This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here: http://flevy.com/browse/business-document/scenario-planning-243 Scenario Planning, also called Scenario Thinking or Scenario Analysis, is a method used in the strategic planning process to help businesses make flexible long-term plans. This document describes a 9-phase process for Scenario Planning, and shows how to apply this process to a workshop environment. Many organizations conduct off-site Scenario Planning Workshops as part their annual strategy development process.

1. Business Framework
Scenario Planning
Scenario Planning is an integral part of
the Strategic Planning Process. This
document describes a robust 9-phase
process for proper scenario planning
analysis and shows how to integrate it
into a Scenario Planning Workshop
environment.
Axes of
Uncertainty
Axes of
Uncertainty
Axes of
Uncertainty
Axes of
Uncertainty
Scenario A Scenario B
Scenario C Scenario D
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2. 3
Contents
• Overview
• Scenario Planning Process
- Process Overview
- 9 Phases
• Scenario Planning Workshop
- Facilitation Tips
- Suggested Layouts

3. 5
Contents
• Overview
• Scenario Planning Process
- Process Overview
- 9 Phases
• Scenario Planning Workshop
- Facilitation Tips
- Suggested Layouts

4. 7
Phase 1:
Define the scope and context
Describe
scenarios
Checked for
robustness
Outline scenarios
Generate
outcome
combinations
Determine
outcomes
Rank
critical
uncertainties
Identify
axes of
uncertainties
Define scope of
scenarios
KEY ACTIVITIES
 Identify the objectives of the scenario exercise
– What output is required? For what purpose? By when?
 Investigate the strategic backdrop
– What are the key options? What are the visions as by
the team?
 Establish the appropriate timeframe
– Determine the industry investment horizon, timeframes
for key decisions
 Clarify what should be included and excluded
– E.g. geographical limits, value chain segments
Phase 1 – Overview
EXECUTION METHODOLOGIES
 Executive interviews and workshops
 Focus group interviews
 Management team surveys
When conducting the
scenario in a workshop
setting, these info collection
activities can be conducted
prior to the workshop

5. 9
Phase 3:
Rank critical uncertainties in terms of importance and business impact
KEY ACTIVITIES
 Identify possible linkages between the clusters of
critical uncertainties
– Are the driving forces independent of each other?
 Sort the critical uncertainties by important to the
business and degree of uncertainty
 Identify the driving forces most relevant to the
decisions facing the business
 Classify the critical uncertainties into the two primary
and relevant secondary categories
Phase 3 – Overview
EXECUTION METHODOLOGIES
 Correlation Matrix (to determine linkages)

Facilitated group discussion (for uncertainty
ranking)
 Voting (for uncertainty ranking)
Describe
scenarios
Checked for
robustness
Outline scenarios
Generate
outcome
combinations
Determine
outcomes
Rank
critical
uncertainties
Identify
axes of
uncertainties
Define scope of
scenarios

6. 11
Phase 4:
Determine possible outcomes for Axes of Uncertainties
KEY ACTIVITIES
 Identify possible stable end-states for each
uncertainty
– Outcomes should be significantly different (i.e. choose
the extremes)
– Pick two outcomes for each
– It isn’t necessary to cover all possible outcomes
– Avoid value judgment over good/bad states
 Characterize and label the outcome of each
uncertainty
 Use a matrix to tabulate the range of identified
outcomes
Phase 4 – Overview
EXECUTION METHODOLOGIES
 Facilitated group discussion
Describe
scenarios
Checked for
robustness
Outline scenarios
Generate
outcome
combinations
Determine
outcomes
Rank
critical
uncertainties
Identify
axes of
uncertainties
Define scope of
scenarios

