Leadership is about making effective decisions. These decisions are invariably based on the mental models leaders carry, about how the world works. In rapidly changing and uncertain business environments these mental models can be fatally inadequate for a company’s survival.
Scenario planning is all about forcing decision makers to consider futures that are outside their mental models. They should leave leaders considering a world of future possibilities vastly different to the slight business as usual variations generally considered through budget planning processes.
Pierre Wack (HBR
) highlights the value of scenarios by asking two questions:
1. What do they leave out? In five to ten years, managers must not be able to say that the scenarios did not warn them of important events that subsequently happened.
2. Do they lead to action? If scenarios do not push managers to do something other than that indicated by past experience, they are nothing more than interesting speculation.
So how to go about a simple scenario planning exercise?
1. First up start with a PREMORTEM exercise.
It is ten years in the future and your business is now out of business.
What has gone wrong?
Brainstorm as many ideas as you can.
Now rank these ideas loosely in terms of likelihood. Also use this opportunity to group and similar ideas under higher level headings
Now pick an idea that seems worth exploring further. Preferably one that might challenge your mental model of the future.
2. Futures Wheel
Step 1: Identify the Change
Write the change that you need to consider in the center of a piece of paper, or on a flipchart. This could be an event, trend, problem, or possible solution.
Step 2: Identify Direct, First-Order Consequences
Now, brainstorm possible direct consequences of that change. Write each consequence in a circle, and connect it from the central idea with an arrow. These are “first-order” consequences.
Step 3: Identify Indirect, Second-Order Consequences
You now need to brainstorm all the possible “second-order” consequences of each of the first-order (direct) consequences that you wrote down in Step 2, and add them to your diagram in the same way.