Scenario Planning

Abstract

A crystal ball methodology that foresees the future is probably one of the most sought-after tools by any organization operating in this ever-changing world. The ability to correctly navigate through uncertainties and drastic changes in the external environment is found to be limited when an inward perspective of the company is utilized. The measurement of performance indicator and the mining of usable information in a sea of big data, among other approaches, may provide limited results in guiding the company towards choosing effective strategic decisions that will sustain the company in the future. This chapter is an effort to pursue an alternative perspective in planning by using Scenario Planning, a group thinking process that encourages knowledge exchange and development of mutual deeper understanding of central issues important to the future of an organization. Applying Scenario Planning framework, a structured approach is elaborated to describe a replicable methodology for sensing critical uncertainties in the external environment. These uncertainties are then utilized as the foundations for creating scenarios, which are attempts at vivid visualizations of how the future may look like. In this research, the effectiveness of the methodology has been demonstrated on the supply chain of Clariant, a Specialty Chemicals Company headquartered in Switzerland, by developing three scenarios that are sample representations of a whole range of plausible futures. These scenarios are differentiated by combinations of high and low conditions of the three critical uncertainties identified: (1) Emergence of trading blocks, (2) Changing consumer needs/behavior, and (3) Changes in logistics infrastructure. These critical uncertainties are also used to further design a new breed of indicators that are used as ground-sensors to monitor which direction the future is heading to. In addition, Scenario Planning also provides a fertile platform on which organizational learning can organically grow. The steps used in the methodology forces users of the scenarios to challenge existing mental models resulting to a wider perspective and appreciation of the dynamics that surround and impact an organization in the future.