The pandemic is teeming with known unknowns. How many people have had it? How many people will get it? What is today’s R0 value in the top 50 markets? How will we assess the risk of bringing our employees back to the office? What impact will new consumer preferences have on our business? Will we have inflation or deflation? A recession or depression? As hard as these questions are, we’ve helped our corporate clients reframe and answer them in multiple ways. You can too. Here’s how.
Scenario Planning aka Strategic Forecasting
Scenario planning helps you identify specific sets of uncertainties and make predictions (best guesses) as to how those uncertainties might impact your business. Here’s a simplified version of our scenario development process you can use to help facilitate your scenario planning.
1. Pick Key Questions
Ask the right questions! Should we buy a new car? Should we invest in XYZ startup? Will we still be able to grow our company post-pandemic? It’s OK if you don’t have all the data you need to find the answers. In fact, that’s the point of this exercise.
2. List Key Known Factors and Potential Interference
You can pull your list of key known factors right out of your original business plan or your operations playbook. Key known factors include suppliers, production methodologies, HR, customer demand, and competitors. Also list potential interference by various types of innovation: disruptive, radical, architectural. List everything you can think of. Be creative. There are no limits to key factors.
3. Identify Key Trends and Forces
Make a list of the driving forces such as the number of people unemployed, the number of businesses you expect to close, the impact of the federal relief efforts, the impact of changes in consumer behaviors, and any other forces that should be included. It will be a long list. It should be. Make sure to include positive trends such as AI assistance, new technologies, breakthroughs (a cure, a vaccine). You can’t plan for a specific innovation, but if you look at the pace of technological change over the past 100 years, you can see an incredible acceleration curve. We’re still innovating. So, keep that in mind.
4. Identify Critical Unknowns
In steps two and three above, you used unbounded creativity to list everything you could possibly think of. There were no rules and no bad ideas. Now it’s time to bring all of your experience and wisdom to bear on the lists. Rank your known factors, key trends, and driving forces in order of importance. You can score each item in your lists by probability or by possibility or any other criterion you choose.
5. The Scenario Matrix
Having ranked your long lists of key factors, trends, and driving forces, choose the two that will have the very biggest impact. They will become the axes of a 2×2 matrix upon which you will craft four scenarios. Here’s a really nice example from Nick Turner’s well-written blog post COVID-19: Scenarios to think the unthinkable and prepare for the uncertain…
6. Develop Probable Futures (The Scenarios)
Now it’s time to write some stories. As you know, stories are best written by individuals, but in this case it’s important to have a hive mind working. So, have everyone in your workshop write a short “press release” or “log line” for the scenario you are crafting. It should include a headline (clickbait is good!), a subheadline (long and wordy is good!), and no more than a hundred words – fifty is better. Collect them all and combine them. The story outline for your scenario will unfold before your very eyes.
7. Socratically Debate Potential Implications
My favorite part of scenario planning and strategic forecasting is Socratic debate. This is where you craft a thesis that will be the basis of a business strategy and tear it apart. For example: The pandemic will save the auto industry. The use of on-demand ride-sharing services will plummet because fear of infection and people will buy new affordable cars to commute safely. Discuss! Another example: Ride-sharing services will suffer until the cars are fully autonomous because people will not sit in a car with a potentially infected driver. Discuss!
The goal of Socratic debate is to identify flaws in the thesis. Revise it and then try to find flaws with the rewritten thesis. Repeat until what is left on the page is the very best thesis the group can agree upon.
If you find the questions too daunting because you do not have enough data, here’s a technique championed by Enrico Fermi you can use to help estimate your responses.
After you have run this process on the dozen or so big questions, you can develop new strategies to help guide you and your organizations through the pandemic into the post-pandemic world. You may not arrive at the right answers, but I promise you that this exercise will help you frame the hardest questions and give you a solid approach to finding a range of answers that you can make actionable. That is truly the best any of us can hope for in the face of overwhelming uncertainty.
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Author’s note: This is not a sponsored post. I am the author of this article and it expresses my own opinions. I am not, nor is my company, receiving compensation for it.t