Executive summary
Quantumrun Foresight encourages organizations to participate in scenario development to improve the preparedness and comprehensiveness of their strategic decision-making. To this end, this brief tutorial outlines three practical methodologies organizations can use to effectively integrate scenarios into their strategy development initiatives.
Challenge to solve
78% of the companies we surveyed failed to effectively incorporate emerging trends into their strategic planning initiatives. As a result, these companies faced increased exposure to risk from outside disruption and lost revenue due to missed market opportunities.
Solution
The effective production and use of scenarios within an organization can improve the preparedness and comprehensiveness of its strategic decision-making while accelerating its reaction time to changing environmental forces.
Similarly, scenarios (and scenario planning, in general) provide organizations with a method to systematically explore the possible, plausible, and probable futures (business environments) that lie ahead but with the ultimate goal of selecting one preferred future to pursue strategically. The graph below illustrates examples of the different futures (scenarios) that the strategic foresight field attempts to define.
Under this framework comes the process of actually brainstorming and building multiple potential scenarios that organizations can then assess, rank, and then use to either guide their strategic planning or their product development processes.
The various methods of scenario production are covered in detail in Quantumrun Foresight’s Scenario Composer tutorial guide that can be read here.
However, once scenarios are produced, some organizations experience confusion about how to practically apply the findings of these scenarios.
In this tutorial guide, Quantumrun Foresight will share three practical methodologies that organizations can use to translate scenarios into strategies and policies that can drive real operational improvements across a variety of metrics.
Scenario immersion
In this method, completed scenarios are presented to as many organizational members as possible in a workshop format.
For each scenario, each workshop participant is asked to identify as many threats and opportunities as they can and write them into sticky notes (digital alternatives are fine).
After some back and forth, each scenario on the wall should have a two-sided threat vs opportunity grid with the sticky notes divided and organized respectively.
For each scenario, the group then brainstorms strategic responses to the threats identified by each scenario. Similarly, the group will also brainstorm strategic responses to the opportunities identified by each scenario and how each could be capitalized on.
Once complete, the group can vote on those threat and opportunity responses that they would like to incorporate into their next strategic plan.
Scenario immersion benefits and drawbacks
Wind tunneling
In this method, existing company strategies are stress-tested against the varying conditions placed upon them by competing future scenarios. In other words, the individual scenarios act like the ‘wind tunnel’ and the existing strategies act like the ‘plane models’ whose performance and integrity the wind tunnels are testing.
In this exercise, a workshop leader prepares a table (Microsoft Excel spreadsheets are fine) where each preexisting company strategy is listed in a row and each devised future business or environmental scenario is placed in the appropriate columns.
Next, each workshop participant is asked to grade each company strategy (using a 1-to-5 or 1-to-10 rating range) by how well it would perform when operating within each business or environmental scenario.
The average group rating for each strategy against each scenario is then collected and entered into the table. The individual scores of each row are added up. And then the strategy with the highest score is the one that, theoretically, would perform best amidst the widest variation of scenarios set against it.
Wind tunneling benefits and drawbacks
Objective wind tunneling
A more rigorous variant of the Wind Tunneling method can be used when an organization has competing strategies and wants to decide which one to keep.
In this method, competing strategies are tested against scenarios in view of a set of objectives to determine which is best.
Reference the table below, and assume your organization has two scenarios to test against, two key organizational objectives (e.g. increase revenues or launch a new line of business), and three competing strategies (e.g. Growth, Diversify, Invest).
Stage 1: In the first stage, for each objective, the workshop group will rank each strategy against the two scenarios under each objective from best to worst (“1” is best and progress in descending order depending on the number of scenarios).
So far, this method is comparing the performance of each strategy based on the objectives in each scenario.
For example, based on the table above, for Objective 1, Strategy 1 performs better in Scenario 1 rather than in Scenario 2; same as Strategy 3. But Strategy 2 performs better in Scenario 2 rather than Scenario 1.
Stage 2: In the second stage, we create an alternative table (see below), where we rate the potential performance of each strategy against all scenarios, across all objectives, using a 1-to-5 or 1-to-10 rating range.
For example, based on the table above, for Objective 1, the best option appears to be Strategy 1 in Scenario 2. The second-best option for Objective 1 appears to be Strategy 3 in Scenario 1.
Stage 3: For the third stage, for each strategy, we assess the scores obtained in stage one and two for each objective. The strategies with the lowest scores will, theoretically, be the best performing strategies for the given objectives.
Objective wind tunneling benefits and drawbacks:
Optimum usages of these methodologies
For organizations with limited time and budget for scenario and strategy development, Quantumrun Foresight suggests limiting your organization’s efforts to the Scenario Immersion methodology. This method is ideal for assessing different business scenarios (including scenarios developed within the Quantumrun Foresight Platforms Scenario Composer interface) and drawing out ideas of how best to capitalize on their potential impacts.
For organizations with greater resources, applying either form of the Wind Tunneling method is a great way to test the efficacy of existing strategies against various scenarios and organizational objectives.
Finally, regardless of the methodology selected, taking the time to analyze scenarios and strategies will ensure that whatever direction your organization chooses to reach its objectives, it will do so with a greater degree of confidence and reduced risk.
