Scenario planning yields options that one day can be exercised.
Anyone who has worked with me knows one of my favorite slogans is “Just Do It,” coined by Nike.
Anyone who has worked with me also knows that having options to “Just Do It,” requires a thoughtful approach to generating the options.
So, are you the founder with the drive and obsession to create a great business?
To increase your chances of success, a list of options is not enough.
You must make choices. You must exercise those options. You must practice.
While working in the pharmaceutical industry, an opportunity arose to disrupt the conventional supply chain of prescription drugs through distributors to pharmacies. There were multiple stakeholders involved: patients, competition authorities, wholesalers, pharmacies, manufacturing, and the pharmaceutical company that employed me.
A cross functional team of in-house counsel, supply chain, finance, and strategy were formed. Detailed analyses, supply chain forecasting, exhaustive profiles of the distributors and contractual obligations were prepared to come up with a disruptive solution to getting meds to patients in a legal 24×7 manner; while also reducing from 200 to 15 wholesalers. We prepared a draft contract for negotiation with the wholesalers.
To our disbelief, the CEO summoned us to her office to inform us that we were to spend one week in an undisclosed location with no connection to the outside world to undergo negotiation training.
We found ourselves like chess players, practicing grueling scenarios with different outcomes to pursue. We learned what BATNA (best alternative to a negotiated agreement), could mean for the patients; our customers. We learned who the players were, different options to concede, and other non-negotiables. Like learning the chess board, we used role plays as the “opponent”; iterations ensued of the game such as how by choosing what piece to begin the game with, we would sway the desired outcome.
With a mindset to have fun, a riskless environment is created. Creativity is critical to generate options. The stakes of the game were relatively low… the worst thing that could go wrong is you had to buy a few drinks.
What is scenario planning?
Scenario planning is a strategic planning method that some organizations use to make flexible long-term plans. It is in large part an adaptation and generalization of classic methods used by military intelligence.
In “A Game of Birds and Wolves,” By Simon Parkin, in 1941, Winston Churchill brought out of early retirement Captain Gilbert Roberts. Roberts was a master game maker, and assigned a select group of 10 women (“Wrens”) from the Women’s Royal Naval Service, to devise a strategy game that would arguably change the tide of WWII through the battle for the Atlantic. Their work contributed, in the words of one admiral, “in no small measure to the final defeat of Germany.”
A thoughtful approach to scenario planning does not require going off site to an undisclosed location for weeks of time. With these five simple steps you and your team will be having fun in a riskless environment while generating real options that can make or break your business.
5 Crucial Steps to Scenario Planning
With this brief introduction to scenario planning, let us jump into the steps.
- Imagine Scenarios around the customer journey and the industry (not the product roadmap)
The assumption is your business has a product and some revenues.
Carry out customer surveys to identify customer “personas.”
Segment the “personas” by buying power, the pain points, willingness to buy with $ dollar amounts.
Quantify the business opportunity in two ways: top-down industry size, spend and assumption on Market share; followed by bottom-up at what price and what level of penetration.
Recast your financial model with the estimated revenues by “persona” and product.
2. Avoid “the hive” effect or group think
Just like role playing in the negotiation training in the intro to this blog, assign roles to the team players involved in product development, sales, customer service and make sure to assign a naysayer on the team to pressure test and to play the devils’ advocate.
3. Chart the course by choosing from the options and assigning confidence levels (CL)
Now the fun begins. Generate three (3) scenarios. Be cognizant of the resources available.
Plan A-optimistic scenario (what you really want to happen)
Plan B- Base scenario (what will probably happen)
Plan C- Worst case scenario (what will you have to do to remediate)
Generate a list of resources needed to meet all three scenarios.
Now assign a confidence level as expressed in 0%-100% certainty for each scenario.
4. Rinse, Wash, Dry and repeat
Go back to Step 1. Scenarios around the customer journey and the industry.
What has changed? In the market, in the competitors, in the product development; in the pricing
Revisit periodically to update the underlying hypotheses and dynamics.
5. Have fun!
Choose names for each team. Choose a prize. Establish the ground rules. Maybe even have “code names” for the new products you will come up with.
The Wrens developed “Operation Raspberry, “a counter maneuver that helped turn the tide of WWII.
I coined a formula in my blog Resilience,
“The ability to generate options + the ability to make decisions + creation of a sense of belonging among the community of Followers inclusive of all stakeholders, shareholders, employees, and communities = Enterprise Value.”
Brenda A. McCabe
If you are looking to build resilience into the company culture, or are looking for an independent advisor with experience in helping teams generate options, please book a time on my calendar, and see if my experience can help your team prepare with options.