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Mary Drotar

Management

Planning for an Uncertain Future

Eight steps in scenario planning

Published: Monday, September 11, 2017 - 12:02

A recent article in MIT Sloan Management Review, “Using Scenario Planning to Reshape Strategy,” indicated a resurgence of scenario planning that initially gained recognition during the 1960s and ’70s. Royal Dutch/Shell has been the “poster child” of success ever since it used scenario planning to address the instability and uncertainty during the 1973 oil crisis.

I was fortunate to be part of the Scenario Planning group at AT&T Bell Laboratories during the late ’90s, and during that time I was trained by Peter Schwartz, a world-renowned futurist that popularized scenario planning.

Why the resurgence?

With globalization and new technologies, the external environment in many industries is changing.

For example, globalization has been a double-edged sword for most firms. At the highest level, consider two results of globalization: growth opportunities in new territories, and at the same time, competition entering your existing market.

Firms can sell products to new markets, creating opportunities for huge revenue growth. Some new markets have an established structure that the firm must learn and adapt to. For example, U.S. medical device firms are familiar with and comply with the U.S. FDA regulations. To sell products into the European markets requires the firm to learn and comply with the Medical Device Directive (MDD) regulations and ISO 13485 standards.

Emerging markets may not have an established structure. A firm planning to sell products into those markets must deal with uncertainties, including:
• Minimal or evolving regulations
• Understanding different customer needs
• Meeting the physical limitations of the use environment

A medical device company that wants to sell into developing countries may have to completely redesign their products and business model to adapt to erratic supply of electricity, undefined distribution channels for consumables, and different medical practices that make a firm’s existing product impractical.

Globalization also means that new competitors from around the globe can enter a firm’s existing markets. Experience in the United States has shown that these competitors can offer their products at a lower price due to differences in cost of labor, favorable international exchange rates, and the structure of trade agreements.

Globalization continues to change the external environment for many firms by creating new opportunities and threats they cannot ignore, and the traditional approach to strategy does not address these issues well. This is where the s2m strategic framework comes into play, and scenario planning is an excellent tool/process we use to help companies adapt to multiple future scenarios in uncertain environments as described above. I’ve included a very brief list of the eight steps in developing scenarios, from Adam Kahane, Kees van der Heijden, Louis van der Merwe, Napier Collyns, “Outline of Scenario Planning.”

Eight steps in scenario planning:
1. Identify agenda, focal issue, decision
2. Identify key forces in the local environment
3. Establish driving forces
4. Rank driving forces on impact/predictability
5. Select scenario logics
6. Flesh out the scenarios
7. Determine implications
8. Determine leading indicators

There are different flavors of scenario planning as described in the MIT article, probabilistic, normative, or plausible. I recommend researching the best approach for your organization. Scenario planning has been growing as a method to help companies better prepare themselves for the changing environment and enable them to adapt quickly. Having been through this scenario planning process multiple times, I can warn the reader that it is not simple process. It is very time-consuming to develop future scenarios correctly.

Discuss

About The Author

Mary Drotar’s picture

Mary Drotar

Mary Drotar is partner and Co-founder of Strategy2Market, a product development consulting firm established in 2002. Drotar’s new product development expertise is in process, strategy, business model development, lean techniques, risk management, organizational development, and team dynamics. She has most recently worked with medical device and industrial companies in improving their new product development process with flexible and agile methods.

Drotar is currently co-authoring a book with her business partner, on a new way to develop products called Exploratory Product Development (ExPD). It is an adaptive process that is based on reducing the biggest project uncertainties.