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Strategic Planning, Scenarios and People

November 27, 2009
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Charles Roxburgh, from McKensey, wrote a great article on using
scenario development to enhance your strategic planning.  Just in
case you don’t have time to read it, I’ve outlined his major points. 
Then I want to talk briefly about what he didn’t cover… that you
need to.

Charles writes that “Scenarios are a powerful tool in the strategist’s
armory… enabling the strategist to steer a course between the false
certainty of a single forecast and the confused paralysis that often
strike in troubled times.”  Scenarios are a powerful tool for under-
standing uncertainty and developing strategy accordingly. 
Scenario planning should emphasize the following considerations:

1. Relook at your business strategy – perhaps next year
won’t be the trend established in 2009.

“Scenarios expand your thinking (perhaps the past won’t repeat
itself)… The exercise is particularly valuable because of a human
quirk that leads us to expect that the future will resemble the
past and that change will occur only gradually.”

2. What are the trends in place that you should be doing
something about today?
  Pay attention to consequences vs.
assuming we’ll just work it out/find a way/figure it out when we
get there.

“Scenarios uncover inevitable or near-inevitable futures….
Companies should search for predetermined outcomes —
particularly unexpected ones, based upon the consequence of
events that have already happened, and the trends that are
already in place.”

Charles identifies four kinds of actions and trends that you would
be well advised to attend to and think through the outcome
impact on your business.

1. Demographic trends – changes in population size and structure
of your buyers.

2. Economic action and reaction – supply and demand affects
everyone, including you.

3. Everything is a cycle; ask yourself how long any trend you
are counting on can be sustainable.

4. Force yourself to look beyond the typical 12-18 month
planning horizon.

He goes on to caution against avoiding several common traps in using scenarios, suggesting that you:

1. Manage against the pull to agree or think like the senior person in the group.

2. Avoid becoming paralyzed with the amount of data to consider

3. Don’t confuse setting clear, limited goals with the consideration
and planning for multiple scenarios.

4. Don’t rely on an excessively narrow set of outcomes.  We are
typically too optimistic going into a downturn and too pessimistic
on the way out. You must include “stretch” scenarios while
acknowledging their low probability; otherwise you tend to
disregard thinking “It won’t happen.”

5.  Treat scenarios as something that needs revisiting, re-
evaluating, sometimes discarding, sometimes replacing.

6. Always develop at least four scenarios, with each having 4
alternatives.  If you only develop or show three, people always
pick the middle one. Four forces them to discover which way
they truly lean.

The Missing Piece in Scanario Planning:

Here’s the big one, especially when it comes to scenario planning
that Charles left out.  It’s people. 

People within your organization.  People in your competitor’s organizations.   Do scenario planning around people.

Strategic planning isn’t complete without including a review of the possible scenarios of the key people in your organization and key external organizations.  Let me give you some examples and you
can fill in the rest:

1. Who’s going to embrace working strategically, who’s going to
resist or ignore it?

2. Who’s going to support change, who’s going to feel threatened
and attempt to sink the effort?

3. What’s important to the people in power and how will that
impact process and objectives?

4. Based upon the marketing effort and press releases of your competitors, what are they targeting as a competitive value add
for which demographic groups?

I think strategic planning around people, their trends and patterns
of behavior, is just as important of a trend to look at as any
economic, demographic or environmental trend.  It certainly is
one of the largest impact agents we deal with.

Summary:

Strengthen your strategic planning by developing scenarios to
aid your anticipation and response to the future.  Roxburg,
suggests you “Look for events that are certain or nearly certain
to happen; make sure scenarios cover a broad range of outcomes;
don’t ignore extremes; don’t discard scenarios too quickly just
because short-term reality appears to refute them and never be embarrassed by a seemingly too pessimistic or optimistic
scenario; understand when not enough is known to sketch out
a scenario…”

I suggest you add people of influence to your scenario planning. 
They actually have a much broader influence on scenario out-
comes, and executing a plan to deal with them, then most people recognize.

Links:
Is Working Strategically Really that Important?
Strategic planning and scenario building software


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