Scenario planning is an often overlooked aspect of corporate decision-making. But it is needed now more than ever.

Scenario planning is a methodology for helping leaders think through alternative futures in a way that enables identification of issues. It raises potential outcomes and impacts and helps conceptualize potential risks and opportunities so organizations can be better prepared.

This post captures some insights that can help accelerate the use of scenario planning in your organization.

The Scenario Planning Process

Scenario planning is a scalable, structured, and iterative process.  As a business practice it is a durable, rigorous framework and methodology for thinking about the impact and risk of the future.  Various approaches are utilized by many strategists and scenario planning practitioners.  For our purposes, we will use the six-step process laid out by Lance Mortlock in his recently released book Disaster Proof: Scenario Planning for Post Pandemic Future.  Mortlock’s process was developed in the tradition of scenario planning methodologies as prescribed by pioneering practitioners such as Pierre Wack, The Shell Oil Company, Herman Kahn, and the Global Business Network (GBN).  For more on Lance Mortlock’s background and his six-step methodology, you should also listen to the OODAcast:  Lance Mortlock on Scenario Planning to Drive Strategic Decisions.

An important design trait of the scenario planning process is that it is highly scalable.  As Lance Mortlock pointed out in his OODAcast interview: “I’ve worked with mega corporations on future scenarios with businesses in multiple countries, Fortune 500 companies. And I’ve worked with non-for-profits with less than 10 people. And the point is as you scale up and down the level of detail, the level of rigor changes as well.”

Also, be prepared to rinse and repeat:  each step of the six steps is highly iterative and replicable as well.  Each step is self-contained and can also be executed as standalone workshops or out of order as you see fit.  Internal teams can generate step 1 through 3 and create facilitation workshops company-wide for step 4 through 6, or vice versa.

Following are the six steps of the scenario planning process:

STEP 1 – Scale and Scope:  Define the scope and identify the stakeholders that are going to be involved in the process.  The question here is “What problem are you trying to solve?”  As engineers would say during the design phase:  this is where you would put a “stake in the ground” or “set levels” before embarking on the scenario planning process.

STEP 2 – Explore the Environment:  Research.  Research.  Research.  Whether an intensive, lengthy process of primary and secondary research conducted in-house or, for reasons of time and/or budget, a very quick and dirty research process with an eye towards compelling extreme samples.  In other words: where are the outlier stories?  Look high and low to generate quantifiable metrics to validate your research.  The data may already be in-house.  Look at all qualitative and quantitative resources with fresh strategic eyes.  All research should be designed to surface business issues to identify the macro and micro variables which may impact your business.   Case studies and use cases are a practical organizational tool in this step.

STEP 3 – STEEP Analysis:  Use all the environmental research to analyze the trends, the risks and the uncertainties using the STEEP (societal, technological, economic, environmental, and political) framework.  As Mortlock notes: “So this is where you are trying to boil those environmental research items that you’ve gathered to say, what does it mean? What are the risks? What are the uncertainties? What are the key trends that we’re seeing? What makes sense of what you’ve gathered?”

STEP 4 – Build the Scenarios and the Signposts:  A matrix of four scenarios (a ‘scenario matrix’) is the most effective number of scenarios, usually visualized in a highly accessible X/Y matrix.  Keep in mind:  generating only one scenario is technically forecasting and not at all effective.  There is one word in step that is vital:  storytelling.  Build strong, compelling narratives around each scenario.  For some in your organization, exposure to the actual scenario planning process will garner support for the challenges of strategic communication ahead.  In a later step in the process, company-wide exposure to the scenario planning stories will be the first time a larger audience is exposed to the implications of the scenarios.

STEP 5 – Scenario Confirmation and Stress Test:  What are the immediately actionable adaptation actions?  What are the probable short term and long-term risks? What is their impact if they occur?  Are there any clear, exponential, existential risks?  These usually take two forms:  Are there any highly obvious but ignored threats (Black Swans) which the scenarios surface adroitly and demand immediate action? Or are there any dangerous, obvious, and highly probable (Gray Rhino) risks which are now abundantly clear and ripe for strategic adaptation action.

STEP 6 – Monitor the Signals:  This step can and should be anything from tracking international and domestic policy initiatives, consumer research, and audience engagement on applicable topics in the form of social media data metrics and social listening platforms.  Each industry vertical has preferences for how information is managed to inform decision-making.  Lean on familiar formats at first, with a keen eye for how best to strategically communicate the findings of the scenarios with familiar tools for monitoring and built-in company levers for action.  If you deploy key performance indicator (KPI) dashboards, make sure to ensure that implicit biases are not embedded in the monitoring mechanism at the system design level.

So too for the business opportunities scenario planning creates for monitoring and generating strategic, adaptation metrics in the areas of predictive analytics, data visualization and machine learning, to name just a few. It is an exciting time in strategy, as scenario planning is ripe for innovation in the sometimes-over-hyped arena of ‘big data’ – with a product development focus on developing tools for strategic communication and response. There is a real opportunity for minimal viable product (MVP) iterations of technology solutions in this space.

Accelerating Your Scenario Planning

As a reader of OODA loop you are already tracking multiple megatrends driving humanity to the future. Tracking trends like this provides a critical foundation for scenario planning efforts. We work hard to provide insights into possible futures along many thrusts and organize our research into categories every organization should consider for planning purposes. We recommend kicking off your scenario planning with a review of these special sections of OODA reporting:

Black Swans and Gray Rhinos

Now more than ever, organizations need to apply rigorous thought to business risks and opportunities. In doing so it is useful to understand the concepts embodied in the terms Black Swan and Gray Rhino. See: Potential Future Opportunities, Risks and Mitigation Strategies in the Age of Continuous Crisis