Opinion

Scenario planning is the way to manage business uncertainties

This column could seriously damage your consultants' wealth

Scenario planning seems suddenly to have become fashionable in IT circles. Trouble is, it's one of those terms, like knowledge management, that can mean many different things.

But if it becomes as popular as knowledge management has been, you can expect sales staff to start selling glorified spreadsheets as 'new' scenario planning tools and to find your existing tools sprouting spreadsheet excrescences. And, in the same irrelevant way, you'll find consultants queuing up to record your planning ideas - and sell them back to you under the same scenario planning guise.

You may already have been engaged in a form of scenario planning recently as part of your business continuity measures for Y2K. That doesn't account for the new fashion, though. What has created the interest is the sudden rise to pre-eminence of e-business. This time round, the fuss is about planning for business discontinuities.

Most IT planning to date has been a form of trending: extrapolating past trends into the future. It's a bit like driving along a motorway at 70mph and looking out the back window to check where you are heading. But the future rarely works that way, as oil companies discovered when the Arab-Israeli conflicts erupted in the 60s and 70s.

Scenario planning in this sense broadly entails trying to draw a picture of your industry five years ahead and thinking what events might upset the smooth running of your applecarts along the way. These deliberations result in the creation of various scenarios five years ahead with managers steering their company plans towards the most probable ones.

The crucial point is not to assume that your business will run and develop in the same way it has before. One problem with wars, as with such natural disasters as volcanic eruptions and tidal waves, is you can't predict them five years ahead. Fortunately, most business discontinuities aren't nearly as unpredictable.

The received wisdom is that markets change radically, rapidly and unpredictably, but this is simply untrue - if only because the human beings who ultimately constitute those markets are unable to change in that way. It is nearer the truth to see organisations in general as being slow to pick up on gradual and insidious changes, which become apparent only when (predictable) thresholds are breached.

Discontinuities in business occur because discrete trends and events suddenly coalesce to multiply and intensify their individual effects. It's what is sometimes called a 'positive feedback loop', the kind of simultaneous juxtaposition of conditions that triggers a chain reaction in physics or chemistry, only this time applied to business.

In the case of e-business, the Internet has been around since its origins as Arpanet in the late 1960s. PCs, Internet access and cheaper telecoms through deregulation have been around for quite a while too. But add the sudden surge in PC penetration of the home market, the creation of the World Wide Web and a few pioneering business ideas, and the separate trends suddenly come together as a major discontinuity.

And the story doesn't end there. Introduction of the euro is an obvious discontinuity in itself and EMU more generally is constantly changing the game in the background. Deregulation around Europe and more to come in the UK will have its effect too, with WAP devices in there as a wild card. All these developments must be taken into account, but together rather than separately.

So when the consultants come calling, don't give them your ideas to do the planning with. Demand to see their information on all relevant trends that might coalesce and when. Then at least they'll have to earn their fees by providing knowledge you may not have.

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This was first published in May 2000

 

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