Scenario Planning: A Practical Guide for Navigating Uncertainty
Updated 8 min read
No-one can predict the future. But you can use StratNav to anticipate multiple plausible futures and build your strategy around them.
Contents
You cannot predict the future with certainty, but your strategy still has to succeed in it. The challenge is not to identify one “correct” forecast; it is to prepare your organisation to make better decisions across several plausible futures.
Fortunately, scenarios provide a practical solution. Instead of trying to forecast a single future, you can imagine, test and anticipate multiple plausible futures.
StratNav provides tools to help you do this systematically, connecting your external insights, scenarios and strategic initiatives in one place.
Three steps to working with scenarios
Working with scenarios involves three connected steps:
- Develop a small set of plausible scenarios.
- Use them to evaluate your options and initiatives.
- Keep a watching brief as the external environment changes.
Develop scenarios
You should base your scenarios on strategic insights about the external environment. You can find these as opportunities and threats in your SWOT analysis, or in your PESTEL and 5 Forces analyses. See Working with insights and insight-based models.
Tip: Focus on external insights with both high uncertainty and a potentially large impact on your organisation. A trend that is certain is important for planning, but it is rarely a useful starting point for scenario development.
There are two ways to do this within StratNav:
- Using the Scenario Builder
- Using the manual method
You can mix and match between these approaches. StratNav will keep the links between your insights, outcomes and scenarios consistent behind the scenes.
1. Using the Scenario Builder
You can find the Scenario Builder in the Scenarios tool in the Analysis quadrant of your Strategy Board.
Click on “Scenario Builder” to launch it. Then:
- Click on each of the two axes to add an insight with both high uncertainty and high potential impact on the organisation.
- You can choose an existing insight from the list presented or add a new one.
- Aim for two insights that are independent of each other. If one outcome is largely determined by the other, they are unlikely to create a useful scenario framework.
- For each insight, define two contrasting but plausible outcomes. For example, if your insight is “COVID-19 lockdowns could have a long-term impact on business travel”, your outcomes might be:
- Vaccination programmes and the easing of restrictions lead to a return to pre-pandemic business travel patterns.
- Cost savings and other benefits realised through remote work mean that business travel never returns to pre-pandemic levels.
- This creates a 2x2 matrix of insight outcomes. Each of the four quadrants represents a scenario.
- Enter a name for each scenario.
- Enter a description for each scenario. Include the interaction between the two insight-outcome pairs shown in the matrix. Also consider the outcomes of other relevant secondary insights from your SWOT, PESTEL and 5 Forces analyses.
The objective is not to identify the future you expect. It is to create a useful range of futures that will challenge assumptions and expose different strategic choices.
2. The manual method
To create scenarios manually:
- Click on an external insight to open the insight editor.
- Scroll to the “Do next” section and click “Specify outcomes and scenarios this insight impacts”.
- Give your scenario a name. Do not worry: you can change it later.
- Enter the outcome for this insight in the scenario you have just created.
Because you have chosen insights with high levels of uncertainty, each insight should have more than one plausible outcome. Add further scenarios and outcomes to reflect those possibilities.
At this stage, you should have created at least two scenarios. Then:
- Click on one scenario to develop it in more detail.
- On the scenario edit screen, scroll down to “Do next” and link the scenario to specific outcomes of other external insights. Scenarios become richer as you add more relevant insights and outcomes.
- Once you have linked several insights and outcomes to the scenario, write the narrative in the rich-text editor. The narrative should be a plausible story of how the future might unfold, weaving the insight outcomes together.
Tip: Write the narrative as you would write a story. Around a page of text is often enough to provide useful richness and context.
Once you have written the narrative, you may want to change the title of your scenario so that it better reflects the story it tells.
Tip: Scenario titles should be short, memorable and emotionally engaging. They should capture the spirit of the narrative, rather than merely describe a combination of variables.
