Business strategic scenario analysis is becoming a common task in the business. Although it is still incredibly difficult to prepare an exhaustive strategy, they do help many businesses to ask all the right questions and prepare for the unexpected.
That’s where scenarios come in handy from a strategist toolbox. Strategic scenario analysis is particularly useful when it comes to developing strategies for extreme events, like Brexit that the planners are currently struggling to predict. Scenarios enable the firm’s operations to reduce the stagnation of a single historical forecast.
We have previously discussed some of the scenario planning pitfalls that one might fall suspect to, but with the growing importance of strategic scenario analysis in an operational environment, we must pay even more attention to strategic scenario analysis and any possible problems that might arise. Keep in mind, this list is not exhaustive as each project could produce its own particular questions, but it is a good place to start!
Solving Only One Scenario
A common issue with scenario planning occurs once multiple different, equally plausible, or implausible (whichever way you want to look at it) scenarios are developed. This problem comes out once strategy takes over and it becomes increasingly difficult, or time-consuming, to solve all of those different scenarios, so instead focus shifts to only one scenario instead.
Another common mistake associated with singling out scenarios is that there is a misconception that you need to pick a single scenario to create a strategy around it.
However, through the exhaustive analysis, specific scenarios were picked in order to create a strategy for a full range of scenarios. Scenario planning is not about choosing just one option for the future but rather dealing with all of the possible outcomes to develop a strategy that will stand the test of all scenarios.
Paralysis by Analysis
Generally speaking, creating a solid foundation for the business future you require a good business strategy and good scenario planning can help to accommodate that. So, when it comes to scenario planning and business risk assessment it becomes the quest for the answers to the unknown. This leads to the risk of getting stuck in the perpetual cycle of business risk analysis, endlessly trying to create new combinations of uncertainties.
To overcome this problem, check that your scenarios are plausible, don’t overestimate the impact of your business and make sure that your scenarios are relevant to the issue at hand.
Ignoring the Growth
When developing scenarios many tend to get stuck in short-term uncertainties, that is your existing market, products, and competitors. However, the reality of the market is that it will not stay that way forever. Anticipate what changes in the market and the competitors you might see and try to be innovative.
With the growing importance of scenario planning, one must understand how not fall into these traps. Common problems that stem from a poor scenario plan often tangle businesses in too much preparation, poor risk management, and might lead to in-flexibility of the strategic plan. As long you understand how to use scenario planning and how not to fall into these traps, there is no doubt you will feel more confident about which decision to make, which strategy to choose regarding the future.