Scenario planning: the time is now

Apr 06 2020 by James M. Kerr Print This Article

Most leadership teams are working out what they must do to stay afloat during the COVID-19 crisis. Some have dusted off their business contingency plans only to discover that the identification of key personnel and critical processes, standard fare in most business continuity plans, doesn’t suffice in determining what to do when confronting a worldwide pandemic. In fact, a different kind plan, or more precisely set of plans, is required.

Indeed, scenario plans are needed in order to lead a company through the crisis and, as importantly, effectively set direction for critical months following the stemming of the tide.

A scenario plan contains the following:

  • A description of a potential situation that, should it occur, would significantly impact, if not devastate a business;
  • An estimate of probability that the scenario may, once day, arise;
  • The key dimensions of the scenario that must be considered and addressed in order to deal with the emergence of the scenario;
  • A list of early indicators that could be tracked to signify the emergence of the scenario;
  • The strategic options or actions that are available and should be pursued now, or in the event of a scenario emerging, to manage through the situation.

Here are some considerations about the scenario planning approach:

1. Each scenario should contain enough detail to assess the likelihood of success or failure of different strategic options. Some questions that you might apply today (as a result of the pandemic) in order to fully sketch out a scenario might include:

  • Will product demand diminish, if government stimulus packages fails?
  • Will key suppliers remain in business, if economy tanks?
  • Will delivery capabilities not function properly, if roadways and shipping piers are quarantined?
  • Have we the bench strength to overcome absence of key personnel?

2. Scenarios require context and that context should be captured as key dimensions of the scenario. For example, understanding of critical parts availability and knowledge of supplier dependencies for these critical parts might be part of the context (i.e., key dimensions of) a “Suppliers Go Out Of Business” scenario;

3. The identification and tracking of early indicators is an essential part of scenario planning. Without them a scenario could emerge and do damage to your business before your company even knows what hit it. Spend quality time defining early indicators. An early indicator of the “Suppliers Go Out Of Business” scenario referenced above might be as simple as one mid-sized, or larger, supplier fails, if you see that happening you may be a sign that this scenario is beginning to take hold in your business environment and it could signify that it’s time to take action;

4. Some of your strategic options may need to be pursued pre-emptively. In other words, some of strategic options for addressing an emerging scenario need to be done now in order to be effective should a scenario emerge. For example, determine the feasibility of “re-designing and / designing-out” critical parts that are likely to become unavailability due to supplier closures should probably begin before key suppliers close in order to be an effective strategy should the “Suppliers Go Out Of Business” scenario rear its ugly head.

5. Scenario planning is a form of strategic planning. It presents the opportunity to uncover and consider strategic questions that would routinely be overlooked if potential scenarios were not being examined. For example, a business may not otherwise consider the potentiality of an impending oil price war in the gulf (or may be quickly write it off as an opportunity to reduce production costs) and how a worldwide recession might be triggered as a result that would cut product demand, had that business not done adequate scenario analysis and planning.

To close, I’ve been using this type of planning approach with clients since the mid-1990s. There has clearly been a higher demand for this kind of service among my client-base. That said, I thought it timely to offer the quick primer. I hope that you find it timely and valuable. Please don’t hesitate to reach-out, if you need additional insight into the process.

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About The Author

James M. Kerr
James M. Kerr

James M. Kerr is a long-time author, management consultant, vision maker and coach to some of today's best leaders. His latest book, Indispensable: Build and Lead A Company Customers Can’t Live Without was published in February 2021.