Repeat this process for your uncertain, high-impact external insights and the strategic options they affect. You may initially create a large number of scenarios. If so, look for ways to combine them into a smaller but meaningful set. Three to five final scenarios is often a useful range: enough to test your strategy properly, but few enough to remain practical.
Tip: Developing scenarios is as much an art as it is a science. Do not expect to get them right first time. You will need to iterate, refine and challenge them. Reviewing them with a diverse range of collaborators can make your scenarios richer, more plausible and more useful.
Use scenarios to evaluate your options
Once you have developed reasonably detailed scenarios, use them to evaluate your options and initiatives. Ask a simple question: if this scenario became reality, how would each initiative contribute to your strategic goals?
The Scenario/Initiative Matrix in the Planning quadrant of your Strategy Board will help you do that. The matrix appears as soon as you have created at least one scenario and one initiative.
The Scenario/Initiative Matrix lists:
- all your scenarios across the top; and
- all your initiatives down the left-hand side.
At the intersection of each scenario and initiative, you can assign a score on a relative scale:
- Very negative: if this scenario plays out, it will have a very negative impact on the contribution this initiative makes towards achieving your strategic goals.
- Somewhat negative
- Neutral: the scenario will have no material impact on the contribution this initiative makes towards achieving your strategic goals.
- Somewhat positive
- Very positive: if this scenario plays out, it will have a very positive impact on the contribution this initiative makes towards achieving your strategic goals.
Once you have scored each initiative against each scenario, use the analysis to help you choose between and prioritise initiatives. All other things being equal, initiatives with neutral or positive scores across the widest range of plausible scenarios are likely to deserve a higher priority than those that perform well only in one preferred future.
This does not mean you should automatically reject initiatives with mixed scores. Some initiatives may be sensible bets on a particular future, while others may act as hedges against a significant risk. The value of the matrix is that it makes those choices explicit.
Tip: Do not be afraid to iterate through and update your insights, outcomes, scenarios, initiatives and scores as you learn. The aim is to improve decision-making, not to follow a mechanical linear process.
Keep a watching brief
Your work is not finished once you have chosen your initiatives. As you execute your strategy and time passes, new information will emerge. Feed this information back into your insights, insight outcomes and scenarios.
Your scenarios should give you clues about the most important external developments to monitor. Make sure you have processes in place, or named individuals responsible, for watching the relevant signals and reporting meaningful changes.
Some scenarios will become more likely, or may begin to unfold. Others will become less likely, perhaps to the point where they are no longer plausible or even possible. As you update your scenarios, update your Scenario/Initiative Matrix scores too. In this way, your strategic priorities can continue to evolve in response to how the future actually unfolds.
Tips for writing scenarios
The more vivid your scenarios are, the more likely they are to engage decision-makers and improve the decisions they make. Superficial scenarios tend to lead to superficial decisions. Strong science fiction often demonstrates this well: it paints a vivid, internally consistent picture of a possible future that captures the imagination.
As you develop each narrative, ask: “Tell me a story of how this might play out.”
A useful scenario narrative usually makes clear:
- what has changed in the external environment;
- how customers, competitors, regulators, suppliers or other stakeholders respond;
- which assumptions about your organisation are challenged;
- what opportunities and threats emerge; and
- what early signals would suggest that the scenario is becoming more likely.
The purpose is not entertainment. It is to help people see implications they might otherwise miss, and to make better choices before circumstances force their hand.
Using #StratBot AI to write scenario narratives
Writing scenario narratives, especially a first draft, can feel daunting.
Luckily, #StratBot can help. #StratBot can write a first draft of your scenario narrative, taking into account what the system knows about the organisation from the Analysis, Direction and Planning sections of the Strategy Board. In particular, it can take account of the uncertain trends and outcomes you have mapped for the scenario.
You should always review and improve the result. However, #StratBot can provide a useful starting point, making it easier to begin than staring at a blank page. Schedule a StratNav demo to see how scenario planning and #StratBot can support your strategic process.
