STRATEGIC PLANNING: Develop a Scenario Planning culture


Scenario planning is a must-use process for functional leaders to drive immediate actions, decisions and longer-term strategic planning. 

The COVID-19 pandemic has triggered a wide range of strategic planning activities. As the focus turns largely to recovery and renewal, functional leaders are increasingly pulled into enterprise conversations about likely outcomes when the way forward is neither clear nor certain. They also have to plan for a range of potential outcomes for their own functions.

Scenarios are compelling descriptions of possible futures — not necessarily the most probable ones, but plausible, coherent and substantially different ones driven by the unavoidable barriers facing the business.

Business models are evolving frequently, particularly as executives consider which pandemic-related trends will become permanent. This requires a prompt shift in the strategy that defines how the enterprise will play and win — and requires all functional leaders to be prepared to support a new strategy.

Those who understand how disruption affects enterprise strategic and operational decisions can make small but powerful changes to prepare their teams to act on the risk and opportunities that come from volatility.

Many functional leaders already serve as strategic advisors to corporate-level scenario planning exercises, but far fewer have experience in scenario planning for their own function. 

Even those who work regularly with their CFOs on financial scenario planning tied more directly to the operating plan, may need to expand their capabilities to apply the discipline of scenario planning to identify and develop their own strategic assumptions.

Scenarios aren’t intended to forecast the future. They are neither predictions nor contingency plans. And they aren’t the same as strategic options, which are things within an organization’s control. Scenarios are external, outside of the organization’s control.

Know the objectives for your function.  Ultimately, the objectives of scenario planning for the function are the same as at the corporate level:
  • Maintain focus on critical growth and transformation initiatives during disruption.
  • Identify “surefire” strategic decisions to pursue, regardless of which future unfolds.
  • Perform due diligence on critical short-term decisions, and make strategic course corrections as needed.
  • Prepare the team to mitigate potential risks, and provide timely risk-aligned guidance for different scenarios.
You can’t, however, simply apply the outputs of enterprise wide planning to finance, assurance or other functions — primarily because the high altitude of organizations’ plans fails to consider the implications for functions’ strategies, risk exposure, demand and supplies.

For example, at the corporate level, responding to a market turn might translate into sales team efforts to attract new customers. But for a function, it might mean renegotiating with suppliers or increasing support for ad-hoc workload surges.

Diagnose the implications of scenarios for your function.  For each scenario cascaded down from the enterprise level, functional leaders need to diagnose and articulate the implications on two fronts:

Supply-demand needs analysis. Review scenarios and understand how each might impact the organization’s demand for the function’s services. Consider how your function may need to increase or decrease its available resources in response.

Strategy-risk exposure and opportunity. Determine the risks and opportunities created by a specific scenario. Consider whether those risks and opportunities significantly change the work that your function will do to support the strategy.

Once the implications, risks and opportunities are clear, adjust the function’s strategy, goals and projects or initiatives for a given scenario. Translate these into individual and team action plans by deciding which elements — people, processes, systems, budget — you should focus onto meet business needs, manage risks and capitalize on opportunities.

Action plans should match the severity of the implications and tie directly back to the function’s core strategy.

Bring scenario planning down to earth.  Scenario planning can often come across as a “blue-sky exercise,” so make the exercise pragmatic by:
  • Leading functional teams to define actions they must either start or stop doing right now to prepare for the future scenario
  • Assigning action items (running a cost optimization pilot project) to specific staff members
  • Participant diversity is critical. Typically, managers’ perspectives are based on their experience, and they can provide input on resourcing. Frontline staff can contribute from operational and workload-impact perspectives. The variety of viewpoints helps reveal interdependencies and uncovers a complete set of potential implications.
The outcome is a playbook of scenario-independent strategic actions and a set of actions that are contingent on each scenario’s emergence. This approach can make strategy execution more resilient because it allows functional leaders, in the event of scenario changes, to simply substitute the original actions with scenario-specific actions without the need for a full-blown strategy review.

Prepare to capture opportunities.  As teams craft risk response strategies, they should also spend time identifying opportunities to revamp strategy, budget and talent enhancement and utilization plans.

Focusing on action items that will help the functional team get ahead of uncertainties is more motivational for functional teams than being left to react to negative effects and is less stressful for those who must execute the action plan.

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