Scenario planning

The worst financial and economic crisis in the post-war era has taught us a valuable lesson: We can no longer trust forecasts. These days managers have to be prepared for rapid trend shifts and sudden, volatile developments. They can no longer draw up and reliably quantify detailed multi-year plans for strategic projects. It follows that company leaders must rediscover the courage to trust to their own entrepreneurial intuition.

Having said that, strategic planning also cries out for new strategic tools that can genuinely help chief executives deal better with uncertainty and complexity. After all, managers, employees and investors alike still need some form of guidance and orientation – all the more so when faced with a future of such utter uncertainty.

Planning for alternative scenarios is one way of responding to this challenge. Though by no means new, this approach has in the past been regarded as complicated, expensive and unreliable. And rightly so. Which is precisely why we teamed up with scientific experts to make scenario planning faster, more effective and more reliable.

We have developed our own more modern approach to scenario planning and put it through its paces it in a series of successful projects for major companies. The model is tailored to the needs of top management. It delivers outcomes that are rooted in solid business sense (and data) and takes account of the individual perspective and experience of each company. It also permits unambiguous statements to be made about which scenarios are probable and whether a particular trend is changing direction.

The Roland Berger approach to scenario planning differs in six main areas from traditional standard practice:

1. Scenario network
   
   We draw on a rich network that includes universities and think tanks around the world, all of which themselves work with scenarios. It also embraces an extensive range of specially selected experts who together provide methodological and thematic knowledge covering a broad array of areas: specific technologies, special macroeconomic fields, environmental considerations and so on. Acting in concert with our in-house industry and country experts, this network is the ideal sounding board to test hypotheses.
2. Three-level approach
   
   To be useful, pictures of what the future holds must cover three levels. Global scenarios (the macro-level) show decision-makers the big picture. Industry-specific and regional scenarios (the meso-level) reveal potential developments within a company's immediate sphere of activity. Finally, scenarios focused on individual organizations (the micro-level) identify specific impacts and possible courses of action.
3. 360° stakeholder feedback
   
   The 360° stakeholder feedback tool gives us fast, comprehensive access to all the knowledge that the client company and its stakeholders have available. In this context, we talk to all the relevant employees in a company and to important contacts in the company's environment. This knowledge can then be channeled into scenario preparation on all three levels, from assessments of long-term megatrends to short-term expectations in key business areas.
4. Milestones
   
   Think in terms of future scenarios and you need milestones – clear indicators of whether a scenario is still valid, and of when early warning signs begin to point in the direction of an alternative scenario. These indicators are tracked by a dedicated monitoring tool – the scenario cockpit – and regularly discussed with management.
5. Process organization
   
   Our scenario planning strategy combines a structured approach that guarantees efficiency, sufficient freedom in defining the problems at hand, the necessary flexibility, and rapid access to data alongside the involvement of internal industry expertise. The process is interactive. Future scenarios emerge in close cooperation with the client – this guarantees that internal and external knowledge is translated into scenarios that are deeply rooted in real business practice.
6. Scenario library
   
   The scenario library – compiled together with the scenario specialists at the Leipzig Graduate School of Management (HHL) – is a unique collection of future visions that we see as important. These scenarios are complemented by our industry and company databases, which comprise the most important data sources and models about technologies and megatrends, industries and companies that are available today.

The benefits of our new approach to scenario planning can be summed up very succinctly. The approach is effective because we have the right access to relevant input. It is efficient because we deploy modern tools and are able to manage the process strictly. It is creative because we paint coherent pictures of the future. And it lays the basis for well-founded decisions because it draws on the client company's full wealth of industry and functional knowledge.