How Scenario Planning Can Help You Innovate Better

In these uncertain times, are you ready to take advantage of the opportunities that will arise in the next few years, or are you paralyzed by indecision? Scenario thinking can help you to be part of the first group.

Many of those who read this post will have heard of scenario planning, some might have participated in workshops, but probably few have thought these times are great to take advantage of opportunities that might not seem that obvious at this time, but with scenario thinking will become more visible.

Scenario planning, is a methodology originally applied by the U.S. Military for planning purposes, later transformed for business application by Herman Kahn in the 1960s and most famously applied by Royal Dutch Shell during the 1970s oil shock, when Shell catapulted itself from one of the weaker, large Oil Companies to the 2nd largest in revenue and most profitable. Since then it has been applied by companies from diverse industries, as well as governmental organizations to help them improve their strategic thinking.

The method itself is not that difficult to understand (although to be done well, it will need some intelligent effort to produce results). It basically consists of orchestrating a set of plausible future scenarios based on insights about social, economical, political and other factors influencing our future.

And why is scenario thinking so important at this moment? For the simple reason that the future is as uncertain as ever. And I am not talking about the end of the Maya Calendar. It is about the financial crisis in Europe (how long will this take?), the emergence of China (will China help economic recovery or is its economy the next bubble), the Arab spring and Iran (how will these events affect the relationships with the West and the oil prices?), protective measures by local governments, the renewed questioning of capitalism and many other issues that might have a direct or indirect impact on your business.

…instead of looking at the “scary” side of different scenarios, I think there are great opportunities to use scenario thinking for positive actions.

How many companies have withered because they were not prepared for a different future? Kodak, of course is an easy current example. But, instead of looking at the “scary” side of different scenarios, I think there are great opportunities to use scenario thinking for positive actions. How can we innovate now to be ahead of the competition in the future, by understanding the strategic requirements in future scenarios? Think about how you would now act   (yes act, not react!) if a future scenario would become reality. Project that scenario and see what would be necessary to act and what innovations you would search for.

Here are a few questions for the company manager to think about:

  • Is your team aware of the different variables that might affect your business?
  • Can they separate between highly possible trends (population growth) and more uncertain trends?
  • Is their view broad enough, or does it only include what is happening in your industry at the moment?
  • Does your team understand how different scenarios require different strategies, or are you working with 5 year strategic plans based on one scenario?
  • Is your team prepared to innovate and take strategic actions for the different scenarios?

Scenario thinking is not about primarily about planning, it is about the learning.

Scenario thinking is not about primarily about planning, it is about the learning (that’s why I refer to it as scenario thinking, instead of scenario planning).It is about your team working together, discussing and sharing. It is about connecting with experts from the outside world that are able to provide insights about economic, social or political trends, raising questions and provoking insights. It also keeps you away from group thinking, that dogmatic “true” view of the future by your management team. Try to pore some fresh thinking into your company to develop strategic awareness within your team and create innovative insights.

And remember:  there is no right or wrong, since we are talking about the future. It is about preparing to act when certain scenarios unfold or at least start to become more likely. Scenarios neither have to be correct and they will never be, nor do you have to know all the ins and outs of world politics and the world economy, to create them.

So what about you and your company, are you prepared for different scenarios? Does your innovation portfolio and pipeline reflect this?

About the author

Caspar van Rijnbach, Dutch from origin, lives and works in São Paulo where he is an Executive Director at Ernst & Young’s Advisory. Passionate about Innovation, he has been working as a consultant for over a decade with large Brazilian companies and multinationals to improve their capabilities in innovation and knowledge management.

Caspar is author and co-author of several books and articles about innovation, some of them published internationally and others in Brazil, in Portuguese. Also, he has given classes at renowned universities in Brazil, spoken at both national and international conferences and has lead many in-company courses.
  • Camila Pires

    Good point!

    Camila Pires 

  • Barroso

    Like it is
    often said – it is crazy to do always the same and expect different results.
    The same should apply to thinking; indeed it is time to detach from always the
    same linear planning thinking. Scenario thinking does high on my “play list”.

  • Richard Mcdonnell

    Caspar,
    In your experience, have you seen senario thinking applied to innovation projects on a case-by-case basis? Or is more typically, applied from an overaching strategic planning aspect?
    Regards,
    Rich 

  • Carolina Matos

    Elucidative post, scenario planning is an important part of building company differentiation in the present for the future.

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  • Rijnbach

    Richard, thank you for your question, scenario thinking can be applied to innovative business models or new business development. I have seen that before. But scenario planning is less appropriate when looking at something very specific, the implementation of a new product for example. Using business models might be more interesting there, implemented using the different variables that have strong impact on demand, supply and production.

  • http://www.facebook.com/people/Jarbas-Pinheiro/100000968655025 Jarbas Pinheiro

    Very good post, Caspar! Scenario thinking is a challenge when all we are asked to do all the time is to deliver the quarterly result…. thanks for sharing this thought! Good one!

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