Academic log

Academic Reflection - Scenario Planning and its pitfalls

Introduction In 1970s organizations faced with dramatic changes due to many external factors such as technological, societal, environmental, economical and political. Scenario planning has become popular since 1970s when the huge success of the prediction of Shell scenario becomes the talk of everyone.

Three main issues addressed by scenario planning are 1) Consistency and plausibility of the scenarios are taken into account and developed via structured methodology 2) Organizations today are evaluated from the implications of these scenarios 3) A foundation for understanding the future uncertainties is synthesis information of an organization

The process of scenario planning includes:

1) Set objectives When setting the objectives, these issues such as time horizon, geographical scope, business units or product areas, unavoidable constraints, definition and deadline must be taken into account.

2) Identify key issues Key issues such as threats and opportunities to the organization must be explored during scenario planning.

3) Build scenarios There are several steps in building the scenarios. First brainstorming about the driving forces which may includes business, technology, social and economic factors and then for each driving forces, identify the critical uncertainties and split them into different scenarios.

4) Create options For each scenario, use the scenarios to brainstorm the potential business solutions. Each scenario generates many possible business solutions and a core business plan is developed from the scenario.

5) Redefine options After the business plan has been developed, refine the possible options and balance between the risk and reward that the stakeholders wish to maintain.

6) Maintain learning In the long term, scenario planning will capture ongoing business learning as it evolves. In short term, an effective early-warning system can be created by establishing processes.

Common Pitfalls of scenario planning in early 1990s: 1)Predictability of a limited set of factor choices 2)Predictability of theme selection 3)Focus on current/next big issues 4)Typical implicit assumptions 5)Unimaginative presentation of scenarios

Common pitfalls of scenario planning in early 2000s include: 1)The process may drift away from ever reaching hard business decisions, if it is not well designed and tightly managed by an experienced team. 2)The scenarios may serve to reinforce established views of 'business as usual' unless there is sufficient external challenge. 3)Practical business decisions cannot be made unless the scenarios are underpinned by facts and sound analysis. 4)The scenario learning may be quickly forgotten unless the process fully engages stakeholders across the business.

References: 1) F.A. O'Brien: Scenario planning -lessons for practice from teaching and learning, Warwick Business School, Coventry CV4 7AL, UK 2) http://www.analysys.com/default_acl.asp?Mode=article&iLeftArticle=87&m=&n=