Wouldn't it be nice to be able to see into the future? Things would be much easier if you could predict what people would do, what the weather was going to be like, or how long it was going to take for things to happen.
In business and project management, there are so many unknowns that you could use your crystal ball for. Think of all the unexpected occurrences that you could prevent, mitigate or capitalize on if you'd seen them coming.
Like when a new project comes in, and you don't know whether you have the capacity to finish it. Or key staff member resigns and you don't have anyone else who has their level of expertise. Or when tasks become more complicated and expensive than you thought they'd be, and that throws your project scheduling and budgeting into a spin. Or when demand for a certain type of product or services skyrockets, and you could have developed something similar if only you'd known.
You may not be able to see these things coming, but with a little bit of planning and the right tools, you can be much more prepared for the unexpected simply by reacting quickly.
It's called scenario planning, and it's how teams prepare themselves for those "what if" scenarios. By assessing the likely ways that things won't go as expected, you can come up with contingencies, identify warning signs, and adjust your approach to eliminate risks.
Also known as what-if scenario planning, scenario planning is the process of assessing uncertainties in a project, initiative or business, understanding their impact and identifying optimal actions should they eventuate.
The thing is, things don't often go to plan. There are many paths to the objective or end result, and while there is an ideal way to get there, there are always unexpected challenges.
Whether you need to deviate from the initial plan or include additional steps to overcome an issue, scenario planning allows you to carefully consider the best ways to address alternate scenarios. Then, when the unexpected happens, you already have a plan to deal with it.
Scenario planning can be used at all levels of a business or organization. It can be for anything from a company's overall strategic planning and direction, to projects or initiatives of any size.
In particular, scenario planning is used in project-driven businesses to understand how many projects is too many, align sales and delivery, keep costs down, and maximize the chances of completing work on time. 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.
It's not just about preparing for things to go wrong either - scenario planning can be for acquisition opportunities or other developments that can help businesses to grow. In this way, it can help organizations to differentiate themselves and give themselves a competitive advantage.
For example, according to PMI, 49% of executives say they're planning on investing in new technology in the next five years. A scenario planning example includes analyzing what kind of tech would make the biggest impact to the business and estimating the cost with an eye to being better prepared to make the investment.
Organizations in all industries can benefit from scenario planning, including digital agencies, consultants and IT services.
According to PMI, project managers lose 37% of their budget due to failures. This is exactly where scenario planning can make the biggest difference.
By recognizing risks, critical uncertainties and alternative scenarios, project managers can:
Other advantages of scenario planning include:
Scenario planning isn't a one-off exercise either. It's best done throughout a project, especially at key milestones or at the end of certain phases. The way things have progressed up until that point may impact your strategic planning, and it means your planning is based on the most up to date information.
There are also some disadvantages of scenario planning:
Runn, however, makes it a lot easier for project-oriented businesses. Harnessing the power of Runn’s tentative projects and real-time charts, you can visualize the impact of endless combinations of projects and variations so you can plan for all the possibilities - without modifying your existing plans.
Our project toggles let you get a forward-looking view of what will happen to your team’s capacity, utilization, and availability instantly. You can also see how each scenario impacts your people on an individual and group level.
Read more about how scenario planning works in Runn here.
By its nature, scenario planning could be an endless exercise. In an uncertain world with plenty of possibilities, the only limit is your imagination. In saying that, for scenario planning to be beneficial and cost-effective, it pays to keep scenario analysis as realistic as possible.
Common scenario planning examples 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 eventuate.
There are four different types of scenario planning:
The best scenario planning process goes through eight steps:
Only two things contain the scope of scenario planning projects - time and the imagination of the person doing it. It pays to keep a few key points front of mind in order to keep the time investment in line with expectations:
The specifics of a scenario plan don't have to match a real life eventuality in order to be useful. If you've modelled to take certain actions if your costs double due to supply shortages, at least some of those actions will likely be applicable if costs rise due to suppliers raising prices, and so on.
The key thing is to recognize significant factors that impact the business and build scenarios that help you to understand the best courses of action when those factors change in various ways.
If you haven't done scenario planning before, it takes time and experience to be able to do it well. McKinsey outlines a few common traps in scenario planning that are best avoided.
When you carry out a robust scenario planning exercise, you'll identify a large number of risks and hypothetical situations that could impact your business. The risk with that is, it can paralyze decision-making as companies look to avoid risks wherever possible.
Rather than becoming a proverbial deer in the headlights, it helps to focus on the most likely scenarios and have a clear plan for dealing with them. Just because you're prepared for multiple scenarios, it doesn't mean you can't also have a primary plan for moving forward.
