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MBAs Guide

MBA Blog: Scenario planning and exploring the future

The importance of planning for the unexpected

Scenario planning relates very closely to the Hindu doctrine of Karma. Balancing good and evil and repaying the virtue with appropriate reward is precisely what scenario planning does.

Scenario planning or analysis is a strategic tool that is used by managers and CEOs to visualise future conditions that have a high probability of occurrence and benefit or respond to them. Every organisation is in the quest for having a clear vision of the future to keep itself abreast of the dynamic situation. 

With change being the only constant and the essence of management it is imperative for an organisation to perfect ‘outside-in’ thinking skills. While managers must understand the significance of scenario thinking, poorly executed scenario planning leaves managers with a feeling that not much was achieved through the process. Many reduce scenario planning to a work of science fiction and do not apply the process well. Further, most managers are guilty of an over-reliance on routines and forget to apply managerial thinking.

It is pertinent to quote an example of BlackBerry mobile phones, once regarded as the lifeblood of corporate organisations for emails, which has sunk into a minority position in the mobile phone market. At one time, when a push email system was virtually nonexistent, BlackBerry phones responded to this need. Today, when the mobile phone market is flooded with phones that have the same facilities that BlackBerry phones have to offer, if not more, there is a trick in the book that BlackBerry missed. Value of a product is created in a domain of scarcity and not abundance.

Did BlackBerry use scenario planning? And if they did, didn’t the foresee iPhone and Samsung as their threats? This pitiable situation of BlackBerry phones has shown us that tougher approach to strategic thinking is the need of the hour. Understanding the contextual environment and the ones own organisation is decisive to develop a tangible and sensible scenario planning process.

While developing the scenario planning process, practitioners must develop and see the big picture by using a helicopter view rather than getting caught with smaller details. Another vital step is to balance short term and long term perspectives by taking into account measurable and non measurable factors.

Iceberg analysis in scenario planning is another great tool organisation must use. In the occurrence of some events, organisations must unearth and enquire the sequence of events to understand it. In such enquiry, organisations come across various stakeholders and prime movers in the events who contribute immensely to understand the present situation.

A statistic shows that on an average, most managers spend less than three per cent of their time thinking about the future and building a corporate perspective on the future. In addition, most managers today have emerged as energetic problem solvers rather than thinking about the future. This results in most difficult questions going unanswered and fire fighting becomes the order of the day. This can be clearly seen in the case of BlackBerry which seems to be in a fire fighting mode rather than concentrating on developing new phones and software. This is precisely the reason why companies lose their strategic edge and do not see or wish to see the problem until it’s too late.

With scenario planning having many benefits such as enhanced perception and enhanced complexity handling skills it is one sure shot mantra for long term survival and success.

Keynes said it best: “The difficulty lies not so much in developing new ideas, as in escaping from the old ones.”

Hemant Chandran is a finance professional and MBA from Strathclyde Business School. He is also an AMBA Global AMBAssador