How to use scenario planning for developing strategy

If given the chance, every organisation would peep into the crystal ball to see what the future of their business looks like – and scenario planning might just be the closest thing you will get to this.

Derived from the film industry, where people pitch a scenario for a film, scenario planning in an organisation is much the same – pitching a story that sounds interesting and exploring some different ideas about the future.

“You look at what happens if economic, social and technological changes occur and how these things interact and create an interesting situation,” AIM WA+UWA Business School Executive Education Scenario Planning and Strategic Conversations Course Facilitator John Sykes said.

“It’s a way for an organisation to collaborate internally and with stakeholders to learn about these different trends, which often seem concerning.”

Mr Sykes said scenario planning when looking to develop a company strategy was one way to prepare for, and deal with, the events happening around them.

“Scenario planning is a way of looking at the future and getting ideas about the future, at least in a corporate and organisational sense.” 

“It can tackle the opportunities and challenges of the future,” he said.

Five steps to scenario planning

Mr Sykes said there were five steps when breaking down scenario planning and the processes behind it.

He said the first step was to make sure the company understood the strategic environment.

“This includes the organisation itself, the stakeholders it interacts with, such as suppliers, customers, regulators, competitors and collaborators, and the changes in the world around it,” Mr Sykes said.

“The next stage – when it comes to developing scenarios – is to look at exploring different interactions of the economic, geopolitical, sociopolitical, environmental and technological changes via storytelling in the way of collaborative and interactive learning.

“Once you have developed these scenarios, the third step is to work out what the strategic implications are for them – how well an organisation would fare in each of these scenarios, what they would have to change, what they would do better, what would be in their favour and what they would keep the same.”

The fourth phase of the process involves communicating the scenarios and strategy to clients and stakeholders before employing the final step of the iteration.

“Scenarios, like strategy, is a constant process,” Mr Sykes said.

“It is important to revisit them as the world changes and potentially update or change them to develop new strategic insights and actions.

“You might get fresh strategic insights, which leads to new actions an organisation may need to do and it just becomes a regular process that is constantly helping organisations deal with all the changes going on in the world.”

Scenario planning in a VUCA world

While Mr Sykes said he kept scenario planning and a volatile, uncertain, complex and ambiguous (VUCA) world – like we have seen in recent years – separate, he did find the two aspects of volatility and uncertainty could be blended together and based around its learning environments.

“Where a VUCA world could be quite useful is in trying to understand volatile environments and their situations, and getting the organisation to grips with the big picture,” he said.

“The company may not have much knowledge of, for example, the war in Ukraine and the geopolitics of Europe and Russia, so it could potentially affect your business relationships around the world.

“Scenario planning could be useful in bringing people together to learn about it and start seeing how an organisation, team or profession fits within the situation and how things might change.”

Mr Sykes said another area where scenario planning could prove useful was in reframing a stuck situation and being able to see a situation in a new or different light.

“Scenarios often talk about reframing, which is a fancier way of saying ‘getting people to see things in a different light’,” he said.

“It may be something that has previously been seen negatively, and then trying to find the positive in the situation.

“It doesn’t have to be situational focuses, it can be people-focused – you could be learning about a new set of stakeholders or perhaps a takeover.”

Benefits of using scenario planning when developing a strategy

Mr Sykes said scenario planning was a varied tool with many methods of implementation, but there were some common benefits.

“It can be used as a risk management and risk assessment tool, looking for all the potential problems that may arise which could affect the business,” he said.

“Another other area is providing an inspiration or belief in leadership, creating an inspiring story for everyone to get behind and excited about working towards.”

Where to from here?

The Scenario Planning and Strategic Conversations course provides you with the skills and knowledge to navigate volatility, uncertainty, complexity and ambiguity in order to devise plausible futures.

By combining an organisation's business idea with scenario planning, you will engage in strategic conversations that aid in decision-making and resource allocation amidst rapidly changing environments.
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