Ever wonder how big companies like Apple, Nokia, and Shell have survived significant market challenges while others have failed? Their secret weapon is scenario planning, like having a crystal ball for your business. Here is how it works.
What is Scenario Planning?
Think of scenario planning as creating different versions of the future in your mind—kind of like alternate endings to a movie. Instead of just hoping for the best, innovative businesses imagine different ways things could play out and prepare for each one. This is like that “make your own adventure” game/comic book from childhood where you can create different endings.
Where Did This Come From?
This strategy started with military planning during the Cold War.
But it took off when an oil company called Shell used it in the 1970s. They imagined what might happen if oil prices changed dramatically – and when they did, Shell was ready while other companies weren’t!
How Do You Do Scenario Planning? A Simple 5-Step Guide
1. Pick Your Big Question
Ask something important about your future, like “How will teenagers shop in 5 years?” or “What happens if everyone starts caring way more about privacy?” “What will happen to suppliers in the automobile industry if consumers stop buying and leasing cars and start using cars on demand like Uber.” “What happens to alcohol sales if consumers start consuming more non-alcoholic beer, wine, and spirits?”
2. Look at What Could Change
We use something called STEEP to check all the important areas:
– Social: How people live and what they care about
– Technology: New gadgets and digital trends
– Economic: Financial issues like how much people can spend
– Environmental: Climate change and green issues
– Political: Laws and government decisions
3. Choose Your Two Biggest “What Ifs”
Pick the two most uncertain and essential factors. For example:
– Will people care more or less about privacy?
– Will people trust brands more or less?
4. Create Your Future Stories
Draw these factors on a cross to create four different future scenarios. Give each one a name and write a story about what that future looks like.
5. Make Your Game Plan
Figure out what your business would need to do in each scenario. Look for things that would be smart to do no matter what happens in the future—those are your “no-regret moves.”
“The best way to predict the future is to create it.” Peter Drucker
Three Tips for Success
1. Think Medium-Term
Don’t look too far ahead (like 20 years) or too close (like next month). About 5-7 years is perfect – far enough to imagine significant changes but close enough to plan for.
2. Get Different Viewpoints
Don’t just ask the same type of people. Get input from people of different ages, jobs, and backgrounds. The more variety in opinions, the better your planning will be.
3. Use Your Plans
Don’t just make these plans and forget them. Check them regularly, use them when making decisions, and update them as things change.
Why This Matters for You
Understanding scenario planning is valuable even if you’re not running a business. It teaches you to:
– Think ahead instead of just reacting. Consider different possibilities instead of assuming one future. – Make better decisions by being prepared for multiple possibilities.
Three Examples:
Nestlé used scenario planning in the late 1990s to anticipate shifts in global coffee consumption. Their scenarios explored various futures of coffee culture and consumer behavior, from continued traditional home brewing to the rise of premium café experiences. This analysis helped drive their decision to acquire Nespresso and expand it globally, as well as their later purchase of Blue Bottle Coffee – positioning them ahead of the premium coffee revolution that transformed the industry from primarily grocery store sales to high-end specialty coffee.
The Coca-Cola Company used scenario planning in the early 2000s to address changing consumer preferences around health and sustainability. They developed scenarios exploring different futures of beverage consumption, which highlighted the growing threat from healthier alternatives. This led to their strategic decision to diversify beyond carbonated drinks, resulting in major acquisitions of brands like Vitaminwater, Honest Tea, and investment in plant-based beverages – moves that helped them maintain market leadership as soda consumption declined.
Royal Dutch Airlines (KLM) used scenario planning in the 1990s to prepare for European airline deregulation. They developed scenarios ranging from continued regulation to full liberalization, which helped them identify the need to build a hub-and-spoke network centered at Amsterdam’s Schiphol Airport. This strategic foresight led them to invest heavily in Schiphol’s expansion and establish key airline partnerships, positioning them well when the European aviation market was eventually deregulated.
Scenario Planning and The Future
Remember: You can’t predict the future perfectly, but you can be ready for whatever comes your way. That’s what separates leaders from followers in the business world.
Think of it like this: If you’re planning a beach party, you don’t just plan for sunny weather—you also consider what you’ll do if it rains.
Scenario planning is just like that but for more significant business decisions.
How do you plan to think like a strategic business leader?
Connect with Jeff at The Marketing Sage Consultancy. Interested in setting up a call with me? Use my calendly to schedule a time to talk. The call is free, and we can discuss your brand and marketing needs.
If you want to learn more about my new offering, The Trusted Advisor Board, you can click here to learn the details. Feel free to email me at jeffslater@themarketing sage.com or text 919 720 0995. Thanks for your interest in working with The Marketing Sage Consultancy.
Photo by Ameer Basheer on Unsplash
