Earlier this week I ran a scenario planning workshop for the board and management meeting of a major Central European company, where we explored the value of scenario planning for the conglomerate.
Scenario planning for macro-strategy
Most people are familiar with scenario planning as a macro-strategy tool, used by organizations such as Shell, the CIA, the Singapore government, the World Economic Forum that want to explore global or industry landscapes decades ahead.
Many organizations in dynamic industries (which today is every industry) can get massive value from building high-level scenarios that can be used for shaping their future.
The reality is that a full-scale scenario planning project requires the appetite from the leaders of the organization. Value from the scenario planning process requires a significant investment of management time, which is amply rewarded from insights and superior strategies, but it needs leaders that truly have a long-term perspective.
Uncovering critical uncertainties
One approach that always resonates with boards and top executives is exploring what it is they consider most uncertain.
Focusing on uncertainties that impact decision-making immediately draws out the relevance of these uncertainties, and how those uncertainties can best be factored into decisions.
Scenario planning for major investment decisions
One of the most powerful applications of scenarios is to inform specific decisions the organisation is considering, such as potential acquisitions and divestments, major investments for example in new plants or infrastructure, and in selecting new country markets to enter.
These very specific and pointed decisions confront large uncertainties, including technologicial shifts, industry disruption, changes in consumer behaviour, economic uncertainties and more. Scenario planning can be an extremely pragmatic approach to making these decisions effectively.
Extending the time-frame of executives’ thinking
This in turn can lead to the appetite for longer-term thinking and strategy among boards and senior executive teams.
Even if they start from a very present view, leading them explore the critical uncertainties in immediate major investment decisions can help to extend their time-frame and breadth of thinking in their corporate strategy.
Image: Jason Devaun