it’s climate change, human rights, water scarcity, or something else. This can help you to better anticipate how they might respond, and how those responses may affect your strategic options.
Identify the driving forces
Good scenarios identify the underlying forces that could shape your organisation’s future in relation to your focal question. This step requires a great deal of research, and is often the most time- and effort-intensive step of scenario planning. However, the more thorough and nuanced the research, the more detailed, plausible, and useful the scenarios. You could consider using tools such as the STEEP (Societal, Technological, Economic, Ecological, or Political/Legal) framework to help you identify your drivers.
Once you have identified, named, and summarised your driving forces, you will need to explore past trends and events, intersections, plausible future states that could materialise within the time horizon, and the potential ways these forces could affect your organisation, key stakeholders, and rights holders.
Rate and rank the driving forces
Scenario planning tends to include more qualitative than quantitative information, and optimism bias often results in the selection of scenarios that are more positive for the organisation. For this reason, is it important to systematically rate the driving forces that you identified in the prior step with respect to their uncertainty and impact. This helps you develop a solid ranking of scenarios. It’s the top two forces that in combination are most uncertain and impactful that will shape the basic parameters of your four scenarios.
Develop the scenarios
A great way to develop scenarios is to take a two-stage approach. In the first stage, you will create initial draft scenarios using unique combinations of the top-ranking forces, and in the second stage you will develop a final set of detailed scenarios. Four is a good number because it provides a variety of plausible futures and prevents teams and individuals from opting for a comfortable middle ground. Lower-ranking forces may appear in some or all scenarios, or be dropped where needed.
Effective and engaging scenarios share a few key attributes: they are plausible, differentiated, have strong internal logic, and are relevant and challenging. Draft scenarios give you an opportunity to consider how various forces might interact, how your organisation and other parties may be affected (including the impact of scenarios on core capabilities), and how stakeholders and rights holders may respond. You can then present your draft scenarios to a small group of close internal stakeholders, and use the feedback to develop your final scenarios.
Identify warning signals, strategise, and assess
No scenario is likely to emerge exactly as envisioned, so it is essential to identify and monitor warning signals. Warning signals indicate which future may be emerging by revealing junction points and turning points along the way. Monitoring warning signals will help you better account for risks and opportunities in your strategic decision-making. To identify warning signals, start by identifying signals of movement in each driver and scenario.
Finally, assess the scenario planning project itself, your satisfaction with project, and the learning outcomes that participants (including external stakeholders and rights holders) gained from the project. This will help your organisation to understand the effectiveness of scenario planning, and to improve the process for future scenario planning projects.
The methods outlined here build upon generations of iterative scenario planning experience and expertise. For more information on these steps, as well as straight-forward and accessible insights and instructions on scenario planning and strategizing for organisations of all sizes, we strongly recommend Dr. Haigh’s book, Scenario Planning for Climate Change: A Guide for Strategists.
Image by Slavcho Malezanov on Unsplash.