Leverage Scenario Planning to Drive Better Business Outcomes

Rising inflation, continued supply chain issues, labor constraints and volatility in world markets continue to weigh on the outlook for the engineering and construction (E&C) industry. While prospects look positive for growth given demand, backlogs and new investment, there is still much uncertainty around where the economy – and the industry – are heading.

Given that, it might seem that long-term planning is a waste right now. While no one can predict the future, planning for different eventualities can help business leaders prepare no matter what happens.

Scenario planning makes assumptions about the future for various outcomes such as continued growth, a significant slowdown, a recession or other economic conditions.

Keeping an eye on movements and events—both within the industry and beyond its bounds—can lessen the surprise factor. Put simply, leaders need to be a few steps ahead of the game. By looking at a range of possible outcomes and scenarios, and by developing a strategic response for each, companies can reduce the shock of industry shifts and minimize crisis-mode decision making.

Here are eight ways that you can start using strategic scenario planning right now:

1. Contrast more than one uncertainty. To get a richer sense of future possibilities, look at two or more key business drivers. By looking at the ways these variables might interact in the future, you can narrow down the scope of plausibility, and learn more about the way they drive your business.
    
2. Illustrate the scenarios. Once you have a sense of possible outcomes, sketch out everything you know about that future and how it looks. Give it a catchy name so that the scenario planning team can understand the tenets of that scenario by shorthand when working to create adaptation strategies in response to it.
    
3. Don’t discount outliers. While one or two of your scenarios will seem more likely, and one or two will seem wholly unlikely, it is important that you address the less-likely contingencies. Looking at how your firm would perform in a drastically different environment can reveal important insights into the strengths and weaknesses of your firm.
    
4. Maintain a clear vision. Scenario planning isn’t about reinventing your firm at every spin of the wheel; it’s about fashioning a more robust and adaptable firm that can survive any number of twists and turns in the coming years. Subsequent strategic planning should return to the idealized vision of where the firm would like to be in 10 years and work through the contingencies to uncover ways to position the organization for such an outcome.
    
5. Track progress against the scenarios. Once you work through your scenario planning session, you will have action plans in place that chart the firm’s response to different outcomes. Although some strategies will obviously set the company in good stead for all eventualities, you will want to track the indicators that show which direction the future is moving in. If one scenario appears to be coming true, the plan might be adjusted to better respond to that contingency.
    
6. Update the scenarios. As part of a long-term effort, scenarios can be updated to reflect broad changes in the industry. As uncertainties are reduced, you may see that one scenario is now more or less impossible and wish to create an alternate scenario that better reflects the drivers of your business moving forward.
    
7. Build an inquisitive culture. Training your staff to stay abreast of subtle events and indices is an important part of building a firm that’s able to adapt to the routine changes in the economy and industry. Familiarizing yourself with relevant indicators, involving yourself in industry dialogues and investing in market studies are all key elements of visionary leadership. Over time, you will learn to recognize change and adapt more efficiently.
    
8. Engage with business drivers. The success of scenario and strategic planning depends on the conversation with the firm’s customers and other influential stakeholders (agency and government officials, vendors, community leaders, media, etc.). Although an awareness of these factions is necessary, participation in those realms will mean the difference between merely watching changes and influencing them.

First popularized by Shell Oil in the 1970s, scenario planning is experiencing a revival, driven by risk-averse, action-driven CEOs. Today, there is a method to creating plausible future scenarios, drawing on the key drivers that impact businesses.

By changing the frame of focus from a single outlook on the future to an array of contrasting possible futures, business leaders may notice things that were previously invisible, pick up on previously unseen issues and tap new opportunities.