If there is one thing we have learned in the past few months, it is how important it is to have business models that are able to absorb external shocks. To a certain extent this might even be common sense. After all, COVID-19 is not the first global crisis, and it will not be the last. In most of our planning documents, however, we implicitly or explicitly assume continued growth and relative stability - in other words, business as usual. It is clearer than ever that we cannot just take future performance for granted.
One important tool that helps us integrate alternative possible futures into our strategic discussions is scenario planning. Scenarios are logical, plausible and relevant descriptions of hypothetical outcomes in the near or far future. They help us avoid confirmation bias and look at the "what ifs?", thus shifting our perspective onto more of the unknowns. By having scenarios, it becomes possible to have critical conversations within our management teams. They allow us to prepare for the unexpected and serve as a basis for action in case the scenarios actually end up occurring. Another way to think of it is as a kind of insurance against otherwise unforeseen events.
Similar to strategy development in general, the value of scenario planning is not so much in having specific scenarios, but in having gone through the process of critical thinking, analysis and scenario formulation. This process strengthens our management team's strategic preparedness while not distracting from the core business.
First popularized by Shell in the 1970s, a growing number of S&P 500 companies now rely on scenario planning as a regular part of their strategy development process. Yet for many small- and medium-sized companies, it is still unchartered territory.
This webinar provides a quick introduction to: