Clem Sunter and Chantell Ilbury describe a simple but powerful scenario planning model in their book The Mind of a Fox.
Scenario planning is not about predicting the future. It is about exploring the future. If you are aware of what could happen, you are better able to prepare for what will happen.
The trouble with the future is that you don't know what it is going to be until it arrives. By then it can be too late to plan for it.
If you cannot reliably plan for the future, what can you do?
The answer is to explore the future. The future is complex, but many of the influences that will determine it are already evident.
By exploring what might happen, rather than trying to predict what will happen, you can discover alternative outcomes and prepare for them; this helps you become sensitive to signals that will indicate possible directions as soon as they appear.
Scenario planning is a structured process for exploring the future. It is both a technique and a way of thinking that enables you to develop and test options before embarking on a strategic plan.
The matrix below shows the model and how standard management techniques can be incorporated into it. It has two axes: the horizontal one portrays certainty and uncertainty and the vertical one control and the absence of control. These two axes yield four quadrants: the most interesting ones are the bottom two, which provide 'the rules of the game' and 'the key uncertainties'.
Next, identify the key uncertainties by asking: "What do we not know and cannot control"? Answers might be "actual exchange rates' or "the price of fuel". Analytical tools such as PESTEL or Porter's Five Forces will help identify significant factors, which might represent an opportunity or a threat. As well as trend analysis, look out for 'wild cards' – events that are completely unexpected, such as diseases or volcanic eruptions.
You are now ready to develop three to five scenarios.
These should have simple, vivid and different themes with compelling titles and be written as stories or press reports.
Different strategies can then be developed and evaluated against the scenarios using a SWOT analysis. Then you can say, "If the future turns out this way, this is what I will do".
Finally, when you make a decision, confirm it using SMART or well formed outcomes.
Scenario planning will broaden your perception and alert you to possible developments so that you can prepare for the 'unexpected'. With this improved understanding, it is then safe to proceed to strategy planning.