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Scenario planning: an answer to turmoil?

As coronavirus tips us into turbulence, we need new tools to help us navigate uncertainty. Scenario planning may just be the strategy for our times

During periods of turbulence, unpredictable uncertainty, novelty, and ambiguity (TUNA), organisations are faced with significant challenges that threaten their business models, supply chains and even entire industry sectors. TUNA conditions can be very unsettling and destabilising for professionals, managers, and leaders.

The way in which we live and work is being altered radically. Powerful forces such as the growing accumulation of CO2 in the atmosphere, ageing societies, wars of old and new kinds, social media, new markets and the impact of technologies mean change is turbulent, uncertain, ambiguous, and novel. Subsequently, the business strategies that worked in the past cannot be relied upon to work tomorrow.

Importance of scenario planning

All of this has led to an increased interest in scenario planning – defined as the process of thinking through the futures that may unfold and how an organisational environment could change in the light of those futures to be used here and now to act more wisely in the present.

Since the early 1970s when scenario planning was first used in a business context, several different approaches have evolved. The Oxford Scenario Planning Approach (OSPA) laid out in Strategic Reframing (Ramirez - Wilkinson 2016) and in 'Using Scenario Planning to Reshape Strategy' is focussed on being practical, useful, rigorous, and collaborative. It involves individuals and groups from across an organisation or from different organisations coming together to examine factors that contribute to the future and by doing so enable a more insightful collective understanding of the present to guide more effective action.

Practical applications of the Oxford approach

OSPA has been used by firms such as Rolls-Royce; inter-governmental organisations such as the IMF, the IAEA, and the EPO; charities such as Diabetes UK and the World Economic Forum; scientific fields as in the Royal Society of Chemistry; and parts of the NHS. It is distinctive in several ways, all of which offer leaders some practical implications for looking at strategy in turbulent times. Somethings to consider are: 

1. Is the focus on scenario planning a learning experience, where the role of people taking part is to learn about changing conditions and how to react, rather than trying to predict perfectly what will happen in the future?

2. The approach always starts with defining a very clear purpose and determining the exact intended use for the planning process. For example, do you want to generate new options for your current business model, or review the major risks facing your organisation? And when exactly will these outputs serve as inputs: in your next presentation to shareholders? In a negotiation with key suppliers?

3. Scenario planning can be taken to be an ongoing iterative inquiry, not a one-off project. When it becomes an iterative process it can become an established part of organisational thinking. It helps leaders to reflect regularly on how their world works and changes, how the situation they are in evolves, and the options available to them.

4. The transactional environment in which an organisation interacts with actors such as competitors and suppliers is assessed and considered separately from and within the larger contextual environment factors such as geo-political, demographic, and technological changes which are beyond an organisation’s control.

5. Finally, scenario planning is about plausibility and not at all about probability. Percentages are not assigned to scenarios as the focus is on developing a richer understanding of the present possibilities afforded from multiple views about possible futures.

Ultimately, OSPA is concerned with helping to develop better leadership judgement. By considering future scenarios regularly, the approach enables greater awareness of present issues and opportunities, clarifying the strategic choices for leaders and assisting them to identify and take the most appropriate actions.

Find out more, as Rafael Ramirez explains the design of the Oxford Scenarios Programme at Saïd Business School.