Crisis Management, geopolitics, foresight: there are multiple applications of Scenario Planning
In the corporate world, scenario planning is akin to an upgraded version of strategy that aims to perceive and anticipate multiple futures. This makes it useful for testing the robustness of a business idea to adjust or reinvent it.

In our first article on Scenario planning, we pointed out that the goal of the approach was to create a more adaptable organization, which first recognizes change and uncertainty and second uses its creatively to its advantage. This is based on deepening the understanding of the fit between the organization and the plausible future environments.

The business idea is the strategic perspective on the organization. The scenarios are the strategic perspective on the environment of the business idea. Through original insights a competitive edge and distinctive competencies can be built, namely by starting with simple questions about the organization “raison d’être”.

• What are we doing? This question focuses on the organization.
• What could we be doing? This question focuses on the environment
• What should we be doing? This question focuses on strategic decision making.

The main question, however, is the following: what if your strategic conversation and scenario development conclude that your business idea is weak or irrelevant?

Scenario planning and the business idea:

Entrepreneurial success results from a combination of three ideas : discovering a new way of creating value for customers, distinctive competencies that generate the desired value, and differentiation.

Scenario planning addresses the devil advocate question: what is unique about us that makes it difficult for others to emulate? It starts with an in-depth understanding of the organizational self, of the capabilities and activities that support success. The business idea is the success formula of the organization. To define it, it must focus on 3 components:

• What pain, need, scarcity is addressed?
• What are the distinctive resources and competencies within the organization?
• What value is created though defensible components against competition assaults?

There are two possible outcomes. The business idea is strong. Strategy in that case is about finding new markets or new offerings to further exploit the success formula. If the business idea is weak, new insight is needed through scenario analysis to develop new capabilities. This notion of fit of the business idea must be addressed by working out both the existing business idea and the set of relevant scenarios.

Scenario planning both helps invent new policies to improve the fit AND supports the decision and actions to implement the strategy. It challenges current business choices such product positioning, territories tapped, or the value perceived by customers. Unorthodox thinking helps frame the following fundamental question: what if my business idea sucks?

Reviewing the business idea:

Before jumping to the conclusion on your business idea, let’s keep in mind that scenario planning is not only out the box thinking. This is a process that starts with deciding on your business fundamentals to prepare the ground for confronting your SWOT and other tools. The process must be kicked off by picking your talents’ brain on the following questions:

• What is your business?
• Who is your customer?
• How do you create value?

This means that the business has to be segmented first, and the analysis conducted for one or multiple segments. Then the point is to find out the Magic Formula of the total system, namely by answering the following questions:

• Who is your typical customer?
• What pains and worries do you alleviate for them?
• What is your total value proposition you offer your customer?
• Could this value be created through alternatives?
• Are you clear about what at makes you unique?
• How difficult is it for competitors to copy you?
• What competitors traits do you wish you had?

The business idea is prime. The competitive advantage is its manifestation. So, the main question to answer is why a customer should buy from you rather than from your competitors. The answer to the competitive advantage question should be specific in one or a combination of the following two categories: differentiation or structural cost advantage.

The next step is to pressure test the distinctive competencies that support the business idea, the ones that are unique to your organization and difficult to emulate by competitors. A simple test is to confront them to your SWOT. The strengths analysis must be based on the distinctiveness of the competitive edges you can maintain or leverage. The weaknesses analysis should test the ability of your business idea to overcome any structural weaknesses identified. The opportunities and threats analysis highlights the business idea robustness to exploit existing opportunities and neutralize the identified threats.

Reinventing the business idea :

By running the business idea through multiple futures, scenario planning differs from strategy 101: it helps test and reframe what is taken for granted, including demand for the current offering or competitive advantage provided by distinctive competencies.

The results of the initial discussion should be expressed in terms of qualitative strategic objectives. These are the BIG ideas of strategic planning. They include existing business areas to be further developed or new business areas to be entered if the business idea is strong. BIG Ideas generally include capabilities and portfolio review.

If the conclusion is that the business idea is weak, the next question is how to make it stronger. This results in the generation of capability options. Capabilities can be created or developed through market development, which is developing new relational distinctive competencies in the market, or innovation, which is applying new combinations of distinctive competencies and changing the rules of a commercial game.

If the business idea is robust, the primary task is to find ways to reinforce it. This leads to the generation of business portfolio options. These may lie in concentrated growth, which is expansion into similar or adjacent markets, market development, which is investments in expansion of market share, or integration, mergers or acquisitions into closely related markets.

Conclusion:

Change in organizations requires dissatisfaction with the current situation or anxiety about the status quo. The recognition of a threat posed by unpredictable future is the playground of scenario planning.

Scenario planning involves creating multiple plausible future scenarios to explore how various factors could impact an organization. It prepares businesses for a range of possible outcomes, focusing on flexibility and adaptability. While Strategy 101 is about defining a plan based on current conditions, scenario planning emphasizes preparing for uncertainty.

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