This article emphasizes the importance of scenarios in strategic
planning and examines how a company can build and sustain
competitive advantage by using scenarios. The author explains
a methodology for scenario construction and integration of
scenarios into strategic plans. Competent managers are not
necessarily effective scenario planners. Towards this end, the
author advocates developing an organizational culture that
promotes the concept of scenarios.
Scenario planning is all about retrospecting the past to assist in introspecting the present, so that
a near accurate future is ensured. Assume for a moment that you are a part of the
think-tank team of a global oil distribution major with interests in different countries. As part of
your job you need to design business strategies to achieve the conglomerate’s growth plans over the
next decade or two. As a first step, you will need to analyze the past and project the anticipated
demand and supply for the product in the future.
You are likely to estimate the demand based on consumption patterns, anticipated growth in
industries, acute demand for two and four wheelers resulting from an increasing population, impact of
conflicts between nations or greater cooperation among them resulting in a quantum spurt in aviation
fuel consumption. Alternatively, you might also anticipate a situation wherein a substitute for oil is
found which could impact demand. As a prudent manager, you will not ignore the possibility of
competitors entering the market and the demand for your product going down.
Similarly on the supply front you will need to ensure that there is no missing link in the supply
chain. Vendors must ensure a constant supply to meet the projected demand. Since your operations
are on a global scale, you need to anticipate the impact of geopolitical situations in different countries,
which could disrupt supplies. In such inevitable situations, alternative supply channels need to be put
in place.
What you are attempting is to create a number of possible future scenarios and attempting to
answer the same with a systematic plan of action. This is what scenario planning is all about. The
concept was pioneered by Royal Dutch/Shell in the early 1970s. The company developed six alternative
scenarios wherein one suggested that disruptions in oil supplies could result in a sharp spurt in oil prices.
Historically, oil prices were stable for over a decade and, therefore, this scenario seemed a distant
possibility. |
