Scenario Planning: Preparing to Enter Uncertain Times

How We Got Here:

We are entering a difficult economic period on the path back to “normal” after the initial Covid-19 years. Inflation is growing, hiring and firing have yet to reach equilibrium, and a recession appears to be looming. We are grappling with TUNA (turbulence, uncertainty, novelty, and ambiguity) at every level of our society.

When it comes to facing these challenges of scenario planning and preparing to enter uncertain times, businesses have a few options. The first is to simply do nothing, steer the ship in the same direction you’ve always sailed, and see what happens. Many leaders take some kind of action, usually planning for the worst (doomsday) and hoping for the best (everything going perfectly right). The third option is to build resilience in your organization through scenario planning.

Scenario Planning Options:

There are many methods of scenario planning, but I like the plausibility approach. (MIT Sloan Management Review provides an excellent examination of two real-world examples here.) The emphasis in the plausibility approach is not on complex models that try to predict the future. Instead, you consider a variety of factors with the goal of strengthening your organization’s ability to cope with uncertainty.

There are two layers to consider in a good scenario plan. The first layer is all the factors inside your direct sphere of influence. These are your customers, investors, employees, etc. The second is the outside factors that are beyond your control. Things like legislation, energy prices, technology developments, and macroeconomic trends.

A good scenario planning paradigm explores how the outside factors might transform the inside factors. Remember that while you have little control of what happens outside your sphere, these events always present an opportunity to reframe and innovate.

If your organization has the will to invest time and resources in scenario planning, remember to cast your net widely as you gather knowledge. You will not build a resilient organization without the input of a variety of players. Step outside the management team and talk to people at every level of the business.

If you need help with scenario planning, reach out to siY.