Scenario Planning and Decision Making

A lot has been written about the importance of being strategic in order to succeed in ever changing and evolving business world. Have you ever imagined what the most important part of being strategic is? It is the ability to notice that the world is changing around you and you need to embrace that change to outwit your competitors. Most business leaders and organisations are quite late in picking up that signals that change is in fact occurring.

There are many examples where individuals, organisations and governments were blindsided by the developments in their respective fields. For instance, music industry totally failed to recognise the potential of digital revolution that began anywhere between late 50s to late 70s. This particular era was marked by the adoption and proliferation of digital computers and record keeping that continues to the present day. Companies like Apple were quick to embrace this change and didn’t hesitate at all in introducing devices such as iPod which totally revolutionised the industry. Unfortunately, the traditional music industry missed this very important development and as a result, lagged far behind in the competition.

How is Your Peripheral Vision?
The peripheral vision may be defined as “your ability to pick up important developments outside your area of focus which might have significant impact on your business outcomes in time”. It is also pertinent to note that the need to have good peripheral vision is quite low in the organisations which are fairly simple and it is relatively high in complex organisations. It also depends upon how your organisation and departments are structured and how much you are willing to share knowledge beyond organisational boundaries.

Balancing Learning and Performance:
Some organisations get too distracted by the changes occurring around them. Similarly, there are organisations which should focus on these changes but ignore them. Therefore, it is very important to maintain a right balance between learning and performing. In this regard, there are actually two types of organisations that are Performance Organisations and Learning Organisations.

The learning organisations are inquisitive and externally focused as well as experimental and innovative. They promote knowledge sharing, reward risk taking and rely on cross cultural teams, the typical example being the Apple of late 70s and early 80s. On the other hand, performance organisations are internally focused and believe in numbers. They reward consistency and dislike ambiguity and deviation form set procedures.

For a company to be successful, it has to create an organisational culture which is a mixture of both performance and learning organisations. Neither of these approaches can work for the organisation alone. You have to create an organisation which rewards risk taking but also ensures consistency because you cannot just continue taking risk without achieving desired results.

Five Reasons Companies Get Blindsided:
In the context of above discussion, following are five major reasons why companies get blindsided.

  • Reactive Leadership:
    Most often business leaders narrowly focus on the current business and lack the curiosity about the periphery or what is happening around them.
  • Strategic Planning Process:
    Strategic planning process of most organisations is internally focused rather than being customer oriented.
  • Inward Looking Culture:
    Again, inward looking culture is the biggest hurdle in the way of embracing change successfully. Business leaders refuse to focus on customers and their demands. Subsequently, they fail to compete with companies who have a customer oriented working culture.
  • Limited Information Sharing:
    Some organisations discourage knowledge sharing across organisational boundaries, divisions and departments.
  • Organisational Configuration:
    Sometimes the configuration of an organisation prevents it from picking up what is happening around it, the typical example is the Barbie which lost major market share to Bratz because the later was good in picking in market signals and analysing what the children of all ages want in modern electronic world.

The General Decision Process:
It is also important to understand what the general decision process is which would help companies to better analyse the markets and make right decisions. The following diagram explains the process.

decision

Strategic Planning:
Strategic planning is all about thinking about the future. Traditionally, strategic planning was actually the financial planning in which focus is only on budget and the strategy is mostly implicit. Similarly, it was also a forecast based planning in which planners used to take into considerations past events to predict future events.

However, the strategic planning approach changed in 70s when focus shifted to strategic thinking. Strategic thinking is all about focusing on strategic issues, exploring multiple futures and dynamic, creative portfolio management. What companies need to do today is to manage themselves strategically. That is, they should develop widespread strategic thinking capability which will enable them to pick market signals more easily. They should also align visions across units and divisions in addition with integrating strategy and reward systems.

Organisations also need to take uncertainty as an opportunity and manage it in best manger possible. They need to monitor the business environment and develop flexible, innovative strategies to embrace change and make most of all the available opportunities. Most importantly, business leaders, executives and managers need to expand their armoury and include latest and potent weapons which will help them to analyse the market trends more effectively.

Finally, there is no denying of the fact that scenarios bound the future. Instead of focusing only on budgeting or forecasting, when you follow a certain trend or scenario and add your own variations, it opens the door to countless possible futures for an organisation. You might not be able to consider all of them, but if you can develop three to five stories or scenarios, you will not only be able to handle uncertainty but will also be able to manipulate the future in your favour.

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