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Scenario planning is, by definition, a business model used to learn about the future. In this model, you develop a strategy by examining several possible situations that may impact issues relevant to the future of your business. An exercise that sounds a bit daunting, for sure. Nevertheless, by taking a critical and intentional look at a wide range of potential events and their consequences, as well as the known and unknown fundamental driving forces that affect your business environment, you will be thinking way ahead of the curve.
It’s those unforeseen eventualities like a government shutdown, a dramatic weather event, an economic downturn, a data security breach, or any other significant interruption of routine business activities that can, with little or no warning, strike a substantial financial blow to small businesses of all kinds. It is unexpected circumstances like these that may affect your ability to serve customers, make payroll, access finance – and in extreme situations – remain in business.
Case in point, the three government shutdowns of 2018, the last of which extended for 35 days into 2019, affected far more than federal agencies and employees. The Wall Street Journal reported more than $2 billion in small business loans were delayed, causing entrepreneurs to halt plans, change course, and in extreme cases, abandon dreams. Months following the end of the 2019 shutdown, BizBuySell, which tracks sales and purchases of small businesses, found that 40% of companies negatively impacted were still struggling. A CNBC |Survey Monkey Small Business Survey found that 35% of small business owners across the country experienced sales slowdowns and 13% reported direct loss of revenue from a government contract.
Although we cannot predict the future, we can prepare for it. Focused future thinking will help you create actionable contingency plans for multiple case scenarios and dramatically improve your ability to respond favorably to an ever-changing, unpredictable business climate. Far too many companies concentrate their annual planning efforts on the product they produce rather than the needs of the people they serve. By identifying and analyzing a variety of uncertainties, and considering what could happen, or may happen, you will be better able to cope with threatening implications and well-prepared to mitigate negative consequences.
Contemplating potential events from every possible perspective significantly reduces the risks of potential dangers, enables better strategic development, sharpens your ability to maximize value and profit, and provides a context for making better-informed decisions when faced with uncertainty. In a fast-moving economic landscape, few decision-making techniques are as powerful, or as useful, as scenario planning.
Scenario thinking is a mindset that does not require a sizable monetary investment, only an organizational commitment to creating an environment where managers are encouraged to step away from routine activities and take time to reflect, learn, and think forward.
The only thing we can be sure of is a future with more uncertainty. When you clearly identify your organization’s strengths, acknowledge its’ vulnerabilities, and plan accordingly, you can prepare strategically for more positive outcomes – whatever the future may hold.
A sports reference may do well here. In Redemption Song, an ESPN documentary about the 1971 and 1974 Howard University Soccer Teams, two-time NCAA Coach of the Year, Lincoln Phillips, imparted ageless wisdom to his championship teams. In summary, he said that in life, there are two things: controllables and non-controllables. Non-controllables, give it to a higher power; controllables, you handle it. These eight action steps are within your control to forestall disastrous business outcomes.
Take a look at what is working, what is not, and what needs improving. It is just as important to think about what to do, as it is to think about what not to do and what to do better. Are you prepared to accept that something you are doing is failing?
Take note of what new opportunities and market trends are on the horizon. What impact do they have on your business? Are you poised for a competitive advantage? Are you in touch with the present and future needs of your customers?
Focus on developing sustainable, long-term market share by being current and relevant. Creating a nimble environment that is positioned to adjust to the current market crisis or opportunities strengthens strategy vision and enhances capabilities for future growth.
Stay informed and up-to-date on information that affects your business and your industry. Read trade journals and business publications. Identify research needs. Update existing plans as needed. Maintain a file of future considerations.
Considering the future enables those involved to learn new ways of looking at things. Follow or become a social media expert and pioneer in your industry.
Discussing a shared vision of how to respond to the “what ifs” provides a clear view of how different factors affect business outcomes. Make sure that members of your team know what they are expected to do and when they are expected to do it.
Using all available data and information when formulating contingency plans ensures that your strategy is rooted in a sound foundation.
Involve team members from all areas of your company and make sure they are up to date and informed on any pertinent changes that occur. Solicit their feedback. How often do you hear: “No one told me!” Engaging in open dialogue may reveal information that is important and insightful yet previously unknown.
With these 8 action steps, you’ll be able to forestall any potential disasters that could spring up!