Decision-Based Scenario Planning
© Dr. Terry J. van der Werff, CMC

Scenario sketching should be in your toolkit, but remember they are for making decisions.

I have used "What If" scenarios steadily since first encountering them in 1967 in Santa Monica, California at the Rand Corporation, which developed them to address military issues.  I have applied scenarios to fields as varied as urban problems, aerospace test facilities, university structures, and hospital departments.

It's embarrassing to admit I did not know there was a formal structure to the process until reading Peter Schwartz's delightful 1991 book The Art of the Long View.  I thought scenarios were simply brainstormed notions of what the future might hold, followed by creative actions we might take.

Over the past nine years I have repeatedly used scenarios with consulting clients and in seminars for CEOs.  They have led me to an important insight: scenarios have everything to do with decision making and little to do with planning!

Despite marching through a multi-step scenario process and explaining it as a planning tool, audiences rarely treats it that way!  We start by building the scenarios around a key issue, but invariably finish by making a decision about an issue other than the one posed.

Why?  I think there are three reasons.  CEOs don’t like basing a plan on a fuzzy process.  The creativity mostly comes in the first hour or two.  Leaders prefer making decisions to learning a process.

Considering scenarios as aids to decision making, not as a planning methodology, greatly shortens the time to teach it.  For CEO groups a half day is sufficient to expose them to key global trends and to sketch a scenario.  For board retreats, a full day suffices both to sketch three scenarios and to use the scenarios to decide on one or two strategies to follow right now.

The value, of course, lies not in the scenarios, but in the discipline of thinking creatively about the future.

Let me illustrate with a six month scenario project in 1995 for a retailer with 40 stores across the United States.  They were well managed, with annual revenues of $500 million.

The CEO and his leadership team developed three scenarios for the question “How do we position ourselves to be a $5 billion company in our industry by 2013?”  One scenario was built around technology, another around life style, and the last around competition.  Several creative strategies emerged.  One strategy stood out.

The Web was new back then.  Some retailers put their catalogs on-line, but this didn't seem adequate in light of the rich global IT milieu painted by the technology scenario.

The CEO’s genius was to ask, “What would our Internet initiative look like if it were a store?”  Everyone’s mindset instantly shifted from an unfamiliar technology to something they knew: how to open a store.  The CEO got a business plan within a fortnight.  His first employee was the store manager.  The Internet store was not put into the hands of the IT department, but into those of a seasoned store manager with full P&L responsibility.

The Internet store has been a smashing success.  Five years later it stands fourth or fifth in revenue amongst its 50+ stores.

Fuller descriptions of the scenario process and two case studies are on our Web site.

Could you benefit from using scenarios for decision making in your company?

Contact us.  We would be delighted to assist you.

 

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