Building a strategic plan for your business might not be your priority, however, working with a plan will focus your efforts and help your team lead the business in a single direction. A strategic plan will require you to define your business goals and enable you to achieve them.
Business scenario planning captures a whole range of forecasts and possibilities in rich detail. By using trends and uncertainties that your business can face you can plan to accommodate your business growth and funds allocation to improve your business decision making and development.
Scenario planning simply means for creating a variety of possible future scenarios for your business. Firms can use this information in a couple of ways, both of which are related to business strategy and development. Firstly, you can use it as an analysis of the current situation of your business and where your business is standing now against the desired business targets. Or organisations can use business scenario planning for goal setting.
In this article, we are going to describe basic scenarios and their differences and provide guidance for creating a scenario for your business.
Identify your driving forces
In order to create a comprehensive scenario and use it for your business, you need to set your business’ driving forces. These are critical driving factors that bring your business revenue. These are best derived from your KPIs – we discussed setting business KPIs in another blog post.
Imagine a scenario
There are many approaches that business can develop business scenarios, but most of them can be broken down to:
- Best guess: optimistic vs. pessimistic scenarios
- This approach looks at the situation based on the current information. The optimistic scenario looks at the potential positives of the future, while the pessimistic scenario looks at the worst case option. These two reviews help businesses establish the most likely future and plan for better responses to deal with any decisions or problems.
- Good vs. bad scenarios
- While similar to best guess scenario, this approach avoids the tendency to focus on the most likely future. This forces manager to give more attention to both extremes.
- Arrayed scenarios
- These scenarios look at alternatives associated with a continuum along a single dimension. For example, firms could plan their response to a slight, moderate, or severe change in the price of gasoline, or other key resources.
- Independently themed scenarios
- This approach looks at different aspects of the future. One scenario could look at possible technological breakthroughs, another at environmental concerns, and a third at potential market changes and so on.
However, all of these scenarios should consider any big shifts in society, economics, technology and politics in the future and see how it will affect your company.
These driving forces can be categorised into internal and external factors. External factors may include any of the market forces that will shape or change the behaviours of the consumers, while internal factors can include planning for turnover of critical top managers, responding to major accidents, or significant changes in stock prices.
There are a couple of things that are crucial for a good strategic business scenario planning. We picked a couple of pitfalls to avoid when creating your scenarios:
In a highly uncertain business environment business, scenario planning has clear advantages. Since nothing is secure and certain, businesses need to prepare for multiple scenarios to stay afloat and plan for the worst-case scenarios to thrive.
However, looking at the potential development of your business, technology, markets and environmental census it is easy to float away from the reality. Make sure that you are not predicting the impossible.
After you create your scenarios, you need to develop strategies against them. First, determine which direction you would want your business wants to be going during each scenario, then decide on the events that support the vision and the outcomes your organisation wants or finds acceptable during this event. This scenario development causes the business to move away from the past business practices by developing potential future situations that possibly question traditional assumptions about the relevant industry, markets, processes or customers, in addition to being a great tool for crisis management.
Depending on the scenario you have predicted it can be easy to put some reference to your strategic business plan and forget about them. However, you need to keep monitoring any changes in the market during the period of your scenario implementation. This will help your business prepare for any further affects changes might have on your business.
If you are interested in taking your business scenario planning on to the next level we wrote an article about Threatcasting.