What is Scenario Planning?
So, you might be asking, “What exactly is scenario planning?” Scenario planning is a planning method that considers many potential future outcomes in order to develop long-term plans. Each scenario is a plausible and specific future event or change in business that dictates a different response if the scenario turns out to be true. Say for example I own an ice cream shop, I would want to understand different future scenarios that could potentially disrupt my business so that I can figure out the best way to respond to them ahead of time. What if the shipment of the new flavor I’ve been promoting is delayed for the foreseeable future? What if a pandemic keeps customers away? Scenario planning can also be for positive changes. What if the supply of a new flavor sells out in a week instead of a month? What if business is so good I need to hire more employees? Scenario planning is meant to prepare you for these specific situations.
Scenario planning is used in many different contexts across industries and across departments whether you are in finance or operations. It can get pretty complex depending on the situation, but many times it’s merely a simple display of plan alternatives based on potential outcomes, which can be just as effective. However, at its most basic level, scenario planning is really a management technique designed to obtain consistent outcomes.
While there are many applications for scenario planning, there are two that are the most common and often cause tension: corporate and functional. Corporate scenario planning is handled by executives and upper management. The focus is on very specific business outcomes like revenue goals, customer acquisition and other high-level key performance indicators (KPIs). In contrast, if corporate scenario planning focuses on business outcomes, functional scenario planning is focused on how to achieve those outcomes. Functional scenario planning is performed by managers or department heads and is extremely pragmatic. This type of scenario planning explores how work that contributes to the desired business outcome will actually get done. This includes what projects will be done when, who will work on the projects and what the budgets will be.
Not surprisingly, these two types of scenario planning often cause frustration in organizations. There is an inherent disconnect between desiring a specific outcome and the required work to achieve that outcome. The managers responsible for developing functional scenario plans often feel overwhelmed and rightfully so. It’s one thing to develop corporate scenarios for specific business outcomes, but to plan resources, projects and budgets for each corporate scenario can be complicated. But that’s where we at Meisterplan can help. We recognize the gap between corporate scenario planning and functional scenario planning and built our project portfolio management software to support managers in their scenario planning.