By Gideon Malherbe, Founding Partner
Scenario Planners usually end with four scenario models to explore external risks and develop their business strategy:
Scenario 1 suggests that tomorrow will be the same as today.
Scenario 2 suggests that, give or take a few events, tomorrow will be better and brighter if we continue in the direction we’re currently going.
Scenario 3 suggests that things will get worse regarding competitor activity and all social, cultural, economic, and civic drivers.
Scenario 4 accepts that things are never black or white but are complex and mercurial.
What good is all this… ?
Most management team members have deep personal beliefs about what may or may not happen. These beliefs and mental models are probably encapsulated in one of the four scenarios. Their daily leadership behavior manifests their opinions and, as such, drives the company in a particular direction that probably has nothing to do with the company’s strategy or plans.
We do scenario planning to surface these mental models and rationalize how to think about the company’s future, including all possible, imaginable futures. By doing so, discretion is tuned to the company’s strategy and away from tribal and personal beliefs members may have. Because we are working with multiple futures, members are not challenged in their private views. Still, they are invited to co-develop many (usually four) viable scenarios that reflect a much wider range of possible futures.
Scenarios are an essential tool to shape mental models about the future. Scenarios are about uncertainties, irreducible uncertainties – the variables in which the range of uncertainty cannot be further reduced by additional analyses.
Scenarios help the leadership team explore previously unthinkable opportunities and identify and solve newly discovered uncertainties. Remember that scenarios are not intended to predict the future but to understand and embrace uncertainty in a wide range of possible futures.
Strategically, a range of future outcomes allows the consequences of significant decisions to be analyzed across different scenarios. This is the crucial connection between scenarios and strategy. Scenarios provide a framework for evaluating the potential outcomes of a given strategy, across scenarios, to test the robustness of the strategy.
We facilitate Scenario Planning sessions as part of developing the company’s strategy. Both opportunities and risks are evaluated, taking all four scenarios into account. We then complete the Scenario Planning session with a 3-horizon strategy: What to fix, what to build, and what the long-term future holds.
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February 21, 2023
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