Scenario planning for the next new normal: 7 key questions
Scenario planning is a highly effective approach to objectively preparing for the next and ever-evolving normal. Here's how to get started.
By Martha Rounds and Serge Findling
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Technology is on the front lines in today’s COVID-19 crisis, and CIOs have a unique opportunity to matter in the face of the biggest challenge they or their companies have ever experienced. Business agility isn’t enough: things are moving so fast that CIOs and other business leaders have to be prepared — before the next crisis or emergency happens. Delays — or worse yet, a “wait and see” attitude — are likely to have costly outcomes, driving some organizations into bankruptcy or hostile acquisitions.
In previous crises, like hurricanes or floods, corporate leadership had a sense of the possible future and could simulate the impacts of that future, noted Paul Krueger, CIO of Poindexter, Inc., at the recent HMG Live! CIO Virtual Summit in Houston. But it’s impossible to predict the uncertainties of the COVID-19 crisis. In response, he says, Poindexter’s analysts are applying what-if analyses and creating a variety of scenarios. “We are prioritizing automation projects, RPA, ecommerce, and capabilities to scale,” he notes. “We are looking at opportunities to get ahead of the competition.”
To adapt, business and IT executives must recognize their own “mental models” and how they see the world — with an awareness of their lack of understanding and limited intuition about the tipping point at which we find ourselves. In our complex world where everything is connected and chain reactions happen routinely, corporate solutions must be holistic and flexible. To lead successfully, executives must account for the whole enterprise and its ecosystems.
Getting started with scenario planning
Scenario planning is a highly effective approach to objectively preparing for the next and ever-evolving normal. This process can be an eye-opener, but it helps executives to make premeditated, strategic choices at every fork in the road. To begin scenario planning, CIO and IT leaders must address the following key questions:
What is the worst-case scenario?
What is the best-case scenario?
What is the most probable scenario?
How might each situation evolve over time?
What will signal which scenario is playing out?
How do we predict our trajectory — how to survive today and how to survive tomorrow?
What are the game plans most adapted to each case, and how do we continuously adapt?
Leveraging scenario planning
Scenario planning builds a set of internally consistent possible futures in which decisions about the future can be played out, with the purpose of rethinking assumptions, improving decision making, and developing human and organizational learning. In some ways, this approach is like an organization’s flight simulator. A scenario doesn’t predict the future; it explores possible circumstances and how to best prepare for those.
Scenario planning involves four basic steps:
Assessment and preparation. Assess the current situation: Get facts and data; identify problems, stakeholders, and their needs; articulate expected outcomes. Also, identify relevant teams, leadership, scope, goals, and timeframes.
Scenario exploration. Look at external forces and drivers: Identify those that will most impact the enterprise and the IT organization.
Scenario development. Create scenarios by developing the best case, worst case, and one that falls somewhere in between.
Scenario implementation. Consider specific issues, challenges, opportunities, and actions related to each scenario.
Currently, the severity of COVID-19 and the degree of global economic resilience are the two forces causing the highest degree of uncertainty. Those critical variables allow the development of five predictable scenarios (see figure below).
Having developed the scenarios, the organization must then consider the specific issues, challenges, opportunities and actions for each. This work can happen in different ways depending on company culture, but diverse, cross-organizational teams do better at understanding the big picture and multiple ramifications.
The ultimate goal of the scenario implementation phase is to build business resilience. It is essential to continuously monitor what’s going on to understand which scenarios are playing out and the organization’s resilience and efficacy. Early indicators and signals must be identified for this purpose. In the case of COViD-19, it is important to look globally, for example, where the virus has already taken hold.
When building your company’s scenario plan for the next six months, use this time to:
Respond to the virus, stabilize critical infrastructure, and create new digital capabilities.
Enable product flexibility and expand self-service.
Adapt products for the current need and demand, and continuously improve as turbulent new markets unfold.
Review staffing plans, understanding that people are your first priority, with cash an important second priority.
Longer term, identify what’s needed for medium- and long-term survival, including crisis communication, real-time visibility, cash-generating processes, technology for stalled parts of the business, and backup plans. Focus on your customers and their new needs — many are asking for delayed, not canceled, orders — and adapt systems to new requirements. And be ready for M&A and divestiture activity, which has already begun to accelerate.
Seize opportunities to innovate, improve, and lead wherever possible. And, of utmost importance, become one of the CIOs who rises to the challenge: be humble, and admit your personal limitations. Be open, visible, and communicative. Finally, commit yourself to your team’s success, and do all you can to ensure the best outcomes possible.
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