Rising interest rates, economic nationalism, data privacy accountability, socio-economic divisions, military threats around the world… One thing we know is that 2019 will be full of surprise. So why are so many companies planning for the status quo? The answer is simple: they are so heads down on today’s priorities, that they don’t take time to imagine what if? and build plans to win in any scenario.Their mental models for the future are straight-line extrapolations from today.
This strategy leads to a tried and true outcome: strategic surprise – missed targets, lost opportunities, and all too often, lackluster performance or organizational demise. It doesn’t need to be this way. Scenario planning lets leaders explore a range of possible futures that challenge conventional wisdom. Scenarios help leaders become more vigilant by exposing critical connections between future uncertainties, revealing insights about risks or opportunities, and providing a shared framework for understanding.
These days, Scenario planning is used to power traditional strategic planning processes, add depth to executive development programs, and bring foresight and pragmatism to leadership off-site meetings. With our expert guidance, scenario planning programs can be efficient and effective, and very high-impact. Based on experience bringing scenario planning to organizations — from Fortune 500 companies to the military — here are five tips to get you started.
Build a Future Proof Strategy for 2019 and Beyond: 5 Tips for Right Now
If your organization is like most of the ones we’ve seen, your strategy is based on a mental model that is fixed on today’s reality. More often than not this mindset has not been made explicit and has not been challenged against potential future uncertainties – even though both could be done today. As a result, you operate as though little outside of your control will happen in the future. Your customers will want what they want today, the competitive landscape will remain the same with no new entrants or surprises, your supply chain will stay static, and none of the macro-trends including the regulatory environment will disrupt your potential for success.
But, how do you know your organization is not just doing the equivalent of optimizing film sales and distribution like Kodak was in the 1990’s? Could your team be devoting its key resources to building a superior product today, only to get quashed due to a competitor’s superior position in the broader eco-system strategy as happened to Netscape in the early 2000’s. Are you missing the opportunity to respond to technology and competitive threats by innovating on your business model and service offering – a mistake made by Polaroid, Borders, Toys-R-Us, and so many others have in the past decade?
Whether your business is thriving, and you just need help lifting your gaze or you’re concerned about specific threats and how they may impact your organization, we can help. We’ve spent more than 20 years helping leaders avoid strategic surprise by building the tools, resources, and critical capabilities for enterprise-level scenario planning.
5 Tips for Right Now
Over the past 20 years, we helped Philips Electronics identify ambient intelligence as an opportunity, leading to its strong positioning around the Internet of Things. We helped Coca-Cola understand evolving customer needs, supporting its diversification from carbonated soft drinks before bottled water was a thing. And, we helped the Department of Defense imagine the security risks associated with climate change, generating funding and attention by showing surprising economic and political impacts of what was then merely an environmental issue. We’ve come to realize that the following essential ingredients are critical to a successful scenario planning program.
Identify the full range of uncertainties facing your organization
The growing complexity of our world makes it necessary to identify systematically a broad range of future uncertainties that could have a meaningful impact on your organization. You should identify questions and potential outcomes for three levels of uncertainty. First are uncertainties around your organization. How might your workforce evolve? How could your strategy unfold? Next are industry uncertainties. How will the eco-system evolve? What new customers actions might occur? How will customer needs change? Finally, ask questions about the macro-trend uncertainties. How will the social, technological, environmental, economic, and political environments evolve?
Rather than developing individual forecasts in each of these areas, scenario planners identify a range of possibilities – so that multiple outcomes can be explored.
Create four compelling narratives
There are more uncertainties impacting an organization than a leadership team can manage at any one time. We often find over 100 relevant uncertainties – each with multiple outcomes. A good set of scenarios should be internally consistent, plausible, and challenging. It should raise the most strategic questions an organization faces, and fundamentally challenge the most critical assumptions leadership holds.
The art of scenario planning comes down to weaving these uncertainties and their outcomes into a set of four realistic, strategically relevant, memorable narratives.
Rehearse your reactions
With the scenarios in hand, cross-functional teams can develop winning strategies for each scenario. Work backwards from each scenario’s end-state to identify core strategies and key triggers for each scenario. This knowledge is foundational for a strategic monitoring system, which can often be set-up during a scenario planning workshop. It is also helpful for generating new strategies.
The mere process of imagining organizational responses to a set of conditions out of your immediate control leads to fresh ideas which might be deployed in the event the scenario occurs – or maybe even if it does not.
Future proof your strategy
Many organizations conduct a cross-scenario analysis to identify no-regrets moves – ones that should be taken in any scenario. Those are readily distinguished from big-bets, which only pay-off in one or two scenarios. Royal Dutch Shell is famous for using scenarios to generate strategic options. Working backwards from a scenario’s end-state, they look at what they would want in place given the occurrence of various scenarios, and identify the most efficient way to maintain a strategic option on that future.
A scenario-based strategy gives the confidence to act early because it connects choices today with future external triggers.
Build a culture of perception
Strategic scenario planning is much more than a planning tool to be dusted off with each planning cycle. A scenario planning installation promotes a mindset of inquiry, communication, and collaboration – a culture of preparing for the unknown. Build the knowledge, incentives, and systems to connect today’s operations with your leaders’ peripheral vision.
If you want preparedness, vigilance and resilience on your leadership team, consider an enterprise-wide scenario planning program.
You’ll get a robust analysis of the exogenous forces impacting your business, a set of interactive learning experiences that enhance cross-functional understanding, and a persistent system for monitoring the external environment and promoting peripheral vision. And, you’ll avoid the otherwise inevitable: strategic surprise.