Remember the good old days of running the business pre-pandemic? We all used to be very stressed and very busy with immediate questions: where to get more traffic? Is the sales team working well enough? How to improve my customer service?
Fast forward to today, the questions that crowd an entrepreneur’s mind haven’t changed that drastically. What’s different is that overarching awareness of how EVERYTHING in your business can shift at a snap of the fingers. The possibility of radical changes was always there, but who would bother thinking about a scenario like a pandemic, when you could be solving an immediate customer acquisition challenge?
Apparently, some people and businesses and, for example, the government of Singapore do think like that. Consider this: if utility operators did not think about scenarios like a pandemic or a natural disaster, we all wouldn’t be making it through this winter.
What is scenario planning?
The scenario planning process was first used in the 1940s by the US Air Force for strategic planning when the country could not afford to “just see how things go”. Another famous case study on scenario thinking talks about Royal Dutch Shell becoming the world’s #2 oil company, thanks to foreseeing radical scenarios that competitors did not plan for. In the 1960s the company started projecting possible scenarios of the future, including those that seemed unlikely at that time, like an oil shock scenario. As a result, when the first and second oil crises approached, management was able to recognize the scenario that was playing out faster than competitors had a response ready.
Scenario planning is not to be confused with trying to predict the future. Even the best consultant would fall short on such an ambitious task. Instead, this process is rather a creative exercise, that includes choosing certain trends as well as key uncertainties and recognizing there are a few possible outcomes: 4 different scenarios, placed about 10 years or more into the future from the current moment. A fairly big time frame is chosen to leave the field of just analyzing current trends and move to the space of creative strategic planning.
Are you planning to still be in business 10 years from now?
When I came across the concept of scenario thinking in the Art of the Long View by American futurist Peter Shwartz, I looked at it as a curious exercise, rather than a practical tool that can be applied in a small business, such as my own PR agency. Companies like Shell must be spending millions of dollars on consultants and facilitation of the process!
The second time I came across the concept was when I was introduced to Ursula Eysin, founder of the Red Swan Consulting agency who personally learned scenario thinking from former Chief Strategist at Royal Dutch Shell, Karl Rose. Her agency specifically focuses on bringing this methodology to SMEs, startups, and small businesses.
She shared a personal story of how scenario thinking saved her from going into a risky investment: the exercise showed that founders had an “out of business” scenario – a big red flag for an investor that founders don’t have their “skin in the game”. How many small businesses truly start the venture, believing the company will still be around for 10, 20, 30 years? What if it’s not the disposal of the capital, but the founder’s ability to think beyond 1-year plans while taking the best decision here and now makes the difference in startup survival rate?
Remember Kodak whose valuation plummeted from $28 billion to just $200 million, because the management was too late to recognize the future when it knocked on the door.
If corporations like Kodak fail to see ahead, it must be even more challenging for the small businesses, busy with everyday survival questions. According to the Bureau of Labor Statistics, about 50% of businesses make it through year 5, though many factors play into this number. COVID-19 outbreak undoubtedly intensified the statistics. A positive effect of an economic shakeup – more small businesses started asking themselves if they could have been more prepared for a scenario like a pandemic. Are you planning to still be in business 10 years from now?
Where do you start to future-proof your business?
Now as we’ve established that you are building something that’s here to stay, it would be useful to know scenario planning isn’t just for the big corporation. This 7-step process guides you from framing a question to formulating 4 possible scenarios. Start by asking yourself and your team what are the internal and external driving forces influencing the development of the situation.
Crucial uncertainties are a key to the scenario-building process. We know how a certain trend is going, but as the last few years have reminded us, events that can’t be foreseen do happen. In contrast to certain trends and predetermined elements, which cannot be changed, critical uncertainties still may be influenced differently. Two of the most significant uncertainties are chosen to create a “scenario cross”: where two uncertainties act as two axes, dividing the field into 4 possible scenarios.
Each scenario – is a possible development of the future, in case the uncertainties we’ve peeked play out. It’s important to put those possibilities into words, name them. In Eysin’s unique view, putting the “subconscious future” of a company out into conscious and talking through the possibilities with the team helps to recognize a scenario when and if it starts to play out.
Since we know it’s more about making space for long-term planning than investing big bucks, try applying this kind of thinking to your own business. Start the conversation with your key team members not trying to predict the future, but spending a few sessions recognizing the many uncertainties that might play out that you want to be ready for.
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