Academic Reflection - From scenarios to strategy

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Pitfalls to avoid

When translating scenarios to strategy it is important to know that there are some methods that will not achieve the desired results.

Developing complete strategies for each scenario and then using corporate finance methods to determine the one with the greatest promise of profitability is not the way to go. The real aim of scenario planning is to develop a resilient strategy within the framework of the alternative futures provided by the scenarios and not to assume that any one future is THE future.

Assigning probabilities to scenarios and then developing a strategy for the most probable one is also not a good idea. Scenarios are not forecasts. They are a collection of futures that establish the boundaries of uncertainty and the limits to plausible futures.

Sensitivity/Risk Assessment

This approach is used to evaluate specific strategic decisions. The question that is being answered is therefore whether or not to proceed with a particular investment after the strategy’s resilience/vulnerability has been assessed.

Key environmental conditions that need to be met in order to proceed are identified and then scenarios are used to assess the state of these conditions. The scenario conditions are then compared with the desired future conditions to assess how successful a “go” decision would be in each scenario.

This method provides a step-wise journey from scenarios to decisions however it depends on the existence of a clear and specific decision focus. This approach provides a relatively straightforward application of scenarios to decision-making, using a series of descriptive and judgmental steps. However, it depends on having a very clear and specific decision focus, one which lends itself to a “go/no go” decision.

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References

1. Wilson I. FROM SCENARIO THINKING TO STRATEGIC ACTION http://horizon.unc.edu/projects/seminars/futurizing/action.asp
2. Leemhuis J P. Using Scenarios to Develop Strategies. Long Range Planning Vol 18, No 2 1985