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What Is Scenario Planning

Scenario planning is not a term that was coined out of the blue. This process got its roots in the US Military. Scenario planning with having played a great role in the military, today has also become a very important method of choice. It is widely being used in difficult situation to compare and decide between different possible solutions of the same situation.

Managing difficult times is tough

Sometimes in life, you will meet with situations that are difficult to handle. Suddenly met with such events can also cause people to lose calm. This can result in an act of hurry. Though actions need to be taken quick in few situations, losing calm can result in serious damage.

Difficult times requires an extra efforts to bring the necessary strength. Strength required to fight with the most adverse situation and also welcome the unexpected, gratefully. This can be only achieved if the person confronted with the problems, thinks ahead of time.

But, is thinking ahead of time all that is needed? This is the part where proper and thought out planning is required. This planning should be governed by all the disciplines concerning the organisation or a particular business. This helps get a wider perspective. Makes things more transparent than opaque.

Different methods have been brought into light regarding this issue. One of such methods, widely used by people is Scenario Planning.

What is Scenario Planning?

Defining Scenario planning

To come out of difficult situation, sometimes we need to evaluate different possible solutions and also Pros and Cons of each solution. In another words, we need to understand various outcome scenario of the same situation and choose the one which suits the most. This process is called Scenario Planning.

Scenario Planning can be all together considered as,

“A synergy of various efforts put together for creating scenarios that readily approach and tackle the possibilities that the future might hold.”

Thus, Scenario planning is an amazing decision making tool to choose from various possible solutions while handling a difficult situation.

Understanding of Scenario planning in detail

Every field has seen the marks of scenario planning at some point of time. It is a process to which people exercising the decision making evaluate the below aspects of a situation,

  • The possible results
  • The impact of the results
  • Analysis of responses received
  • Keeping a proper hold on both; positive and negative aspects of a decision

By keeping in mind the above points, It becomes easier to analyze. This thorough analysis makes it easier to understand both the risks as well as opportunities underlying in the decision. Making it easier to understand the future possibility of a loss as well as gain.

This understanding of various scenarios, helps plan for dealing with them. This helps organisations deal with things at a qualitatively rapid pace. So the survival out of a tougher place, becomes easier.

Scenario planning comes with different methods to implement. All can be utilised based on suitability on a personal level and also depending on the situations and requirements. It becomes important to adapt the best apt template for your situation at hand. This will ensure scenario planning works the best for you.

One key feature for scenario planning is, you are allowed to be as pessimistic as you can be optimistic. The possible outcomes should be unbiased. Gives you the very required clarity.

Paying heed to various facts and figures, helps make the decision more reliable. One needs to remember, Your opinion counts, when backed with reliable evidence. It’s good to be opinionated, but, when talking about a possible being equally realistic is also important.

Examples of realistic or unrealistic Scenario

Below mentioned is an example of various scenarios. One showing the correct way while the other focusing on what needs not be done.

Situation: A girl has recently graduated high school. She studied in Science subjects. She is also known to have passed with flying colours.

Realistic Scenarios example
  • Scenario 1: In two years from now, the girl will have a stable career. She will probably be in professions related to science.
  • Scenario 2: In two years from now, the girl will be pursuing higher education. Most likely in some discipline of science.
Non realistic Scenarios example
  • Scenario 3: In two years from now, the girl will be studying in the 10th standard. Barely able to pass the tests.
  • Scenario 4: In two years from now, this very girl will complete her high school with art subjects.  

Types of scenario planning

Working on different scenarios are the essence of scenario planning. Similarly, there are different types of scenario planning. These types can be based on various factors of evaluation. Some important and mainstream types of scenario planning are:

On basis of quantitative analysis

Scenario planning which completely relies on quantitative analysis is mostly adopted by businesses and various organisations. Quantitative scenario planning involves the various mathematical notions related to market forecasting. All the scenarios in the quantitative model are expressed in mathematical solid numbers. Some of the items that are regarded in this analysis are,

  • projecting the revenues
  • Analysing the returns on investment, keenly
  • evaluation of market shares

This scenario planning model is most specifically known for providing various outputs to a business model. These can be characterized as below,

  • Keeping a track of best case scenario
  • Acknowledge in the worst case scenario
  • Keeping at par with neutral scenarios

With keeping track of above points, this model also is very easy to manipulate. It has never been easier to manipulate the outputs.

The model only requires some changes of a few related variables for far better outputs than before. The model gives way to changing numbers and stats. This helps an organisation to act and adapt accordingly. No matter how big the change market experiences, the new case scenarios are just a few variables ahead. This makes quantitative scenario planning models, completely dependent on,

  • knowledge of key variables
  • management of the truthful relationship between these variables

Events based

The type of scenario planning is also known as operational scenario planning. This scenario planning is specifically carried out to determine the possible outcomes of an event.

