Scenarios, not forecasts

The problem it solves

Most company plans are built on a single future: the one leadership considers most likely. Sales will grow roughly as they did last year, costs will rise a little, the main client will keep buying. Nobody writes it down like that, yet every decision takes it for granted.

When that future fails to arrive, the company reacts late and unprepared. The symptoms repeat themselves: a shift in the market that was visible from a distance and that nobody was watching, an investment that only made sense if everything went to plan, emergency meetings where questions that could have been settled calmly months earlier get discussed for the first time. After each surprise people talk about bad luck, and the next plan is built on a single future all over again.

The problem is not a shortage of forecasts. It is treating a forecast as a certainty and committing money, people and time to it that cannot be recovered later. A leadership team that prepared for one scenario has to improvise in all the others, and it does so at the worst possible moment: once the room to decide has already been used up.

What it covers

An executive talk on a way of planning that does not depend on guessing the future. A forecast picks the most likely outcome and bets on it; a scenario describes several possible futures and prepares what the company would do in each. The talk works through that difference with the leadership team and leaves behind a method that can be applied to the next planning cycle. It involves no figures and no financial projections: the scenarios here are descriptions of futures and of decisions.

It starts with the uncertainties that matter. Of everything that could change outside the company — client demand, the cost of inputs, access to skilled people, the rules of the sector, technology, a competitor's behaviour — only a few things would really alter its decisions. Attendees pick out the two with the greatest consequence and the least certainty, cross them, and describe three or four futures that are plausible and clearly different from one another, each in a paragraph any member of the team could explain.

With the futures on the table, the talk turns to the decisions the company has already taken or is about to take. Some make sense in every scenario and can go ahead without further debate. Others only pay off in one, and the question becomes how much of the company is riding on them. The talk closes on early signals: what would show, months ahead, that one of the futures is starting to take shape, who needs to watch for it, and which decision would follow if it appears. That preparation turns a surprise into a decision that had already been thought through.

Ninety minutes is enough to install the method and leave the skeleton of the scenarios; building them fully with the leadership team takes the workshop format, available as an alternative. At ALUD this work sits within the Strategy engine and feeds the review of priorities the organisation carries out in every planning cycle.

What participants learn

• Distinguish a forecast, which bets on one future, from a scenario, which prepares decisions for several.
• Identify the external uncertainties that would change the company's decisions depending on how they resolve.
• Build the skeleton of three or four plausible futures from the two uncertainties with the greatest consequence.
• Classify current decisions into those that hold in any scenario and those that depend on a single one.
• Define the early signals that would show which future is forming and who should watch for them.

Agenda

1. 01Forecast and scenario: two different questions
2. 02Uncertainties that change decisions and noise that changes none
3. 03The two forces with the greatest consequence and how they cross
4. 04Plausible futures that are clearly distinct
5. 05Decisions that make sense in any scenario
6. 06Bets that pay off in only one, and how much of the company rides on them
7. 07Early signals and who has to watch them
8. 08If this happens, we do that: decisions prepared in advance

What the organisation leaves with

• A list of the external uncertainties that would change the company's decisions, ranked by consequence.
• The skeleton of three or four scenarios, each described in a single paragraph.
• A classification of current decisions into those that hold in any scenario and those that depend on one.
• A list of early signals, each with the person responsible for watching it.