In general, humans are not very good at predicting the future. Yet, we still need to plan for both our business and our personal lives. One way to generate very powerful business forecasts is through a technique called ‘scenario planning’.
Scenario planning involves thinking creatively about all possible outcomes, including consequences, good or bad, and actionable responses for each consequence to enable successful outcome management ahead of time. Brainstorming a broad range of scenarios and considering how best to respond to each one helps you navigate any challenge that comes your way.
Over the last 18 months, many of our clients have benefited from our scenario planning to navigate the uncertain conditions of a COVID-impacted business landscape. We have assisted clients in making data-based decisions to adjust and adapt their business to the market and ensure their profitability and cashflow continues to grow.
In this short video, we offer best practices in scenario planning to help you develop better forecasts and plans. See below for the transcript.
Forecasting and planning for a business isn’t easy, especially in times of uncertainty. Sometimes it’s hard enough to predict all the possibilities, let alone put the right plans in place to deal with them.
Scenario planning is one way to narrow down the options in order to arrive at a set of powerful and relevant solutions. But it pays to seek assistance from experienced scenario planners who know how to forecast for businesses of all kinds. Beyond Advisors assists clients in every stage of their professional journey to grow their businesses and reach their goals. We help you to figure out exactly what you’re looking for and what to focus on to help your business achieve these goals.
Want to expand your business capabilities, assess your current model or add a new product range? Get in touch with Beyond Advisors.
“Hello, and thank you for joining this short video on scenario planning – a method of generating very powerful business forecasts.
What’s the challenge here? The challenge is that humans are not particularly good at predicting the future. It doesn’t matter if it’s the weather, the sports match, or certain things which will influence your business — and political uncertainty, economic uncertainty and other factors makes this even more difficult.
Yet we still need to plan. We still need to think what might happen in our business in various scenarios. What exactly is a scenario? Think about it this way, there are assumptions we make, and then we consider what will happen, based on those assumptions.
I might assume it’s going to rain tomorrow, and the consequence of that assumption is that the sports match will be postponed. And the action I proposed to take is to make alternative plans.
If we look at a business example: Here’s a scenario where we think customer demand will increase for our products. The consequence of that is that we will sell more. And the action we plan to take is to expand our production capabilities to meet that demand.
Here’s another scenario.
Our assumption is that customer demand will decline. And the consequence of that is, we will sell less. And the action we propose to take, is to enter a different market where we may be more profitable. When doing scenario planning, here are some best practices to keep in mind:
First of all, think broadly, think creatively. What happened last year or the year before, may not be relevant in the coming years.
And consider both internal factors, the factors you can control — investment in people, investment in real estate, pricing and so on.
But also consider external factors– political risk, economic risk, regulatory risk, and so on.
Try to develop a wide range of scenarios – we don’t want to look at scenarios which are substantially similar. We want to actually look at scenarios which are quite different, because this gets us thinking about our business and helps us to generate our plans. And yet we don’t want to overcomplicate these models. If we’re looking at too many variables and too many scenarios, the activity can become counterproductive.
Most importantly, think what actions you will take in each scenario. What exactly are you going to do?
Is it around pricing, or production, or staffing, or investment?
We need to get really precise on this and link it to each of the scenarios we’ve considered. Sometimes it’s helpful to have outside facilitation when scenario planning. External people might be able to ask you questions or challenge your assumptions, which helps you arrive at a more robust set of assumptions, and therefore better scenarios.
We hope that’s helpful for you as you consider scenario planning best of luck and thank you for joining us for this video.”