Scenario Planning: No Black Swans | Leaderonomics

Scenario planning (SP)–the ability to depict possible futures, consider their impact, and plan for these futures–is a fundamental component of strategic business planning and the role of organizational leaders. In using SP, leaders envision three to four possible–but uncertain–scenarios that may play out in the future and which are dependent on multiple variables, such as the economy and competition, to name a few. One challenge in SP is finding a balance in planning for specific events that are more likely to happen–often referred to as “known unknowns” and those that are rare or unexpected such as the coronavirus, acts of war, and natural disasters. These rare events are referred to as “black swans” due to their low probability of occurrence. However, as pointed out in this article, events that are sometimes referred to as black swans–in some cases– are really “known-unknowns”–meaning that they are not unprecedented, although they are less likely to occur. In this short article, TM Nagarajan summarizes aspects of SP and outlines five steps to help leadership teams expand their thinking on multiple scenarios, including 1) Identify a focal question, such as how is our industry’s landscape changing? 2) Identify key forces of these changes by asking questions such as what factors or trends influence this issue? 3) Prioritize relevant forces – which of these factors have the most impact on our business? 4) Develop a range of plausible scenarios the organization may face, 5) Discuss the implications for each scenario, including opportunities, risks, and responses. Within the context of strategic workforce planning, these scenarios are used to determine the workforce implications of a given scenario. Overall, the goal of SP is not to predict what will happen but to expand our view of what could happen and use this information to prepare our organizations if a scenario unfolds. As HR practitioners, it is important that we enable our leadership teams to envision multiple versions of the future–a few of which will be less obvious (but possible) and where the stakes are high. By helping our leaders expand their thinking in SP, we enable proactive responses in mitigating potential threats. Moreover, these proactive responses can sometimes provide a competitive edge.