Scenario Planning – The key to more accurate plans and forecasts. part 4/4
In this series of blogs we will be looking at how scenario planning can help organisations produce better and more agile plans and forecasts. In our last blog we covered what to look for in a scenario planning solution. In this blog – the last of this series – we will look at the benefits of scenario planning.
The benefits of Scenario Planning
Royal Dutch/Shell has used scenario planning since the early 1970s for evaluating various strategic options and cite this as the main reason why it has consistently produced better oil forecasts than other major oil companies. According to the publication ‘Planning Review’, the company claims that it also helped them to respond early to the overcapacity in the tanker business than its competitors.
The main benefits of Scenario planning include:
- Creating an agreed understanding of how the organisation operates today and how value is generated
- Imagining how the organisation could perform in the future and the operational changes that would be required
- Quantifying the impact of uncontrollable events so that suitable prevention measures can be considered and maybe put in place
- Assessing ‘best’ and ‘worst case’ scenarios so that forecasts can be evaluated and changes suggested to improve performance
- Evaluating the organisation’s current business model against those of a competitor to determine where additional value can be added
As mentioned in a previous blog, the business world is hard to predict. To cope, managers must constantly assess the future with a range of scenarios that reflect an ever-changing business environment. Without scenarios, the business is presented with a ‘Go’ or ‘No go’ choice, where managers either believe of disbelieve the plan presented to them. But when done correctly, scenarios presents an organisation with multiple choices based on a range of assumptions about the future, and where the impact of multiple changes to its business model can be explored.
Organisations should not measure the value of planning or forecasting on how accurate it predicts results. The value is in providing managers with a way to communicate what drives success; to evaluate the risks an organisation faces, and to guide the best way to allocate resources to achieve desired outcomes given an anticipated business environment and the limitations in which the organisation operates.
We hope you found this series of blogs useful. You can download the complete set as a White Paper by registering here.