Watching the Economy by Clint Burdett CMC® FIMC
Use Scenario Planning to Adapt As We Emerge From This Recession
By Clint Burdett CMC
Scenario planning is an efficient, cost-effective method used to observe, understand and adapt to economic, social, technical and political developments that will impact your organization, community and region. It pulls together the best minds to anticipate demand and shape the future. Scenario planning's economic value is created two ways: to steer your organization towards its best opportunities for first or second mover advantage or to avoid the over-confidence that leads to unexpected losses. There is less risk you will be caught off guard.
As we emerge from the recession with consumers holding back, scenario planning prepares a firm to adapt intelligently. The method helps push your planning horizon out to about five years.
Scenario planning uses techniques both to overcome ingrained perceptions and make sense of the unexpected. Key leaders work with their experts to anticipate and test long range activities as they tailor goals. Overtime, the scenario planning methods builds confidence in an organizations adaptability, sustainability and resilience. The participants improve their skill observing and understanding the context of future events. These leaders become more thoughtful and decisive either selecting opportunities to pursue or ending projects with no value.
Judgments are based on best practice, understanding of market direction, present and future demand, and measurable success factors. The effort also must be an effective use of time as most firms have cut staff the last two years to save costs.
Key staff evaluate opportunities and threats. Keep the process simple, involve at most seven key players who:
- in the first year, develop a framework to assess the politics, economics, societal development and technical advances in your market and the region,
- identify at least four to at most seven scenarios that bound the worst-case to best case outcomes of your current plans,
- solicit expert feedback from within the organization and its community on the likely outcomes. Community feedback is obtained through informal dialogue with community groups and customers, or is assessed in focus groups and targeted market research,
- reduce the list to four scenarios and prepare a one page "story" five years out for each one.
The overview identifies the data needed to track "will the story come true" (the drivers and their metrics) and recommends appropriate actions, and
present the scenarios, the stories, at a budget review about four months before the strategic planning session for the next budget.
The key staff use their direct reports to gather data which must also contribute to operations plan for the next year. A consultant works with the team leader on the process steps, locates data, and facilitates the team's formal meetings. The consultant's value is to bring an expert outside perspective into the discussions and to keep the process simple and focused.
The process is repeated each year and the data flows into the strategic plan and budget planning. The personal reward for participating in the process is team members will have significant influence over the firm's vision, goals and objectives.
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