By taking the time to do scenario planning, businesses can make informed decisions in stressful times and reveal the biggest opportunities.
We’re all working in a faster-paced, more volatile landscape than before. Digital disruption, inflationary pressures, supply chain volatility. Business is more exposed to risk and change now than in previous years.
For project-based businesses, this volatility means unpredictability. Clients may delay, cancel or change the scope of projects. Resources may be unavailable - whether that’s materials, equipment, or people.
This unpredictability is anathema to the rigorous planning that businesses like yours thrive on. It’s a risk to delivery, efficiency, and profitability. A change to just one project can have negative effects that ripple through the whole business.
This is where scenario planning is invaluable. Scenario planning helps businesses prepare for the ‘what ifs’.
And in the current climate - unlike people and projects - ’what ifs’ are in high supply.
Scenario planning helps project-based businesses prevent, mitigate or capitalize on these ‘what ifs’ to protect their operations and profits.
But without the right tools and techniques, many struggle to do it effectively. Which is why we’ve written this guide 🙂
Scenario planning is a strategic management process that helps organizations understand the impact of different situations on their business. They model different scenarios to predict how they will affect things like production, profitability, people requirements, etc.
Through scenario planning, project-based businesses can be prepared for various ‘what if’ scenarios.
This helps you respond effectively to situations outside your control - such as project scope changes. Anticipating and planning for likely risks allows you to pivot faster, increasing your resilience and agility in a volatile market.
Scenario planning also helps you proactively manage scenarios that are within your control. Like helping you pick the most profitable path to pursue. Such as the best combination of projects to onboard, or how to prioritize and schedule different projects.
There are four different types of scenario planning. These range from strategic horizon scanning for threats in the wider business landscape, to comparing specific scenarios at an operational level.
While broadly similar, each type of scenario planning has a different objective, approach, and (often) stakeholders. Here’s an overview.
Your business needs to engage in all four types of scenario planning to be well-prepared for everything the universe might throw at it.
But in this article, we’ll be focusing on operational and normative scenario planning, as these are the two types of scenario planning that are most relevant to project-based businesses day-to-day.
Put simply, normative scenario planning helps project-based businesses strategize and prioritize to achieve their business objectives - for example, supporting strategic capacity and capability planning for your anticipated future demand.
And operational scenario planning helps them plan and adjust for any changes or opportunities along the way - for example, rescheduling projects and reallocating resources when a project changes, to still achieve the best outcomes across your current project load.
Your business lives and dies by the success of its projects. That success can be measured against various high-level metrics - such as client satisfaction, delivering on time and on budget, and profitability - as well as more granular KPIs like high resource utilization and low schedule variance.
But these are hard to achieve consistently in the ever-shifting sands of project work.
According to PMI, project managers lose 37% of their budget due to failures. And research from McKinsey shows this is down to factors like shifting requirements, reactive planning, unrealistic scheduling, and an unaligned team.
This is exactly where scenario planning can make the biggest difference to project-based businesses.
It helps project managers and senior leaders anticipate and manage the impact of external and internal pressures, to still achieve the best business outcomes.
In particular, scenario planning is used in project-driven businesses to:
Achieving budget and timeline goals are key objectives for any project manager, and the ability to quickly deal with unexpected issues gives you a much greater chance to do that.
Operational scenario planning examples in a project-orientated business can include:
For example, a consulting business working with a client can look at what it would do if the client's project ends up taking longer than it's allocated. This could impact the business in a range of ways:
Understanding how you'd react in these types of situations helps to speed up the response and make better decisions if they come to pass.
An example of normative scenario planning in a project-based business could be:
Scenario planning helps project-orientated businesses:
These all position businesses for success because they’re proactively pursuing the optimal scenarios for their business, rather than reacting to what happens around them.
In our recent webinar Transforming Resource Management Through Experiments, Sarah Koegler from The Ready also pointed out the following benefits of scenario planning:
It can be really fruitful and beneficial to do scenario planning. So every quarter, lay out the different possible scenarios around what might sell, might end, what might extend, who might be where, and it helps you get a little bit more ready for whatever might be coming. And it also helps you see gaps that maybe you wouldn't have anticipated if you hadn't gone through this scenario planning rhythm.
Now you know the benefits of scenario planning, you might wonder why businesses don’t do it more. Full disclosure, there are also some disadvantages.
Fortunately, normative and operational scenario planning can be made easier for project-based businesses with the right tools - like Runn.
If you’re not yet familiar with Runn, it’s a resource management platform for project-based businesses managing 500+ people. It includes amazing features for resource allocation but, for the purpose of scenario planning, you need to know about the project planning module.
Runn’s project planner lets you quickly create projects - the schedule, phases, milestones, budget etc - and find and allocate suitable staff to them. That’s the day-to-day application.
For operational scenario planning purposes, you can duplicate a project and easily adjust the parameters to create multiple versions/scenarios. Doing this will let you see the impact of different disruptions on KPIs like spend, schedule, and profitability.
So if a client does need to change their project scope or schedule, you can quickly assess the impact and come up with a strong Plan B. One that doesn’t end up in resource clashes, delayed deliverables, or a knock-on effect on all your other projects.
What’s really handy is the fact you can create tentative projects in Runn too. Projects that might happen, might not.
Creating these ‘what if’ projects in Runn lets you understand the impact of onboarding different combinations of client work, so you can pick the best scenario. For example, if onboarding Project B causes resource issues for Project C. Or if schedule slippage in Project C would totally derail Project D.
You simply create the projects and then toggle them on or off to instantly see the impact on things like resource utilization and capacity.
You don’t need to wait to start scenario planning in Runn. Go make yourself a drink and sign up for a free trial using just your email address.
Then you can experiment with Runn’s intuitive project planner for yourself. It’ll only take a few minutes to see what we’re talking about.
Play around with our silly sandbox data or import your own if you want to make things more meaningful.
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