Economic Downturn Underscores Importance of Scenario Planning

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Preparing for Critical Uncertainties Can Mitigate Impact

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Scenario planning provides organizations an invaluable opportunity to have a strategic discussion around key drivers and critical uncertainties in their operating environment

With business owners and nonprofit directors alike feeling a sense of uncertainty about the extent of the current economic crisis, veteran strategic planning facilitator, Erica Olsen is advising her clients and others to develop scenarios in advance for the situations they are most likely to face in the looming economic uncertainty. "Scenario planning is a way of simplifying a complex future by providing you the opportunity to ask the 'what if' questions and rehearse how you may respond should a certain event or trend happen in the future." When several scenarios are run, a range of choices that identify potential threats and opportunities may come up. Many of these choices otherwise go unnoticed if you focus obsessively on your organization's present-day situation.

Scenario planning is a subset of strategic planning. Basic strategic planning tends to address the incidents of the day, but scenario planning looks at what might happen tomorrow. It was first developed and used by the U.S. Air Force during World War II. It gained acknowledgment in the business world when Shell Oil utilized scenario planning techniques to predict the oil crisis of the 1970s. By focusing on understanding what the future looks like, "Scenario planning provides organizations an invaluable opportunity to have a strategic discussion around key drivers and critical uncertainties in their operating environment," says Olsen. "With increasing uncertainties surrounding the worldwide economies, scenario planning is necessary now more than ever if organizations are to survive and thrive in the coming year."

Typical scenario planning sessions involve addressing the driving forces - significant trends like economic turmoil, or political and technological issues likely to affect the larger world - along with the smaller scenarios that may hit closer to home. And lest scenario planning invoke only negative associations, Olsen notes that it's not only about preparing for unexpected threats but also trying to foresee unanticipated opportunities. "With scenario planning, you're imagining not just one, but a variety of future possibilities. All the great opportunities in the world aren't enough unless you have contingencies in place."

The goal in scenario planning isn't to create one specific future. Instead, by drawing attention to key drivers and exploring how they push the future in different directions, planners create an array of possibilities resulting in the ability to make crucial decisions today. Recessions are an inevitable part of a dynamic economy. No amount of planning will prevent a recession, but scenario planning can play a big part in determining whether or not an organization weathers the storm.

Erica Olsen is the author of Strategic Planning for Dummies and a founder of M3 Planning, Inc, a nationwide leader in on-demand strategic planning tools and services. She is also a co-developer of the company's award-winning strategic planning software, MyStrategicPlan, a web-based system that helps organizations develop and manage their strategic planning. Through M3 Planning's online client base and onsite strategic planning facilitation work, Erica has developed and reviewed hundreds of strategic plans for organizations worldwide.

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