Scenario Planning: Or Does Your Organisation Rain Dance? (Strategic Planning)

By More, Hamish | New Zealand Management, May 2003 | Go to article overview

Scenario Planning: Or Does Your Organisation Rain Dance? (Strategic Planning)


More, Hamish, New Zealand Management


The military developed scenario planning. When you think about it, it's easy to under stand why. Then management embraced it. But where do managers start with scenario planning and how do they introduce it into the organisation?

We all plan ahead to some degree. We think about what we will be doing tomorrow, consider options for dinner at the weekend, choose between a holiday this winter or next summer and consider answers to the interview questions looming later this afternoon.

Organisations do the same thing. But they have created a whole raft of techniques to explain this 'forward thinking', with models, structure and formulistic approaches used to predict what will happen in the future and how it will impact their enterprise. However, these models generally fail to take account of the fact that we live in an unpredictable world, and we should explicitly allow for this degree of 'unpredictability'.

We are conditioned to thinking about the future. It is intrinsically linked to our well-being. Some observers even suggest that our development as a species is based on our ability to think ahead and plan for events that have not yet happened.

When we start to think ahead and plan for uncertain events, we realise how interlinked everything is. We begin to realise that detailed planning for the future is fraught with risks and errors.

So, where to start? How do managers and, through them organisations, plan for and handle uncertainty?

The majority of us create a fixed plan and aim to stick to it; ignore situations that are uncertain and suggest the plan is incorrect; or grin and bear it when adverse events transpire.

But what happens when the stakes are significant, when your survival may be at stake--can you afford to rely on a positive outcome and gamble with the organisation's future? Can you afford to ignore the signals that indicate the planning is wrong? Is management's personal need to be proved correct more important than the organisation's well-being?

The further into the future we try to look, the less clearly we can envisage how things will transpire. This is a major issue for strategic planning, when organisations aim to make decisions that may affect their very existence. Should we spin-off that business unit? Should we restructure? Should we buy that company? Should we build a new manufacturing plant? Should we create a new business? Should we invest in the next generation internet? Should we launch this new product or service?

These questions are known as "long fuse, big bang" issues. They take a long time to play out, and when they do, the outcome will be a major upheaval or "big bang". The resultant bang may put an organisation out of business, may result in a takeover. The ideal and preferred outcome is a huge positive outcome.

Senior executives make decisions that affect tens, hundreds or even thousands of people--how can they ensure that their decisions are the best possible given the current level of knowledge?

Most organisations plan for the future. Many create sophisticated plans, detailing what they want to do in the future, and forecasting where they believe the organisation or industry is headed. These are the strategic plans, business or organisational strategies.

Most of the time, these plans are adequate. They provide a degree of coherence and direction for organisational activities. However, traditional planning usually takes a linear approach, assuming that tomorrow will be much like today.

This approach works well in a stable and unchanging environment, but fails when it is most important, when discontinuous events throw existing behaviours and models into disarray.

Traditional planning models become less reliable the further out the planning horizon. For "long fuse, big bang" problems, traditional planning is little better than using educated guessing, and frequently worse given the insular views of close-knit groups within organisations. …

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