Financial uncertainties, unpredictable national and international scenarios, environmental hazards, and technological breakthroughs have taken organizations by a surprise. This has led many leaders to turn to Scenario Planning in order to come up with multiple possible scenarios—instead of planning and devising strategy for a single possible event.
Scenarios encompass plausible, but unpredictably important, situations and problems. They comprise combinations and variations of facts and related social changes. In Scenario Planning, possible scenarios are developed using diverse perspectives on potential future outcomes from teams of subject matter experts.
Scenario Planning is a Strategic Planning tool—that gained recognition in 1960s and 1970s—used to develop workable, longstanding Strategic Plans. The classic method to Scenario Planning allows analysts to create simulations for senior management to make informed decisions. The method relates facts—e.g., political, geographical, demographics—with key drivers identified through trends—e.g. economic, environmental, social, and technical.
By preparing for predicted scenarios in advance, organizations can avoid weaknesses or effectively reduce their adverse effects than tackling real-life problems when facing emergencies. Royal Dutch/Shell first utilized Scenario Planning to tackle the turmoil triggered by the 1973 oil crisis. The technique entails identification of factors that join in several ways to create unexpected possibilities. It involves factors, e.g. unprecedented laws, technological innovation, insights about the future, and values. Scenario Planning combined with Systems Thinking approach results in logical scenario development.
Since the emergence of Scenario Planning as a planning tool, in the late 1960s, various types of Scenario Planning have surfaced. The most commonly used are:
- Probabilistic Perspective—Involves making predictions in percentage terms or as best-case versus worst-case scenarios.
- Normative Perspective—Entails envisioning what a future should look like.
- Plausibility Perspective—Involves recognizing the unpredictable part of uncertainty and exploring the sources of turbulence and uncertainty.
Lately, the Oxford Approach to Scenario Planning is being employed across the globe to examine a variety of circumstances. The approach focuses on 2 layers:
- Immediate Business Environment: Comprising a company’s suppliers, customers, competitors, partners, and other stakeholders.
- External Environment: Comprising the factors that are outside the organization’s direct control.
Organizations utilize Oxford Scenario Planning Approach in different ways to analyze diverse circumstances. Instead of assigning probabilities to scenarios, the Oxford Approach concentrates on perceiving and creating rational, thought-provoking, and practical scenarios. Each scenario in the Oxford Approach is a narrative that relates to potential variations in the organization’s external and internal environment, regulations, and trends.
The Oxford Approach to Scenario Planning has the following 5 core characteristics:
- Scenario Planning should clearly address the constituents of organizational strategic framework.
- A minimum number of potential realistic scenarios should be suggested.
- Scenario Planning counts on redrafting frames and perceptions.
- The Scenario Planning initiative calls for dedicated resources.
- Scenario Planning is aimed at assessing various subtle signals.
Let’s, now, discuss a couple of the core characteristics in a bit detail.
1. Scenario Planning should clearly address the constituents of organizational strategic framework.
The framework upon which the organization’s strategy is developed is more important in the Scenario Planning process than the strategy itself. This framework entails the underlying assumptions that structure the composition of the strategy—e.g., the time period under deliberation. Other important factors of the framework pertains to the Scenario Planning process, i.e.:
- Should the process be cooperative or competitive?
- Should it be a one-off initiative to be done during the annual planning cycle?
- Should the strategy be kept confidential or made public?
2. A minimum number of potential realistic scenarios should be suggested.
The number of possible plausible scenarios generated through the Oxford Approach to Scenario Planning should be kept to a minimum.
Interested in learning more about the other characteristics of the Oxford Approach to Scenario Planning?
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