How important is scenario planning?

Events of the last decade or so have thrown a number of seismic challenges at businesses–a major financial crisis, Brexit, China accelerating as the biggest global GDP, Coronavirus and sadly only recently the Ukraine crisis and impact on global supplies and international teams. While in the case of Brexit and China, there has been some time to plan, very few businesses could have predicted the scale of the financial crisis or the pandemic.

In fact, no-one can predict the future, but scenario planning gives us the space to consider what we might do if the unexpected happens; to consider the ‘what if’–even if it’s the unthinkable.

What is scenario planning?

Scenario planning looks at big-picture stuff with a long-term outlook and considers the things you don’t know the answer to. Shell have famously used it since the 1970s, when it helped the company to navigate the oil crises of the time.
It’s different to forecasting, which looks at figures going up and down in the near-to-medium future. It’s also different from business continuity planning, which is about risk management.

Why do it?

Business leaders who invest time and thought to change are ultimately better placed to deal with times of great uncertainty, and those that have considered the potential threats to their business do better when unexpected events happen. This is why I think scenario planning should be part of every leader’s toolkit.

How to scenario plan

I have had the opportunity to work first-hand in organisations that practise scenario planning. The general approach is:

Get your leaders involved in a brainstorm exercise where you consider what the possible dangers to your business might be.
Imagine a reality that you’ve not been in before, that may never happen. Consider the potential dangers pertinent to your business and allow people to play with the unthinkable – for example, if a key supply of goods suddenly dried up. What factors might cause this? Get lots of ideas out and written down.
Start narrowing it down to around 3-5 recurring themes. Throw out the really wild ideas; you can’t consider every scenario. Discuss and write what you might do in each chosen scenario and keep a record of them.
Check regularly to see if you’re any nearer to these scenarios and keep an open mind to other possibilities. Add to or remove from the list as things change.

While it can be daunting to think about the potential harms to your business, don’t forget that unexpected events can provide huge opportunities too. Being able to adapt to sudden demand for your products is a scenario that every ambitious business owner should have a plan in place for. Just ask any hand sanitiser or mask manufacturer!

If you’d like to equip your leadership team with better skills for dealing with uncertainty, to find out how our People Puzzles HR directors support growing businesses through their people, Call us on 020 3633 6830.

Jane Burgess, People Director