Updated: Jun 30
The speed of change, especially climate-related, means that the future of the planet and companies are changing very fast. How does your future look? Scenario planning provides the answer.
Meet the future
Can you predict the future? Most likely we will fail.
But we could always prepare for possible future scenarios. Just like Royal Dutch/Shell did in the 70s. In the late 60s and 70s, Shell developed a method called "scenario planning". Planners carried out in-depth analyses of possible future and management considered them with great attention to develop strategic plans. Shell, from being the industry laggard, became one of the best performers.
Today the process of scenario planning is well established and deeply systemised. Bill Sharpe and others at International Futures Forum have taken the original work of Pierre Wack and made scenario planning easier. In the UK, the government office of science has set up the futures, foresight and horizon scanning program, which has developed one of the best scenario planning toolkit.
Even if the government in London doesn't seem capable of taking decisions based on future scenarios (ahem.. Brexit is a done deal), some of the best scenario reports are generated by this program.
What is scenario planning?
Source: Innovation360 Group
It is the process of developing plausible future scenarios that an organization might face. It is not a prediction or a probabilistic modelling exercise. It provides the external outlook to strategy development by combining certain external factors with uncertain trends.
In the context of innovation, it provides the input to identifying strategic initiatives that require innovation; the solutions that aren't known.
The exercise involves exploring certain and uncertain trends using the PESTLED canvas and combining them with horizon scanning and technology watch to look for future trends. A key aspect of the exercise is understanding the causal loops that are likely to play a role in the different scenarios.
Using the scenarios an organisation can hope to
See what's coming and prepare for change.
Identify necessary projects to be executed now.
Identify areas where ideation work needs to be done.
Understand an industry or region and prepare for change.
Developing the Scenarios
The scenario development process is a detailed and systematic process that involves internal and external participants as well as researchers working with technology. We have developed a 5 step process powered by two technology solutions developed by Innovation 360 group, PESTLED360™ and SCENARIOS360™.
PESTLED360™ is powered by artificial intelligence and holds global key drivers and scenario data in your industry while SCENARIOS360™ is one of the most comprehensive Scenario planning tools on the market (using PESTLED360™ as input). Using these tools we are able to develop scenarios with speed and minimal resources, something very few consulting companies can do.
Step One: Collect possible issues linked to the driving forces in relation to the key focal issue. There are two approaches to identifying forces. The first approach is by adding relevant key drivers from a linked PESTLED canvas, and the second approach is to answer below inspirational questions reimaging the future of your organization, based on the Shell 7 questions method.
The definition of a force, in this context, is any interaction that, when unopposed, will change the state of an organization. It can be a global or a local positive/negative key driver; it can be a potential threat from a competitor or a new entrant, a possible substitute, or any other interaction that might challenge and change the status quo.
The eight inspiration questions reimaging the future of your organization:
If you could speak to someone from the future who could tell you anything about [this venture], what would you like to ask?
If things went well, being optimistic but realistic, talk about what you would see as a desirable outcome.
If things went wrong, what factors would you worry about?
What needs to change (systems, relationships, decision-making processes, culture for example) for things to go well?
Looking back, what are the successes we can build on? The failures we can learn from?
Looking forward, what do you see as priority actions which should be carried out soon?
If you had absolute authority and could do anything, is there anything else you would do?
The collect stage will engage internal and external stakeholders in multiple workshops and utilize the SaaS-based PESTLED360™ platform. This enables us to engage a large number of participants to identify and contribute to driving forces.
PESTLED driving forces
Step Two: We cluster the forces and identify the inter-relationship among them to identify causal factors and key forces to be considered in the exercise.
Once key drivers are identified, they are categorized based on certainty and importance in relation to the key focal issues. For each scenario force added, please check the ones that the outcome is uncertain. Mark also those forces that have high impact. A force can be both uncertain and have high impact.
Step Three: In this step the focus is on the important but uncertain factors. We identify the extremes of uncertainty that is possible with each of the forces.
Each axis should contain a pair of two opposite extremes of the Scenario Force. You can add one or more axes to Scenario Force.
We then prioritize the axes.
Step Four: We select the most interesting axes and combine them to be able to develop scenarios. You can add several axes to one scenario.
We work backwards to understand possible plots or evolvements that can signal that the scenario is about to happen.
We develop multiple stories/descriptions of the future that detail various plausible scenarios that can occur.
Causal loop diagram from our work
Step Five: The scenario planning exercise is completed by identifying major causal loops and systems diagrams of the various feedback and balancing loops at play.
Once this is done, we develop a timeline of indicators that provide an early warning that a particular scenario is unfolding.
Scenario planning is a management tool that is designed to allow organizations to evaluate the efficacy of strategies, tactics, and plans under a range of possible future environments. In short, it is a perfect tool for today’s increasingly uncertain and volatile world.
Some of the important things to consider during the scenario planning process
Develop between two and four scenarios. Developing more than four scenarios can be confusing and counterproductive. Each scenario should be sufficiently distinct to materially affect future plans or decisions.
The intent is not to develop the perfect scenario but to provide a mechanism for testing strategy, plans, decisions about projects (in each innovation horizon) and behaviours (based on capabilities and leadership) under a range of credible future scenarios.
Scenarios should be organized around the Scenario Forces based on your PESTLED360 and the Eight Inspiration questions.
Each scenario must present a credible and logical alternative view of the future.
Scenarios must be consistent.
Each scenario should clearly describe the assumptions or pre-conditions upon which it is based (including how far in the future it is).
The differences between each scenario should be clearly documented and understood.
The completed scenario should include:
A narrative that sets out the major elements that describe each scenario.
A listing of the key drivers that will determine whether the scenario prevails.
The definition of leading indicators that will provide an early warning that a particular scenario is unfolding.
Quantifiable metrics that allow the organization to test strategies, plans, or decisions for efficacy under each scenario.
If you would like to discuss this topic further, DM me, I am happy to spend an hour brainstorming with you
Krishnan is a leading innovation consultant and focuses on helping people and organizations innovate and build capabilities for innovation. He brings over 25 years of experience in the industry and consulting. You can reach him by phone / WhatsApp: +919791033967 or email: firstname.lastname@example.org