Scenario planning is a strategic planning method used to prepare for potential future events and situations. It involves identifying key factors that could significantly impact the future, developing scenarios around different combinations of those factors, and determining how to respond under each scenario. The key steps are to identify sources of uncertainty, build scenarios by exploring how the uncertainties might interact, estimate the likelihood of each scenario, identify early signs or "trigger points", develop action plans, and monitor for trigger points during implementation. Scenario planning helps organizations make better decisions and be more resilient when facing an unpredictable future.

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2.  What problems do dynamic and
uncertain environments pose for
strategic planning?
 How can we make planning more useful?
 Faster decision processes
 Preparing for the unpredictable:
Frameworks and processes
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3. But it’s the #1 mgt tool &
least likely to be dropped
--California Management Review
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4. Where we How we Where we
are now get there want to be
Business Definition, Vision Statement,
External/Internal Philosophy Strategy
Assessments Key Result Areas
Objectives
Goals
The mission of the School of The vision of the School of
Business … is to create ideas Business is to be internationally
and alumni that have maximum renowned for our ability to
impact on business. create knowledge and leaders.
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5. Frame the
problem
Identify
decision criteria
Weigh each
criterion
Identify
alternatives
Evaluate
alternatives
Implement best
alternative
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6. Fast Decision-Makers Slow Decision-Makers
 Build multiple  Develop one alternative,
simultaneous alternatives go to 2nd if the 1st fails
 Seek advice from  Seek advice haphazardly
experienced counselors (e.g., unqualified people)
 Resolve conflict using  Resolve conflicts using
consensus w/qualification consensus or deadlines
 Integrate the decision w/  Consider the decision in
other decisions or tactics isolation.
* Eisenhardt, K.M. 1989. “Making Fast Strategic Decisions in High-Velocity Environments.” Academy of Management Journal, 32(3): 543-576.
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7. 7 Scenario Planning

8. 1. Identify assumptions about underlying
sources of uncertainty.
2. Build scenarios by exploring interactions of
the sources of uncertainty.
3. Estimate the likelihood of each scenario.
4. Identify trigger points when the early signs
of each scenario should be visible.
5. Develop action plans for likely scenarios.
6. Watch for trigger points as you implement.
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9. Vision: Build the tallest free-standing tower with
one Builderific set in 3 min.
Planning: You get 10 min to organize your “firm”
& plan the tower.
 Develop plans for at least 2 scenarios.
 Don’t assemble pieces during planning.
 Bring your “vision” to the front ASAP.
 Start with all pieces back in the box.
 Only use materials from the box.
 Measured from the “base” to the top.
Can’t be leaning against anything.
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11. 12 Scenario Planning

12.  Type of task: How is this like strategic planning
in firms? Is this a fair analogy?
 Planning process:
 Time on management vs. engineering/architecture?
 How did you develop your scenarios?
 Was there a systematic exploration of what might
go wrong?
 Unforeseen events?
 Did anything unexpected happen?
 How did you adjust?
 How can you plan effectively in this setting?
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13. It takes 5 miles to
stop this thing
If you see ice 3
miles ahead...
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14.  What are the sources of uncertainty?
 How might these interact to form scenarios?
 What are the trigger points to identify the
scenarios?
 How can you prepare for the scenarios?
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15. Consensus: Delphi Technique
 Discuss until agreement is  Collect ideas via survey
reached.  Compile results & return.
 Ask members for new insights.
Brainstorming:  Repeat the cycle until a consensus
 No idea editing/evaluation. emerges
Nominal Group Technique: Devil's Advocacy
 Individual written analysis  Assign people to challenge
before discussion proposals and assumptions.
 Take turns presenting ideas  Include members who disagree.
(no editing or evaluation yet)
 Discuss & evaluate ideas Dialectic Inquiry
 Individually rank ideas  Subgroup develops alternative
 Select best alternative using different assumptions.
 Debate alternative plans.
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16.  Paralysis. When facing the unknown it can be hard
to know where to begin. Start with several of the
most plausible scenarios.
 Communicating a vision with multiple scenarios
appears non-committal. Still, analysis promotes
preparedness and cautious statements.
 Don’t dismiss low probability events since they do
occur and can be highly impactful.
 Illusion of control can result from the analysis –
encouraging groupthink.
 Interactions among variables lead to rich scenarios
(e.g., mkt demand x competitor response).
Source: Charles Roxburgh (2009), The Use and Abuse of Scenarios. McKinsey Quarterly
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17.  Planning hazards in a dynamic environment:
 Implementation. Resources don’t come together as
was assumed.
 External changes challenge initial assumptions
 Rigidities result from “sticking to game plan.”
 Coping strategies:
 Contingency planning: 1) Requires a clear
signal to switch; 2) Can’t identify everything
but may still help…
 Process interventions can help identify
critical assumptions.
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18. Please sit with your teams today
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19. 27 Scenario Planning

20.  Exercise: Dating Game Decision
 Sources of uncertainty
 How do they interact to create scenarios?
 Exercise: Google/Motorola Tree
 Sources of uncertainty
 How do they interact to create scenarios?
 How to integrate into financial models
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21. 29 Scenario Planning

22. 1. Identify assumptions about underlying
sources of uncertainty.
2. Build scenarios by exploring interactions of
the sources of uncertainty.
3. Estimate the likelihood of each scenario.
4. Identify trigger points when the early signs
of each scenario should be visible.
5. Develop action plans for likely scenarios.
6. Watch for trigger points as you implement.
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