Scenario Business Planning
Scenario planning is a selection of future scenarios that go beyond budgeting and routine strategic planning which is based on the current and last business reports. Scenario planning is a tool used to probe the future by using several scenarios from good, bad, better, and worst scenarios with a specific objective. Scenario planning is a prediction of the future by using the current data available and trends in the industry. Several narratives with the maximum of five but not less than two are developed in conjunction with the selected set of scenarios. Based on strategic plans, each scenario will cover details to be used in the evaluation of success and failure of the scenario. The set of scenarios is intended to support a specific objective and answer some questions presented to address, “what if” analysis. An example of a planned scenario was the anticipation of a drop in oil prices that Royal Dutch/Shell has used in 1986, (Ogilvy, 2015, January, pp.-7).
Traditional forecasting has used an assumption of obvious variables and current trends that affected the current position of the business will remain the same in the future. The prediction is based on speculations that the risks and business opportunities will continue to be the same in the next few or several years. Traditional forecasting is doomed to fail although the right variables are being used and provide future predictions by using the current mathematical formula. Scenario planning uses a more diversified data to address the future scenario resulting from different changes in the industry such as disrupted innovations, global and domestic economy, consumer’s behavior and trend, need for incremental or breakthrough innovations, and other imminent changes. The main difference of scenario and traditional business planning lie on the force and variables use to formulate the prediction. While traditional planning uses specific current tangible data to formulate a simple five-year strategic planning, scenario planning uses a set of scenarios to address various forces that could change the position and landscape of the industry. Some unknown variables and real-life events will affect the future of an industry from better to worst scenario. Scenario planning uses the specific goal to transform the current business model into a more advantageous and detailed planning through the lens of the future driving forces in the social, consumers’ behavior, worldwide and domestic marketing, and technological trends. (Wade, 2014)
A “future proof” strategy (Aurik, Fabel, & Jonk, 2015, p. 151) is used to reduce risks and threats for business sustainability when the worst social and economic interruptions arose. Identifying and understanding potential business disruptions and threats will serve as a sound foundation in setting several scenarios that are advantageous in aligning a business model. It will require a sufficient commitment of leadership to tackle predicted risks and threats by using all resources available. (Aurik, Fabel, & Jonk, 2015).
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