Scenario planning is the new black

In an uncertain world, plans with a single focus are no longer sufficient. Business leaders need to constantly scan the business environment, assess what lies beyond the ‘span of predictability’, and be prepared for a multitude of options. Scenario planning makes all of this possible.

As an important part of any business, scenario planning shouldn’t just be done at the start of the year, but instead considered throughout. Being able to crunch large volumes of external and internal data in a modelling environment, eliminates manual spreadsheet links and errors, resulting in improved accuracy. Being able to do it fast, with all planners participating at the appropriate time, gives organisations the agility they seek.

To be most effective, it should be performed in real-time, collaboratively, and in an integrated manner across different levels of the organisation. Additionally, data analytics such as predictive modelling allows organisations to understand the root causes behind problems and predict future outcomes.

There’s never been a more important time to consider strategic planning as part of transformation

Organisations exist in a world that is becoming more complex, interconnected and changing at an ever-increasing rate.

Businesses need to be continuously planning and budgeting. Proactively responding to market conditions such as consumer behaviour, hyperinflation, and supply disruptions could result in competitive advantage. The finance team is in a unique position to pull the company together and drive collaboration across business units. Every action in the company is reflected in the data, which is typically held by finance. But it’s not enough to just report on the numbers, there are tangible benefits for the business by empowering data-driven decision-making.

FP&A has the tools to define the outcome of a strategy and provide clear direction based on reliable data from all around the company and in the market in which it operates. With so much data available, securely collecting and sharing the data between teams is essential. Organisations should fully embrace analytics and machine learning to detect both abnormalities and opportunities.

Digital transformations, unlike other transformations that are culture driven, such as mergers or performance turnarounds, enable smart entrepreneurship and allows agile decisions to be made by digitisation.

There are many ways of driving transformation programmes:

Transitional

• Existing way of operating replaced by known but different way
• Will occur in a realistic timeframe
• Impacts specific organisation domains/sub systems

Incremental

• Participative evolution
• Mainly used when minor adjustments are needed
• Focus is mainly improving something existing
• Current culture and practice will produce change
• Acquiring capabilities to achieve is practical

Transformational

• Triggered by environmental or internal disruptions, or product lifecycle shifts
• Change is aimed at competitive advantage
• Process starts before destination is fully defined
• Scope is significant with fundamental change
• Involves significant learning and change programme
• Radical change to product/process, operations, technology to meet customer needs

As part of any transformation, the project team need to consider key elements such as the culture of the organisation, the people, key processes, existing analytics as well as technology already in place. Whichever route the organisation chooses, data and strategic planning should be at the heart of the digital transformation programme.

For further information, including the differing transformation options, download our scenario planning best practice guide.