Maybe you’ve set aside a small rainy-day fund--just in case you have a month when your cash flow slows to a trickle. Or you’ve devised an ad hoc Plan B in the event that your carefully laid marketing plan flops. Both great ideas.
But what about the truly unexpected--the black swans you’ll never see coming?
It might sound counterintuitive, but you can plan for those, too.
People who get good at strategic thinking tend to notice the unexpected sooner than everyone else because they have prepared minds. They’ve done smart scenario planning, and as a result, they’ve developed a sense for what may come in the future.
So, if you’ve felt bamboozled by too many costly surprises and industry changes, read on.
The Makings of Smart Scenarios
Scenarios are well-crafted narratives about the future that tell very different stories about what might happen. A few scenarios are usually enough to define a broad range of potential fates--though the more volatile your recent past has been, the broader you’re going to need to think. Your focus should be on things you can’t control or predict, in order to put some boundaries around the range of possible worlds you may have to deal with (whether you like it or not).
Good scenarios provide competing intellectual windows on a complex phenomenon and challenge how you think about it. For example, if U.S. automakers had more seriously examined various globalization and technology scenarios a few decades earlier, they might have switched their design and manufacturing strategies much sooner.
The aim is to stress test your current strategy and make sure your plans contain enough flexibility that you will win no matter what the future brings.
How to Do It
Let’s see how scenario planning works in a simplified case. Your company is a small business with a mostly unionized work force manufacturing street sweepers for municipalities around the country. Here's how you'd approach scenario planning:
My book Profiting from Uncertainty offers much more detail about scenario planning, with fully developed examples from different industries. My next column will address how to use your scenarios, once developed, to arrive at better strategic decisions.