Planning with Scenario
In times of high uncertainty, the work of those who perform both strategic planning and budgeting becomes more difficult. Last year, many companies preferred to work with quarterly budgets instead of annual budgets. Many companies, on the other hand, are content to identify the effects of uncertainties with sensitivity analysis. Sensitivity analyzes can be used to determine how small changes in the market will affect the income statement and balance sheet. However, in environments where uncertainties are high, not only marginal changes, but also changes in steps to be taken in the face of different realizations should be evaluated. For example, although the results of minor errors in exchange rate forecasts can be detected by sensitivity analysis, scenario studies would be more accurate since the measures to be taken in the face of a 50% devaluation would have to be very different.
Uncertainties in the behavior of both the future and current and potential competitors make strategic planning difficult. In this respect, many institutions carry out strategic thinking in the form of "scenario analyzes" instead of an immutable strategic plan. First time II. It is known that after the World War II, "scenario analysis" started to be used in the future planning of the think tank RAND Corp.
Through scenarios, strategic planning encourages creativity. Teams that perform strategic planning in organizations often have a similar mental model of work. Often important enough to participate in the strategy generation process! To come to a position, it is expected to have worked in the institution for a long time. However, the fact that those who have been in the same environment for a long time have similar experience also reduces the intellectual differences between them. For this reason, some organizations include people with different experiences who are outside and/or new to the organization in the strategy development process. Scenario analysis encourages creativity as it allows for modeling of personal differences of opinion and uncertainties about the future.
Scenario analysis also allows the flexibility and resilience of adopted strategies to be tested in the face of different future scenarios. Thus, it becomes easier to determine and follow the indicators related to the breaking points of the strategies. It also allows for resource planning to reduce the risks associated with the identified strategies.
Scenario analysis helps to prepare alternative plans close to the main plan. In this way, the adaptation speed of the institution to the changing conditions increases. Determining the steps to be taken in the face of changing conditions in preparation for the uncertainty of the future increases the richness of strategic thinking.
Scenario analysis also accelerates the organizational learning process. Determining the strengths and weaknesses of the institution and the opportunities and threats that the institution will face in different future scenarios helps to gain some experiences without incurring the cost of learning by living.
Scenarios developed and analyzed in the scenario planning process reveal different alternatives, unlike classical forecasting and market research, which carries the current situation forward with mathematical models. Thus, by recognizing the warning signals and revealing the facts underlying the scenarios; surprises can be avoided, changes and shocks can be adapted more easily and treated more effectively. The expected result from scenario planning is to enable employees to constantly think and exchange views about the future.
Today, companies, large or small, want to involve their employees more in the creation of their strategies and futures, and scenarios are becoming important tools for these efforts. However, pre-testing the decisions that can be made according to different possibilities will provide companies with significant competitive advantages.
For these reasons, the use of scenarios in strategic planning is becoming more common day by day. Because those who have strategic intellectual preparation gain the opportunity to direct the events instead of following and reacting to them. The way to be successful in the future is to prepare the future.