This helps to analyse impacts of external or internal event on the organisation. Thus, helping to better plan any specific operation within the organisation. This type of model is mostly helpful in short term. This prepared model is useful only till an event has its future. And, dies down with time. But, it can be a beneficial step in further growth.

Time to repair the roof is when the Sun is shining – John Kennedy

Event based scenario planning also helps us to evaluate time based impact of any solution. Same solution on same situation implemented in different times can have different outcomes. So we can plan to choose the best time to implement any solution with the help of timeline based scenario planning.

Normative Scenario planning

This model is more inclined towards the end result for the determined goal for an organisation. In another words, normative scenarios are more likely to work towards a vision and less likely to consider objective planning. Normative scenarios mostly focus on the improvement of a company’s work structure in the coming future.

These models were more preferred back in the 1960’s and 1970’s. But, with the more progressive nature today these scenarios are very less likely to be used.

They are quite often seen being utilised as a combination with various other types of scenario planning. Normative scenarios can also be easily analysed and formulated just by the involvement of Internal factors.

Strategic Management Scenario planning

To define strategic management in layman’s language this definition seems to be befitting,

“Strategic management scenarios are defined as the scenario models completely based on external forces on a particular organisation. This type of scenario planning has nothing to do with the internal factors within the organisation or company.”

This model of scenario planning is the most preferred and fruitful one of all. Due to the ever changing trends in the market environment, strategizing accordingly provides an upper hand. This model proposed to talk about the requirements of the clients more than the facilities or advancements within the company.

These are the scenarios that are considered most difficult to format it. This is because of their nature to evaluate a greater perspective. This model provides equal opportunity for brainstorming to various individuals in an organisation. So this model is not limited to a few important people. Thus, strategic management scenarios are considered progressive.

Scenario planning while strategic management helps to reduce the risk by preparing one ready for the wrong scenario in advance.

Process involved in Scenario Planning

Scenario planning is a well structured method to deal with possibilities. Make it necessary for understanding every step involved in the scenario planning procedure. There can be different necessary steps that can be introduced depending on an organisation. Some of the commonly used steps to achieve scenario planning model are as below,

  1. First step involves envisioning. This is more likely to be achieved by brainstorming.
  2. Second step comes with investigation. Try to investigate various trends looming around in the market.
  3. Third and an important step is making the right choice. Analyse the best method to drive yourself into growth.
  4. Fourth step will seek your attention towards formulating a scenario template. The one best suited for you.
  5. Fifth step encourages you to start with prying out the  possible scenarios.
  6. With the Sixth step lay down the scenarios. Present them, in the best way possible.
  7. Seventh step finally brings you to evaluation. The scenarios that are presented, all need to be thoroughly and critically analysed.
  8. The Eighth and final step comes with recommendations. It’s finally time to provide possible methods to deal with laid down and analysed scenarios.

A Scenario Planning example

Situation: A business organisation, based on manufacturing and export of milk products like paneer, cheese, curd, and butter etc. It becomes necessary for you to keep a check of the possibilities that the company might encounter in the coming 2 years. 

This situation can account for 3 very easily formulated scenarios. The three scenarios can be,

  • one completely optimistic,
  • one completely pessimistic
  • And the last one, being neutral

Scenario 1: (Optimistic) In the coming two years, their business will outgrow the narrow market. Expanding more overseas.

Scenario 2: (Pessimistic) The coming 2 years will be hard on the business. The business will suffer losses. This all will result in closure of the exports to the limited importers overseas.

Scenario 3: (Neutral) There are no evident changes in the market of the products. Therefore, the company keeps working consistently. Making every possible effort to grow the market. 

Importance of Scenario planning

Scenario planning becomes a very important approach because in situations of crisis you are readily available with steps. These steps already planned out to bring in the required results, to fight the situation. This gives an organization or a leader advantage in the competitive field.

Conclusion

Scenario planning, is the self made magical window into the possibilities of  the future. Through scenario planning, a person or organisation successfully manages to formulate, the threats and opportunities in the future. This method throws light on the results that asserting a strategic approach can lead to.

These numerous scenarios for the future of an organization, lead to them working out ways to deal with them. Both, the negative as well as positive aspects. Focuses on scenario planning and how one can benefit from it. How relatable does scenarios planning feel for you now? Whatever you, the reader gathered, is welcomed in the comment section!

Recommended books for Scenario planning

Article Credit:

This article is contributed by Ms Rashi Arera. Passionate about writing, Rashi sees herself as an artistically inclined and intellectually dominant individual. Writer by profession, her goal is conveying knowledge while maintaining relatability.

More Articles from Ms Rashi Arera

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