Scenario planning gives organisations both agility and speed

Increasing disruption in the business environment has created an urgent opportunity for financial planning to expand its role. In addition to dealing with business shocks, organisations have had to deal with a massive shift in consumer preferences over the past few years.

Uncertainty makes high-functioning agility and integrated business planning essential to success. By leveraging their insight, they can help the organisation navigate a crisis or take advantage of missed opportunities.

No matter how complex the future may seem, there’s never been a more important time to use scenario planning. Future-fit organisations survive disruption by actively responding to changes. “Threequarters of corporate strategy leaders say significant pivots to strategic plans now happen more frequently” says Marc Kelly, Vice President of Research at Gartner.

Anaplan has found that scenario planning helps organisations better understand the present, consider what might change in the future, and explore what those changes could mean for the business. It lets leaders imagine various plausible futures and explore ways to position the business accordingly.

The scenario planning process raises awareness of potential risks, but also helps the business spot opportunities. Based on different scenarios, business leaders can formulate more flexible strategies that ensure the organisation has the agility to compete in whichever future comes to pass.

It gives leaders an opportunity to test a strategic plan’s effectiveness, as well as provides an opportunity to create best and worst-case scenarios while planning for both outcomes.

“Functional leaders who understand how disruption affects enterprise strategic and operational decisions can make small but powerful changes to prepare their teams to act on the risk and opportunities that come from volatility.” Marc Kelly, Vice President of research at Gartner.

Using scenario planning to drive innovation or mitigate risks

Typically, higher performing organisations continuously innovate, introduce new products and position products or services in new ways. The ability to respond to market needs with new business models is key to enabling the organisation to gain a competitive edge and emerge as a market leader.

Scenario planning is very useful as a collaboration tool to support those innovation options. For instance, an organisation may be considering two alternatives such as geographical expansion versus a new target segment of customers within an existing geographical region. By using scenario planning, the leadership team, are able to assess the impact of the scenarios covering all potential outcomes and risks associated.

Similarly, scenario planning can be useful in developing contingency plans in the context of business disruptions. Recent events such as the pandemic, Brexit, global supply chain disruptions have meant the businesses have had to adjust to multiple business shocks in recent years.

During periods of business disruption, it is natural to focus on cost-cutting, however, by continuing to invest in initiatives that support long-term growth, CFOs can play in role in positioning their organisations for faster recovery.

In order for scenario planning to be useful, it needs to be as complete and detailed as possible, continuously updated with the latest data, and most importantly, refreshed throughout with the impact of the strategies being considered. That cannot happen on a spreadsheet.

If companies involve the right experts and enable people from all levels to contribute their views, scenario planning gives people the opportunity to question conventional wisdom and the assumptions that underpin current strategy. Picking the most likely from a range of plausible futures should result in a more considered strategy and more focused annual planning. With the ongoing business disruptions, watching and waiting isn’t an option.

According to Gartner, the time is now to build a digital roadmap on customer needs in 2 – 4 years’ time and leverage technology to meet known and projected customer needs. Additionally, prioritise digital bests by focusing on those with the largest impact on high-value business outcomes.

Scenario planning cannot be expected to provide all the answers, but it does help a company to ask better questions, prepare for the unexpected, and position themselves for growth.

For further information, including the differing transformation options, download our guide