Changing the Way the World Thinks about Strategy

Scenario planning can be a very important part of your strategic plan. One question that sometimes comes up is should I use a single scenario or multiple scenarios? Another question is with more than one, how do you choose what the scenarios are?

use multiple scenarios in your planningShould you use more than one?

A single scenario is the basic approach that we use in Simplified Strategic Planning. This is because, in many instances a single scenario gives us a good snapshot of the future we expect to happen. There is no need to use more scenarios if there is little chance of great variations in the future of your industry.  There are however often situations where different possibilities will lead to very different outcomes.

To determine if you need more than one example, take a look at the basic expected outcome. Are there any highly likely changes that may or may not occur that would dramatically change that outcome? If there are, you should consider having two or more scenarios.  We use the Industry Scenario to create the Winner’s Profile (page 4.8 in the Simplified Strategic Planning Manual), an outline of the traits of a company that is most likely to success in that situation. Multiple scenarios are most useful when the resulting Winners’ Profile would be dramatically different between the resulting scenarios.

Useful categories for scenarios

Here are some examples of future categories that I have found useful when working with companies:

  1. Event based scenarios.  This is useful when there is an either or event that could happen, eg. the passage of a new healthcare law, an election, or the approval of a new drug.
  2. Best case worst-case most likely scenarios. This is useful when there’s a great deal of uncertainty and a wide range of possibilities. For example in my April article on Covid, I speculated on three outcomes for the Covid pandemic, and some clients have used this approach basing scenarios on variables like the price of oil.
  3. Alternate trends . This can be useful when you see major trends in an industry that may lead to wildly different outcomes. In several cases, I have worked with teams that could not choose whether their markets were going to become more specialty oriented or commodity oriented. Another divergence would be whether your industry is going to consolidate or become more fragmented.

Keep it simple

While this list is not exhaustive, the three approaches above are both the most common and the most useful.  Generally, you should keep the list as simple as you can.  It’s good to encompass markedly different outcomes that could happen in the future.  It’s not useful to create multiple scenarios covering small variations in outcome.  This is especially true if the resulting Winners’ Profiles are virtually identical.

If you would like to explore which approach to planning would work best for your company the team at Center for Simplified Strategic Planning offers the best team based strategy facilitation you can get.

 

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