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Insights: Scenario Planning – Creating Valuable Memories of the Future

Scenario Planning - Tough Decisions Ahead

Introduction
We’d all like the ability to see into the future so that we can plan for what’s to come. Unfortunately we don’t have a crystal ball or some other tool to help us know the opportunities that will present themselves or the obstacles we’ll face. Some would argue that this uncertainty for the future limits the value of any forecast, strategic or long-range plans we might develop to guide us as individuals or the enterprises we lead or work for. Yet we are routinely developing strategic and business plans and committing significant human, time, and financial resources to defined initiatives when we have no idea what the future may reveal. Scenario planning is a process that contemplates a range of potential futures that can better inform our strategic and business planning efforts and equip us to better react and adjust as we’re implementing those plans.

Michael Hotaling

Recently, Michael Hotaling, leader of C&S’s aviation practice, has begun to facilitate scenario planning exercises in virtual meetings for the Airport Issues Roundtable (AIR). AIR is a gathering of airport leaders from Arizona, California, and Oregon that Michael first drew together in 2009 to enhance peer-to-peer learning and to take action to respond to industry challenges and emerging trends. He has facilitated annual meetings of AIR and is currently guiding the participants through a framework to develop scenario plans to equip these leaders for rapid decision making in the next several months.

What is Scenario Planning?
The process of scenario planning was developed by Royal Dutch Shell in the late 1960s and is still in use by the company today. For more information on Royal Dutch Shell’s scenario planning, visit their scenario planning website. Scenario plans developed by Shell have helped the corporation to react better than their competitors to extreme changes in the oil and gas industry that have played out in the last six decades including the 1973 oil embargo and the collapse of the price of crude oil in the 1980s. Scenario planning is about developing a reasonable range (no more than 3 to 4) of potential futures that could realistically emerge to help inform key decision making. These potential futures are crafted as stories with enough descriptive detail to allow the reader to understand relevant conditions of that future and how the author(s) thought that future may impact them or their organization.

What Scenario Planning Isn’t
A scenario plan is not a vision for the future, a prediction of future events or conditions, or a strategy for an organization. One cannot expect any of the scenarios play out exactly. In most cases, actual events will mirror elements of more than one of the scenarios. Those developing the scenarios should not make specific commitments based on any one of the individual scenarios. They simply serve as a means to stimulate our thinking of how we would react individually and collectively within an organization to potential outcomes. These “memories of the future” serve to better equip us to be nimble and flexible, to adjust to real events, and avoid getting trapped in a framework of an inflexible strategic or business plan.

How Are Scenarios Developed?
Scenario planning is most often conducted in a team environment. Gathering a cross-section of strategic thinkers is recommended, each of whom brings valuable perspective to the process. It can be a team of three or a much larger team that divides into subgroups to develop individual scenarios. An independent facilitator can help guide the process or someone within the organization can act as the guide as long as the individual guiding the process has an understanding of the details of scenario planning.

These memories of the future first take into consideration a set of inputs based upon existing knowledge of the environment and field of interest. These inputs can be a combination current understanding of items like politics, economics, public perceptions, and other factors. Inherent knowledge and experience combined with research efforts can often lead to a robust list of inputs that then can be winnowed to create a focused list of influencing factors.Scenario Planning Flowchart

The next step is to determine the scope and timeframe for the scenarios that will be prepared. Scoping might focus on the future of commercial air travel or demand for professional services by the public and private sectors. Keeping the scope narrow and relevant to the organization helps to avoid scenarios that lack factors to inform important decisions. A timeframe for the scenario is also set that should be a reasonable future threshold. Often a range of five to ten years into the future is selected to craft the content of the scenario. Longer timeframes aren’t unusual—Royal Dutch Shell has set 50 years as the timeframe in their most recent set of scenarios.

A brainstorming session to identify driving forces, pre-determined elements, and critical uncertainties leads the developer(s) of the scenarios into the next stage of the process. Driving forces are the key trends that are expected to shape the future like technology, politics, and the regulatory environment. Pre-determined elements are those items that seem certain no matter what else happens and might include events already in process that have high probability of reaching their conclusion. Critical uncertainties are those elements that may have significant effect on issues the scenarios are concerned with.

The final step is to write the scenarios based upon all of the inputs and the results of the brainstorm outcome in the identify and explore stage. Scenarios are written as narrative stories and are best kept brief (two to three pages) and are intentionally in contrast with each other. Sharing these scenarios with the entire organization can help others gain an understanding of the results of the process and enable broader sensing and responding to outcomes that begin to mirror aspects of the scenarios. While any single scenario is unlikely to play out, your team will likely notice the emergence of aspects of a scenario or combination of scenarios.

Is Scenario Planning Right for Your Organization?
This pandemic has taught us all the value of being equipped to make important decisions in the midst of surrounding conditions changing very rapidly. There will be a great demand to make critical decisions of lasting-impact once we begin to emerge from this current normal. Scenario planning now can help your team better prepare to react to those rapid changes and ultimately make decisions based upon important dialogue you’ve already had in this type of process.

We’re ready now to help guide your team through this process. Michael can be reached at (619) 857-5357 or by email at mhotaling@cscos.com.

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