Businesses can be impacted by many circumstances. Often these circumstances are from external forces at play that need to be understood. Recently, while working with a client we discussed a
number of challenges that the company was experiencing. We talked for some time about external events that the company was aware of but could not control.
The uncontrollable business events included an aging population and workforce, the availability of self-disciplined and skilled resources, tax law adjustments, Canadian and international industry regulation changes, the happenings in the global economy in Europe and the USA, the Canadian banks’ financial treatment of midrange Canadian businesses, the natural resource market’s price volatility, access to private investments, Manitoba’s diverse economy, technological changes in the industry and the list went on and on.
To work with a midrange, successful Manitoba business and to discuss the external happenings that keep the senior team up at night was a gift. We were able to dialogue on a number of potential threats, determine if they were real and determine possible solutions. In essence, we engaged in Scenario Planning as an approach to strategic planning.
Scenario Planning is an approach that is used with other strategic planning models. It is particularly helpful to ensure that the core planning team truly engages in strategic thinking. When focused correctly, strategic issues and goals are identified. That is a great benefit to any business.
Most literature tells us that Scenario Planning is a five step process. The key is to ensure you take the time to openly identify perceived issues, determine if they are real and decide what to do about them.
Step one is to identify and select several external forces and think about and consider related changes which might influence and impact the business. This might include a change in regulations, demographic changes, education alterations, economic activity, etc. An environment scan of media – both traditional and new – for key headlines often suggests potential changes that might impact the business. This type of business intelligence can be automated in technology savvy workplaces.
Step two is to remember that for each change in a force there is an impact. In this case, discuss three different impact scenarios for the future business. Consider including 1) best case, 2) worst case and 3) reasonable case scenarios that might arise within the business from the resulting change. Reviewing the worst case scenario often provokes strong motivation to change the business.
Step three is to consider what the business might do. This leads to developing potential strategies for each of the three scenarios to respond to change.
Step four involves the core team indentifying common strategies that must be addressed to respond to possible external changes. This is the moment of truth as the team starts to see opportunities to deal with external forces that will impact the business.
Step five is to select the external changes most likely to affect the business. Traditionally this is done over a 3 to 5 year business planning horizon. However, depending what business you are in and the way technology works, planning horizons are collapsing to 18-36 months. You need to consider the planning horizon that makes sense to your business and identify reasonable strategies that can be leveraged to deal with rapid change.
If used correctly, scenario-based planning is extremely powerful. It allows for a guided dialogue on realistic events that can have a dramatic impact on a business and its people. All businesses need to keep a keen eye on the horizon and consider the events, positive or negative, that can impact their future. The key is working pre-emptively to ensure approaches are in place to deal with uncontrollable issues that may arise.
