Pacifica Continental

What is scenario planning and how to use it

In a VUCA world (volatile, uncertain, complex, and ambiguous), it is easy to see that the traditional model of companies’ strategic planning needs to be updated. This is because, while we plan how to get from point A to point B, the surrounding reality can change in unpredictable ways. In addition, often we do not know how to react or even understand the change that has occurred and its impacts. Continue reading to learn how scenario planning can serve as a valuable tool to address this issue.

Traditional strategic planning

Certainly, it would be glaringly incorrect to claim that planning long-term goals and objectives is somehow obsolete. It is possible to observe that the great importance of the strategic planning process lies in the discussions and decisions it fosters. By drawing the organization’s attention to complex and elaborate topics that may end up not being discussed on a day-to-day basis, opportunities are created to identify the dilemmas faced, preferable choices and prioritization of actions that will lead to the desired result.

Thus, we believe that the greatest strength of the planning process is to update the organization’s logic in the face of its present moment. You need to become increasingly aware of how the world around you can and should influence the courses of action taken by your leaders and teams. Such a conclusion is in line with the words of Peter Drucker, considered the father of modern management, “a time of turbulence is a dangerous time, but its greatest danger is a temptation to deny reality.”

Scenario planning

The concept of scenario planning, which has grown since the Covid-19 pandemic, has induced organizations to build adaptability and room for change into their previously rigid and meticulous strategy designs. After all, scenario planning starts from uncertainty, listing several possible futures and analyzing what posture would be adopted by the organization in each of these perspectives. In this sense, this planning technique mainly seeks to answer the following questions: What can we do now to shape the future in our favor? What do we need to do now to be minimally prepared for the worst possible cases?

The process of scenario planning

There are several ways to accomplish scenario planning, but the process generally includes the following steps:

  • Define the scope of the future that will be imagined. Select the period (e.g. five years from now) and the main issues that will impact you (e.g. crises, strikes, political events, etc.).
  • Identify stakeholders. After all, who will be at the forefront of this change? Who will be affected by it? These voices and perspectives must be incorporated into the planning process. In other words, it is necessary to understand the different strands from which change can come. An example would be to carry out the analysis of PESTLE factors (political, economic, social, technological, legal, and environmental).
  • Reflect on critical uncertainties. Identify possible obstacles and design possibilities for favorable, unfavorable and surprising scenarios.
  • Validate possibilities with stakeholders. That way, you can understand if there is logic behind these assumptions and add nuance and context (ruling out unlikely or not-so-relevant possibilities).
  • Write 3-5 end scenarios. Each option with a title (for example, “Start of new operation”) and a short story to align the results and events until then.
  • Determine postures and tactics based on the developed scenarios.
  • Define a review process and steps. Finally, regularly review predictions, postures and tactics based on how reality unfolds.

Posture and tactics in scenario planning

  • Tactics: These are the actions we can adopt according to our posture. Examples include big bets that move us toward our desired scenario, minimal investments that will allow us to adapt and recover faster in adverse scenarios, or smart decisions that will pay off no matter what.
  • Posture: Refers to our positioning in front of the imagined scenario. It can be positive (effort to shape a more favorable reality) or defensive (effort to adapt to unfavorable realities).

In conclusion, scenario planning serves as a valuable tool for organizations to be able to take ownership of the circumstances and initiate movements towards prosperity. As Peter Drucker said, “The best way to predict the future is to create it”.

Pacifica Continental’s strategy

At Pacifica, we are constantly incorporating new tactics from our customers’ scenarios to develop customized solutions and new services within our expertise and better accommodate market demands. For example, it was thanks to our customers that we identified openness to expand and improve our various solutions, delivering results beyond expectations.

Finally, it is through this essentially consultative approach that we drive ourselves forward as more than a service provider, but rather a business partner, accompanying and adding value to the corporate strategy of several companies as they move towards their ideal scenarios. Take a look at our solutions to learn more about how our specialized team can accelerate your company’s results.

Written by Manuela Rangel