Strategic Planning in a Capricious World: Part 4 – Scenarios

Posted on: February 26, 2024

Welcome back! We’ve been discussing how to create a strategic plan when looking into the future seems pointless. It is beneficial though, if not essential, so let’s carry on. In Part 2, we looked at the current starting point for your business, and in Part 3, where you’re headed. Now it’s time to think through how you’ll get there.

In our example, you produce and distribute winter tires in the mid to high price range. Your tires are ranked as the third safest on the market. Your Visionary Goal is to be #1 in ranking and #1 in sales. You have two primary strategies to reach this goal. The first is to expand into new geographic markets. The second is to introduce a new product that can capture the top ranking in safety. You have a prototype design, but you need to produce a sample for testing.

Traditionally, you’d now take your goals and the information you’d collected and make a plan – one plan. In today’s business environment, that’s not enough. “Stuff” is happening on the regular these days, so your strategic plan also needs to be a sort of contingency plan. What’s recommended is a process called scenario planning.

Manish Kotwala, a consultant in the United Arab Emirates, explained it well.

Scenario planning is a powerful tool that allows companies to develop a flexible strategic plan that can be adapted to different future scenarios. It involves creating multiple scenarios of how the future might unfold, each with its own set of assumptions, risks, and opportunities. By exploring these scenarios, companies can develop a more nuanced understanding of the potential future and identify strategic options that will enable them to succeed regardless of which scenario unfolds.

To create scenarios, companies should start by identifying the key drivers of change in their industry or market. These might include technological advancements, changes in customer behavior, regulatory changes, or geopolitical events. Companies should then create a range of scenarios that reflect different combinations of these drivers. For each scenario, companies should identify the key risks and opportunities and develop a set of strategic options that will enable them to succeed in that scenario.

While the tendency is to use scenarios to plan for negative events, you also need to consider potential opportunities that you can take advantage of. In our example, winter weather is definitely a driver, so climate change needs to be one of the factors in your scenario planning. What if typical markets don’t get snow? That’s one issue you need to be ready to deal with. But, there’s also a chance that areas that don’t usually get snow are blanketed. Can you come up with a plan to capture this market? One might be to make agreements with dealers in areas that are near your warehouse locations or along your transportation routes. There’s no downside to them having “what if” agreements, although you will need to be prepared to deliver.

Scenarios are about having plans in place for quick pivots and watching for signs that the path you’re on may need to change.

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