The importance of Scenario Planning in strategic projects
Scenario planning is becoming more important than ever given the uncertain and changing environment in which the companies operate nowadays. This notion is especially valuable for PMO leaders driving the pipeline that will strategically fuel the future of the organization.
Either you are an executive recommending the CEO to keep your organization within its core business and stop expensive projects in the riskier arenas, or a Portfolio Manager exploring different variables before defining the strategic path for your programs. In both cases, how should you decide where to place your stakes?
The answer cannot be reduced to a single forecast and traditional risk management. It is important to embrace uncertainty but it is also important to remove (or at least minimize) the negative impact of reactionary responses to changes in the business environment.
The solution to this quandary might be good Scenario Planning.
The scenarios themselves should not be seen as the required end but rather a management tool to improve excellence on strategic decisions in a project or organization.
Example of a Process to Build Scenarios
By doing a quick literature search, you can find different methods on how to build scenarios. I will share with you one that consist of 5 main steps:
Step 1 - The Focal Question: The first step in the process is to agree on the strategic issue we want to address, typically in the form of a “focal” question.
Step 2 - Driving Forces: Identify the forces driving future change.
Step 3 - Critical Uncertainties: Identify critical uncertainties. The emphasis at this stage should be on divergence and not convergence. Of greater concern is to identify driving forces that are both important and uncertain and thus have a wide range of future outcomes.
Step 4 - Scenario Framework: At this stage we should be able to create a clear framework with a combination of the critical uncertainties with possible future outcomes that could be resumed on a diagram.
Step 5 - Scenario Characteristics and Storylines: Having defined a logical framework, this step involves identifying major characteristics and building a storyline for each scenario in a creative brainstorming session to describe the future end states.
Even if uncertain, the ‘real future’ will most likely contain elements of the defined scenarios. The aim is to gain insights from these on what/why could change, and what this knowledge might mean for strategic decisions.
Also important is to monitor ongoing change by defining flags per scenario that will serve as early warning system to signal that a specific scenario is emerging.
Watching for these flags should allow to make sense of change on an ongoing basis, and to react more effectively than competitors to significant changes in the business.
The strength of scenario planning is to widen and deepen thinking about future business environment affecting projects’ strategic choices by enhancing a sound risk analysis and ultimately improving the organization’s performance.
This is especially important on early-phase strategic projects that might dictate the footprint of the company future portfolio.
What about you: how do you decide where you place your bets in your strategic projects?
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About the Author:
Carlos Abreu de Carvalho is a multicultural Project Manager, having worked and lived in 5 different countries across 3 continents. He has the experience in driving projects across governmental, non-governmental and corporate organizations within pharmaceutical and healthcare sector.Carlos is a Pharmacist by training, a PMI certified Project Management Professional (PMP) and member of the PMI Belgium