The Planning Process
Dealing effectively with significant events, situations and trends requires adequate lead time. Otherwise, you are forced into a short-term reactive mode that may not work.
A brief outline of the scenario planning process is available here (in the right sidebar).
If you carry out a process of this nature, here is what the process should give you:
1. A Short List of Major Uncertainties
This list can come out of routine management and board meetings or it can be developed in a separate, probably annual, planning session. It should not be an extensive list but only the top few that you want to be as prepared as possible to handle.
One possible list might include:
- Significant inflation
- Higher financing costs
- Supply chain disruptions
- Increased regulation
- Higher taxes
- Long-term decreased demand
Your list should be prioritized in terms of likelihood and potential impact.
2. A Way To Assess Impacts and Responses
You should also have a systematic way to assess the possible impact of each item on your organization and to develop suitable responses. Building scenarios is part of the process but you really want to have as well a system model that links uncertainties to a model of your organization.
We prefer the system model approach because it generates quantitative, specific output. We want to know how much of an impact in each case that the organization is likely be able to absorb and survive.
You also want to be able to propose responses and see what effect these may have on the organization's robustness and resilience. Some will be ineffective, or have serious side effects. Others may be beyond the available resources.
A good model is especially important if your responses include a financial or organizational component. This should be fed into your normal business planning processes, most of which require quite specific, quantitative input.
Your initial model will probably be revised, tuned and perhaps elaborated over time as you learn more about your target uncertainties and their likely impact on your organization. In fact, a major benefit from this work is often the greatly enhanced understanding of what can affect your organization and how you might protect it from serious damage.
3. An Early Warning & Tracking System
The third output should be a background system to track each of the uncertainties routinely and to reassess the current impact / response strategy. This generally leads to adjustments, both in the responses and in the model itself.
Of particular importance are "triggers" that are considered to be precursors to an event being realized and "indicators" that are dynamic attributes of the event process itself. You need to track anything that has the potential to give you the greatest possible lead time to rearrange priorities and adjust response plans.
Your early warning system may in fact be the most valuable and important part of your planning process. Advance warning is so critical that the entire process may want to focus on it.
Process Resources
Just what you need — another planning process — with virtually everyone in the place fully tapped out, particularly your top people.
Here are a number of ways to minimize the resources that this process needs:
1. Use a session in your annual strategic planning process to identify major uncertainties that you want to address. You are probably doing something like this today anyway. Use a facilitator to focus discussion.
2. Assign the scenario development to a small team — perhaps 3-5 people — who are both analytical and experienced enough to understand the uncertainties. This should be a background assignment.
3. Have the scenario team present progress output quarterly to management and get feedback on focus and content.
4. If you don't have one in-house, retain a consultant who is an expert in systems modeling for business. This should not be a major task for someone who has done these before.
5. Have the scenario team propose responses to each scenario and model the expected impacts.
6. Review responses and impacts with management to get these tuned and adjusted to reflect other priorities, resources and timing.
7. Have the scenario team and model builder develop a simple early warning system. Assign its use to two of the scenario team members.
As always, the first pass through is the hardest. Updates should require far less time and effort.
How We Can Help
If you don't have the necessary resources available in-house, we can provide you with assistance in several areas:
- Process facilitation
- Model development
- Scenario definition
- Response development
- Early warning system design