Scenario planning is a tool that allows businesses to consider not just one possible future, but multiple futures in which they may be competing. When strategies are developed against several plausible futures, we are prepared to defend against a broader range of competitive threats and pursue a wider variety of opportunities.
Scenario planning at its core is a type of contingency planning that forces us to develop strategies to be put in place if scenarios begin to play out in real life. Scenarios rarely come to fruition exactly as imagined, but since we develop multiple visions of the future, the elements from different scenarios begin to overlap.
Indicators are key
How do we know when scenarios are playing out to the degree that we should change our strategy? It’s easy to develop a prophetic mindset and that is especially true for those who lead scenario planning exercises, but this is a trap. Scenario planning is not a method of predicting the future. It is a means of anticipating plausible alternative futures so that we’re better prepared for change in an uncertain world.
Early warning indicators are essential. Scenarios are written with a brainstormed list of indicators that tell us when something that resembles our storylines is coming to fruition. It’s important to regularly monitor indicators, so that companies know when scenario strategies should influence day-to-day business operations.
Indicators can be thought of as small signs of big change. These indicators are related to the change drivers that are used to build scenarios. Each indicator is assigned importance, giving the scenario a quantitative framework to assist the decision around putting a contingency strategy into play.
Scenarios in action
Using the example of Mintel’s senior scenarios, which anticipates how home automation and robotics will influence the drive to age in place and potentially reshape the future of the household care category. One of the scenarios, titled ‘From the Ground Up’ anticipates a future where public subsidies drive tech investment that leads to the wide-scale construction of high-tech homes for seniors. These homes reduce consumers’ reliance on traditional household care products that require a manual approach to chores.
Scenario planning is a means of anticipating plausible alternative futures so that we’re better prepared for change in an uncertain world.
One presumption for this scenario is the cost of caring for growing elderly populations will give governments an incentive to prolong people’s independence and delay their institutionalization. This scenario tests the effect of a key change driver, where a growing demographic imbalance means fewer young people to care for the elderly, tipping the scales towards technological solutions.
Indicators that can tell us if this change driver is playing out to influence government policy include changes in the birthrate, immigration (because immigrants tend to skew younger than the population at large), healthcare costs and the societal cost-benefit tradeoff between institutionalization and independence.
The last indicator is multifaceted and involves trends around economic growth, the solvency of social safety nets, changes in the healthy lifespan and the participation of older people in the labor force, which would increase the economic benefit of keeping seniors independent.
What we think
Monitoring scenario indicators is often the hardest part of the process because a single scenario can yield hundreds of early warning indicators. This step requires the dedication of resources to monitor the external environment over an extended period of time. The development and monitoring of these indicators is also a critical step in ensuring that scenario planning is not just an interesting intellectual exercise about the future, but a means of influencing the real-time deployment of new strategies.
