Wednesday, August 19, 2009

Scenario Planning - Preparing for An Unknown Future

Scenario planning has become an important tool for organizations and businesses. It provides a process for discussing and managing change in a organization when the future is unpredictable. It is defined as a strategic planning method that allows an organization to create several options or scenarios of what might happen in the future, how the organization might respond to that future and what financial impact the options would have on the organization. Scenario planning moves to action planning creating defined implementation steps.

The process usually has four major steps:
  • Conducting the Environmental Scan - what are the trends classified as what are the knowns and the unknowns as one looks out to the future.
  • Developing the Options - brainstorming a set of options or possible scenarios with a process to determine the two to four most likely scenarios
  • Measuring the Financial Impact - running the numbers to understand how the scenarios will financially impact the organization - both budget and cashflow are important to develop.
  • Creating an Action Plan - describing how the organization would implement the scenario if the future develops as anticipated. This last step prepares the organization to quickly and effectively respond to changes in the environment as trends unfold.

Scenario planning is an important tool for the savvy manager. Understanding how to create scenario plans, develop the financial projections and create the action plan empowers managers to be prepared and manage change in their organization. It provides a disciplined process to think out loud about the future and understand how to wisely position the organization for the future.

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