A scenario planning exercise is about dealing with uncertainty, but managers need to be careful about not relaying uncertainty to staff and stakeholders. You can't exactly go and say "there are four alternatives but we don't know what's going to happen."
Rather, your communication can acknowledge there are other possible futures while also outlining your ideal plan. You might say, "This is our plan, but we know how we'll react if X happens."
In fact, this can be a part of clear, open and transparent leadership. Your understanding of different scenarios qualifies your plan even more, and it pays to remember that.
Again, not many people would have had a plan for a global pandemic a few years ago, but it might have come in handy. When developing scenarios, it can be tempting to not pursue ones that seem far-fetched. If you're presented with a range of options, don't just ignore the most extreme ones.
How realistic a scenario is should only account for one aspect of the usefulness of a plan for it. A scenario with a major impact on the business could still be worth exploring even if you think it's not going to play out.
Also, if you've done scenario planning for a situation in the past, don't throw it out. It may have usefulness in the future if there are common traits that can be applied to other situations.
McKinsey outlines that many businesses (and perhaps people in general) are typically too optimistic when facing a downturn and too pessimistic on the way out.
When planning a worst case scenario, it's worth pushing the limits of what you consider to be worst case. It's better to have a pleasant surprise than a bad one, so when forecasting the impact on profit of a major event, err on the low side.
Scenario planning can create the illusion that you're fully prepared to handle whatever the world throws at you. While it certainly helps you to deal with the unexpected, it doesn't mean all your bases are covered.
It's important to review your scenario analysis and update it if needed. This also includes considering other possible futures that may be worth adding to your current scenario planning.
Scenario analysis is about dealing with (and preparing for) the unknown. While this is exactly what makes it useful, there are some situations where there is so much uncertainty that you can't build out a useful scenario plan.
The more assumptions and estimates you have to make in your scenario planning, the more the plan will rely on a very specific set of circumstances, and the less useful it will be.
Triggers are the signs that a scenario is unfolding, and can help to initiate the plan you've developed for them.
For example, for the scenario that you've built around investing in technology in your business, one trigger can be siloed communication within regular processes.
Identifying triggers means listing them as part of your scenario development plan and also being able to see them happening in real time, so you know it's time to initiate the plan.
There are a few rules of thumb that it helps to keep in mind with scenario planning.
Developing two alternatives in a scenario isn't enough, but it may be worse to develop three. As outlined in McKinsey, if you develop three then most stakeholders will tend to choose the middle one.
Developing four scenarios forces decision makers to properly analyze the information and select one they truly believe in.
It's common to present scenarios in quadrants, with variables on each axis. However, many scenarios have more than two uncertainties, so this approach is too simplistic.
The best way to resolve this is to create multiple two-by-two analyses using all combinations of uncertainties. This helps to bring to life the common aspects in some of the uncertainties, and they may be able to be combined to make it more simplistic.
A base case is the one that has the highest probability of actually playing out. Identifying the base case as part of your scenario development means you can give it the appropriate weight and justify spending more time building it out.
It also helps when communicating scenarios to be able to outline which is the most likely, and why.
Giving scenario plans catchy, memorable names is the first step in getting them adopted. People will forget long, boring and descriptive titles, but they'll embrace fun ones. Stick to short names (between 2-4 words is best), and play them off movies, songs or historical events.
It takes time to learn how to develop scenarios. There's no wrong way to do it, but plainly the best scenario plans are the ones that play out in reality. It might be helpful to look through old scenarios to see what they got right and what they missed. Why did they miss things? Are there other questions that could have been asked to improve their relevance?
The best scenarios are those that aren't predictable. Ones that are conventional and middle of the road aren't overly valuable because they generally fail to account for unforeseen circumstances. If things always went to plan, there wouldn't be any need for scenario planning in the first place.
While it's often tempting to dismiss radical, maverick opinions, it's worth considering the merits of something unexpected. What's worse than the worst case scenario you're planning for? Be open to extreme possibilities.
In a typical scenario planning exercise, you'll end up with all sorts of events, actions, forks in the road, notes...it can get really messy doing it all free hand. If anyone else picks up your scenario plan, often they won't know where to start. Even worse, you can pick up your own plan two years later and struggle to make sense of it.
However, scenario planning software follows clear frameworks and standardizes inputs to bring to life exactly what steps are being taken and when. You can use scenario planning templates, test tentative plans to see the impact of decisions on other areas of the business, and use this insight to improve responses with greater insight.
Scenario planning models are pre-programmed, which means even first time scenario planners can use them to build out informed, in-depth plans.
