Using Scenario Planning to Reshape Strategy (PUTTING SCENARIO PLANNING TO…
Using Scenario Planning to Reshape Strategy
Rather than trying to predict the future, organizations need to strengthen their abilities to cope with uncertainty. A new approach to scenario planning can help companies reframe their long-term strategies by developing several plausible scenarios
This paper is part of a long-standing research and practice stream on scenario planning
practices and the use of scenarios as a scholarly methodology
The research has included integrating scenario planning with other fields such as social ecology, sensemaking, and design through the Oxford Futures Forum, an interdisciplinary forum. The research has also included an inquiry on specific scenario planning issues raised by participants in executive development programs
Among other things, we have conducted a survey that was completed by 163 professionals who attended our executive education program and that assesses how organizations use scenario planning interventions
This approach is intended to be collaborative in order to get individuals and groups at all levels and functional backgrounds within an organization to examine an array of factors that contribute to the future and, in the process, to reframe their collective understanding of the present
Scenario Planning at Rolls-Royce
Rolls-Royce avoided the worst consequences of the 2008 financial crash, thanks to its substantial order book and the stability of its aftermarket service business, but in early 2014 the company ran into difficulties
The arrival of a new CEO in July 2015 greatly intensified the company’s search for ways to improve its prospects. That summer, several dozen of the company’s top managers participated in an executive education course at Oxford University
One of the early sessions focused on scenario planning. Based on what the executives heard, some of them began to lobby internally within Rolls-Royce for a company-wide scenario planning process
The idea was to catalog significant factors that might affect Rolls-Royce by the year 204014 and to develop a set of strategic questions
Process To kick off the process at Rolls-Royce, about 25 mid- and senior-level Rolls-Royce executives were selected from different business units, functions, and locations
In using the Oxford scenario planning approach, it is important to distinguish between immediate actors one does business with (located in the smaller brown oval) and the diverse factors in the larger contextual environment. The contextual factors are beyond the influence of the organization. Scenario planning is about exploring how larger contextual factors might affect an organization.
Scenarios are developed by combining contextual factors (particularly ones that are less well-known and more uncertain). Each scenario will be based on a unique combination of contextual factors.
PUTTING SCENARIO PLANNING TO WORK
Here are five important characteristics of the Oxford approach to scenario planning:
1 Scenario planning involves attending explicitly to what is framed in and what is framed out when setting strategy. In the scenario planning process, what matters is not so much the organization’s strategy itself but the frame that strategy is built on. The frame is made up of assumptions, and these assumptions implicitly shape how the strategy comes together. For example, a frame might include the period of time you are considering; the breadth of factors to be included; whether the scenario planning process is to be predominantly competitive and collaborative; whether it is a one-time activity as part of the yearly planning cycle; or whether the strategy should be shared or kept secret.
2 By proposing a limited number of scenarios, scenario planning enables organizations to reperceive current and plausible future contexts. For example, at the Royal Society of Chemistry, the links between disciplines and between scientists and artificial intelligence are different in each of the scenarios.
3 Scenario planning relies on iterative reframing and reperception. By building several frames from the contextual environment factors, strategists have an opportunity to see the actors they do business with take different roles in each scenario. For example, a supplier in one scenario could be a partner in another scenario. This allows strategists to revisit the role configuration used in the current strategy — reexamining the assumptions and bringing in new questions to consider.
4 Everyone involved in and affected by the process should be considered a learner. This means that people involved with scenario planning need to work on the organization rather in it. Having external facilitators or dedicated staff members assigned to the process helps make this possible.
5 Scenario planning is designed to explore different types of weak signals. Either they are weak because they are very new (scenario planning considers how they might look when they have been around longer and are stronger); they are weak in relation to other signals managers might respond to (scenario planning focuses on how they might become salient); or they are weak in relation to the dominant cultural, strategic, or professional frame (scenario planning invites its intended users to look at them from an alternative framework). In order to explore weak signals, scenario planning needs to focus on the plausible as opposed to the probable.
As the Rolls-Royce and RSC cases show, scenario planning can help strategists look beyond their current circumstances — and with longer time horizons — to test existing strategies, make sense of the causes and effects of turbulent, uncertain, or ambiguous conditions; invent new options; open up or enhance the quality of strategic conversations; and pave the way for collaborative strategies
Help participants identify the assumptions about the future that underpin their current strategy. You should be prepared to help the learners articulate their sense of the future and the set of assumptions they are using in their current strategy. In our experience, this part of the process depends heavily on gathering information and developing insights gained from internal and external interviews
Be prepared to invest significant amounts of time and resources in the scenario planning process. Although every situation is different, the amount of time and resources required will depend on what the organization is trying to achieve and its goal
Remember that scenario planning is an iterative process. In our experience, this point cannot be overemphasized. It’s important to recognize that the initial set of scenarios that organizations develop may not be sufficient
Invest time and effort in preparing participants. First, it’s important to identify who the intended participants in the scenario planning process should be and how these participants learn