Scenario Planning
Introduction
- Businesses renew their strategy every few years, some more often. The purpose is to align the team to a set of objectives and allow development of strategy, annual plans and budget for the following financial year.
- That strategy process is often challenged because, since the prior strategy renewal the economic outlook and market may have changed. Clients, competitors and suppliers may have merged, been acquired or exited the industry. Government policy and the regulatory environment is often fluid and determined by the state and federal government of the future.
- Without the senior leadership team窶冱 alignment of those external considerations the strategy development process, including renewal of objectives, analysing current position, identifying and evaluating alternatives, is not always done effectively.
- Scenario planning is a preliminary activity to the strategy development process that aligns the senior leadership team to these external changes. Shell was one of the first companies to adopt this approach and many management books have been published about this process.
- Mainsheet has, only last week, supported a client窶冱 scenario planning process and would like to briefly overview and share the benefits of a scenario planning engagement
What is Scenario Planning
- Plausible scenarios are created through a set of variables or uncertainties that are connected by logic. They present the possible environments of a business in +3 years.
- Scenarios are not fixed, nor do we attribute likelihood. They allow us to consider possibilities and discuss the impact, opportunities and risk for the future of a business. Sign posts that may indicate that a scenario is forming could also be agreed and tracked.
- A lesson from the recent scenario planning exercise is that policy, regulatory environment or competitors could change a company窶冱 existence. Action could then be considered and assigned to mitigate that outcome.
Scenario Planning benefits
There are several benefits from a scenario planning exercise:
- The senior leadership team has a reference and a prioritised list of 窶藁ust dos窶�, 窶話est bets窶� and 窶蕨o gos窶�, or opportunities and risks, against which strategic options can then be created and evaluated.
- The benefit of a Board窶冱 participation in the company窶冱 scenario planning exercise is that they will have a reference against which the strategy is later presented.
- As important as providing the 窶倪兮nswers窶� a scenario planning exercise aligns the Board and senior management team to the external environment in which the strategy will be developed. This process builds team alignment and cohesion that can only benefit decision making and operational effectiveness.
- Scenario Planning
Services/Strategy/Corporate Growth Strategy
Gerard Moody is a Director of Mainsheet Capital, a national strategy, consulting and corporate advisory firm. He has recently returned to consulting following twelve years in management roles across professional services, construction and industrial services. Gerard commenced his career as an Officer in the Australian Army and served with the Australian SAS.
He led a scenario planning exercise for a client in February 2019. Please contact Gerard or other Mainsheet Directors to discuss how we can assist your scenario planning or strategy development in your current planning cycle.