The world is full of surprises, and of course, none of us know what the future has in store for us. But this uncertainty does not stop us from making plans for our businesses.
Your outlook on life affects how you consider the question: What’s going to happen next? Naturally, those who are optimists tend to expect the best, while pessimists assume the worst. Neither stance gives us anything near an objective view of what actually may emerge next.
We also tend to make assumptions about the future by looking back. Both the optimistic and pessimistic perspectives often assume that the future will either continue a past trend or turn it around, for better or for worse. However, the reality of our fast-paced, rapidly changing world is that the past is not always reliable guide to the future.
The future can turn out very differently from what we imagine, and that difference between what we assume and what comes to pass, can make or break businesses.
There are various strategic planning techniques that small to medium business owners can use to handle the uncertainty up ahead. One of these useful techniques is scenario planning.
With its origins in military intelligence, scenario planning caught the attention of business when it was used effectively by Royal Dutch Shell in the early 1980’s. One of their scenarios then was to craft a story based on answering a very uncomfortable question: ‘What if the oil prices dropped by 50%?’ Because they explored and worked through this unlikely possibility at the time, the company was actually prepared when to everyone’s shock this scenario did come to pass in 1986. Shell to this day still advocates exploring and crafting scenarios to plan for the future.
Scenario planning is a group process that aims to thoroughly consider current social, technical, economic, environmental, and political (STEEP) trends, and from that describe a number of different possible situations that might emerge. These scenarios then give you insights into what could emerge and inform your day to day decision-making as you move towards the uncertain future.
Typically the scenario planning process includes:
- a comprehensive group discussion to identify the major STEEP developments and driving forces up ahead
- an evaluation of these developments that analyses key drivers and developments which are certain to occur and that identifies the greatest uncertainties, as well as highlights which are likely to happen first and prioritizes them in terms of potential impact on your business
- the crafting of outlines of possible futures based on the priority possible outcomes
- in-depth working through of the expected impact of each of these possible futures on your business, market and industry
- the identification of signifiers that will enable you to recognise the emergence of each possible future scenario
- the development of your strategies to deal with each of these scenarios
The benefits of scenario planning include:
- enabling you and your team members to step out of your prevailing worldviews, exposing blind spots that might not be taken into account in more standard forecasting processes
- increasing awareness of what is likely to occur, as well as what could come as a surprise to you
- increased capacity to recognise a scenario in its early stages of unfolding
- flexible long-term plans based on a wider, deeper scope
Just because major global companies like Shell are proponents of scenario planning doesn’t mean the process is any less useful to a small business owner. You still need to plan for uncertainties and this a valuable way to do it.