7. 13
Phase 5:
Generate plausible combinations of outcomes
KEY ACTIVITIES
 Create strawman models for each scenario by
selecting internally consistent combinations of
outcomes for critical uncertainties
– Check for and discuss possible conflicts among
outcomes selected
– Where the most important critical uncertainties are
evident, make sure to include all identified outcomes in
the selected scenarios
– Target to create around 4 scenarios—don’t create too
many scenarios!
– Ensure the scenarios you have created are distinctly
different
Phase 5 – Overview
EXECUTION METHODOLOGIES
 Facilitated group discussion
 Breakout groups
Describe
scenarios
Checked for
robustness
Outline scenarios
Generate
outcome
combinations
Determine
outcomes
Rank
critical
uncertainties
Identify
axes of
uncertainties
Define scope of
scenarios
Don’t try to over-think the process of
generate every possible outcome—use
sound judgment to evaluate whether the
scenarios selected represent the broad
range of possible future states
TIP

8. 15
Use the top 2 uncertainties to
create a scenario map for the initial 4 scenarios to work on
Phase 5 – Scenario Map Example
Scenario A Scenario B Scenario C Scenario D
Regulatory environment Harsh Harsh Liberal Liberal
Brand premium Erodes Maintains Erodes Maintains
2 PRIMARY AXES OF UNCERTAINTIES
REMAINING AXES OF UNCERTAINTIES
Price of oil Increases Drops Increase Drops
Technology breakthrough Yes Yes No Yes
Threat of digitization High Low High High
… … … … …
… … … … …
… … … … …
These values
defined by the
Scenario Map
(from previous
slide)
Describe
scenarios
Checked for
robustness
Outline scenarios
Generate
outcome
combinations
Determine
outcomes
Rank
critical
uncertainties
Identify
axes of
uncertainties
Define scope of
scenarios

9. 17
Phase 7:
Check scenarios for robustness
KEY ACTIVITIES
 Test the stability of the end state described
– Will stakeholders in the industry intervene to prevent
this end state from occurring?
 Test the relevance of the scenarios described
– Do the outcomes relate to the decisions facing the
business?
 Test the internal consistency of the scenarios
– What contradictions do the scenarios contain?
 Test whether the scenarios are distinct and unique
– Try to avoid developing scenarios that are variations of
the same theme
Phase 7 – Overview
EXECUTION METHODOLOGIES
 Facilitated group discussion
 Breakout group presentations
 Validation with external industry reports
Describe
scenarios
Checked for
robustness
Outline scenarios
Generate
outcome
combinations
Determine
outcomes
Rank
critical
uncertainties
Identify
axes of
uncertainties
Define scope of
scenarios

10. 19
It is important to document all
leading (contra-)indicators and economic parameters
Phase 8 – Key Indicators
Scenario A Scenario B Scenario C Scenario D
KEY INDICATORS  …
 …
 …
 …
 …
 …
 …
 …
KEY CONTRA-INDICATORS  …
 …
 …
 …
 …
 …
 …
 …
The tracking and monitoring of these indicators will help determine any
strategic changes in the future.
Describe
scenarios
Checked for
robustness
Outline scenarios
Generate
outcome
combinations
Determine
outcomes
Rank
critical
uncertainties
Identify
axes of
uncertainties
Define scope of
scenarios

11. 21
Successful scenario planning workshops are usually conducted offsite
over a 2- or 3-day period with involvement beyond just top management
Scenario Planning Workshop – Facilitation Tips
 Allow plenty of time for the group to
bond and for the discussions provoked
by the scenarios
 Go offsite
 Be sure to involve the top team …
 … but also consider including other
“expert” resources
• Each breakout group exercise can open up
wide ranging debate around deep questions
which will affect the future of the business
• Schedule evening work to create the
opportunity for an open-ended discussion
• It is difficult to engage senior management’s
captive attention if they are accessible to deal
with current business ―crises‖
• Don’t allow the management to delegate the
exercise—they oftentimes won’t buy in to
scenarios unless they have been through the
learning involved in exploring the future
• Involve people from further down the
organization—especially people capable of
creative, out-of-the-box thinking about the
future of the industry
• Invite academics, industry experts, regulators,
and even partners (e.g. suppliers, alliance) to
enrich the breadth of the discussion

12. 23
Workshop layouts that work well include the horse shoe and round table
layouts
Scenario Planning Workshop – Suggested Layouts
HORSE SHOE LAYOUT ROUND TABLE LAYOUT
SCREENSCREEN
You should avoid classroom or boardroom layouts.

13. 1
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