Lesson Plan 4 Scenario Planning

16. June 2008 – 16:11

ObjectivesScenario Planning

  • understand the concept of scenario planning
  • application of the scenario planning procedure to a case
  • explain Delphi Method
  • give examples of driving forces and how they affect a business
  • integrate the scenario plannning method in a strategic planning of a business

Why use scenario planning?

Would you have done things differently if you had had a few year’s advance notice about developments such as e-commerce, economic growth and the recent downturn? All of us would plan better and avoid mistakes if we knew what the futrure would be like.

Scenario planning allows considering a range of alternative futures.

Herman Kahn, one of the founding innovators of the practice, developed scenarios to see past the cultural blind spot that thermonuclear war must never happen. What if it did happen? asked Kahn. What sort of world might the survivors face? Thinking the unthinkable, Kahn argued, was the only way to keep one’s strategic vision from getting stale.

Scenario Planning considers combinations of uncertainties in each scenario. Scenario planning can benefit from computer simulations but is less formalizes.

Scenarios are used to stimulate new ideas. They form the basis of a strategic debate which is radically different to the traditional business planning.

Scenario planning creates a flexible plan for the business which is composed of a variety of options. Scenario planning enables the business to adapt the plan to the evolving environments.

Procedure

  1. Decide on the key questions to be answered by the analysis.
  2. Set the time and scope of the analysis. A usual time frame can be 5 to 10 years.
  3. Identify major stakeholders.
  4. Map basic trend and driving forces (industry, economic, political, technological and societal trends). Describe each trend, how and why it will affect the organisation (Brainstorming).
  5. Find key uncertainties. Map the driving forces aon two axes, assessing each force on a uncertain/predictable and important/unimportant scale.
  6. Check for the possibility to group the linked forces. If possible reduce the forces on the two most important (x/x diagram).
  7. Identify the extremes of the two possible outcomes of the two driving forces and check the dimensions for consistency and plausibility. 3 key points should be assessed: time frame, internal consistency, vs the stakehodlers.
  8. Define the scenario, plotting them on a grid. Usually 2 to 4 scenarios are constructed.
  9. Write out the scenarios.
  10. Assess the scenarios.
  11. Identify research needs.
  12. Develop quantitative methods. Develop models to help quantify consequences of the various scenarios, growth rate, and cash flow.
  13. Converge towards decision scenarios – scenarios which address the fundamental issues facing the organisation.

Literature: http://lessons.lerntipp.at/21/scenario-planning-references

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