Hi! Managers: The vital role of scenario planning

Business leaders need to become more agile in their planning, budgeting and forecasting capabilities. Doing business as usual, or trying to ignore what is happening, will bring trouble for many organisations.

One way of managing the changes and staying one step ahead is to create a map of uncertainties and examine the visible and hidden forces that can drive organisations in an unknown future. Whereas traditional planning provides a narrow view of the future, scenario planning is a new way of thinking to help leaders and organisations develop more effective strategic directions in the face of uncertain and chaotic circumstances.

External drivers are the forces of change outside organisations that will shape future dynamics in both predictable and unpredictable ways. They include the political environment, scientific and technological developments, social dynamics and economic conditions that may evolve, interact and provide organisations with challenges and uncertainties.

Scenario planning is a process of exploring these uncertainties by visualising what probable future conditions or events may unfold, what the consequences or impacts would be, and how to respond to them.

Scenarios are normally created with multiple sets of issues, to capture a range of possibilities the future may hold. The success of scenario planning relies mostly on the ability to scan the environment to determine what forces and trends are likely to be relevant to developing new insights.

There are some steps underpinning successful scenario thinking. These include considering the long-term view to clearly understand both potential threats and opportunities; thinking from the outside-in, to gain a broader knowledge of external drivers; and embracing multiple perspectives to surface challenges and a variety of future possibilities.

Sometimes, external stakeholders such as consultants, advisors, or former associates can be great resources to help challenge current assumptions or provide a broader picture of external drivers.

Business has to be managed in a proactive manner by anticipating and preparing for uncertainties. Many business decisions are still based on fixed perceptions and beliefs.

Scenario planning can help business leaders to frame and prioritise their thinking about long-term plans and discuss strategies based on key drivers and critical uncertainties in their operating environment.

In the face of increasing complexity and turbulence in worldwide economies, it is essential organisations have a scenario framework embedded into their business strategy to make better decisions today and in the future.

Nutavoot Pongsiri is human-resources manager at Chevron Thailand Exploration and Production. Follow his articles in Hi! Managers on the second Friday of each month.