Recent events have shown us how fast and dramatically businesses can be derailed by unexpected events. It may feel to many that there is nothing that could have been done to mitigate against recent events but Jim Berry, Director of the UCL MBA, says otherwise and would encourage every business to adopt regular scenario planning as part of their business strategy. He spoke to Business Leader about the importance of ‘scenario planning’.
During the past year, I’ve noticed a liberal use of the words ‘unprecedented’ and ‘unexpected’ in newspaper editorials and company statements in relation to the life-changing events we’re living through. While ‘unprecedented’ and ‘unexpected’ are not unfair descriptions for how people may feel about the effects of the global pandemic, we should acknowledge that businesses do have the capacity to prepare for disasters of all kinds.
As recently as 2019, a group of business and governmental leaders participated in a table top scenario (Event 201) looking at the effects a global pandemic could have on work and society. While the pandemic has had many unprecedented effects on global society and the world of business, to say it that it was impossible to plan for, is inaccurate.
While COVID-19, and to a lesser extend Brexit, have disrupted linear projections of the future, their effects on business can be planned for. In the management world, these events are called discontinuities – they radically change the trajectory of markets, industries, or society. Regular planning cannot account for these breaks from ‘ business as usual’ and a different kind is necessary to prepare for them.
Planning for the future is both a focus of my research and my MBA teaching and the past year has illustrated the importance of scenario planning. The aim of scenario planning is to avoid imagining the future as a continuity of present conditions and instead, focus on what might change and how you can successfully navigate that disruption. The potential for change is almost unlimited, but exploring potential futures, even unlikely ones, can pay dividends by creating a more resilient and proactive organisation when disruption inevitably arrives.
So how can you incorporate this type of planning into your organisation? Scenario planning will be unique for every business, but there are introductory principles that can help to kick-start the process.
- Identify your key dependencies
Every company has dependencies it must manage. It’s important to establish the resources that a sudden and dramatic lack of could cripple your business – these could be particular people, skill sets, parts or the products from other companies. Once these have been identified, consider a scenario where one disappears. How could the business deal with that scenario and how might negative effects be mitigated proactively? Solutions might entail cross training staff or diversifying your supplier list. These are the most urgent and easiest scenarios to start with and offer the most direct and immediate value.
- Don’t limit your options
Then, it’s time to broaden out the scope of potential scenarios. Think of some of the fast changing events that have happened around the world (e.g. natural disasters or dramatic political change) and consider if they happened again. Additionally, the nature of the type of disruption you are planning for could mean that multiple resource streams are affected at the same time, so you will need multiple solutions to effectively plan for mitigation. By developing multiple plans to survive under adverse conditions, you help your organisation build resilience.
- Make sure you are fully using the intelligence within your organisation to plan effectively
If you only talk to a limited number of people in one area of your organisation, it is likely that the solutions to disaster scenarios will be equally limited. Examine the different parts of your organisation and consult with each of them in order to understand the different dependencies across the business. Including people from multiple levels, functional and geographic areas will not only ensure a diverse body of knowledge is represented but also that learnings from these exercises are dispersed around the organisation so when disruption arrives, teams can quickly take action.
- Plan for the positive as well as the negative:
After our collective experience of 2020, we’d be forgiven for inclining towards negative predictions. But not all scenarios result in bad outcomes. Scenario planning should include deciding the action to be taken if changes in the markets mean that they have an abundance of a key resource you are dependent on – these could include a skillset that is usually in short supply or a change in trade policies in the business’s favour. Having these plans in place mean that leaders are in a position to help their team to spot the signs and implement a plan quickly, hopefully ahead of the rest of the market.
The likelihood that we are going to have another ‘once-in-a-century’ pandemic may be small, but the exact scenarios you plan for do not have to occur for the process and learnings to have value. A company I worked with in London ran a scenario planning exercise in 2018 focused on transportation disruption. What if, they asked, mass transit in London was shut down for a month? How could they continue to work. The company developed a mitigation plan for how they might enable their workforce to operate from home. They built a plan.
Alongside many other frailties in the global supply chain, the COVID-19 pandemic has exposed the weaknesses that arise when our ways of working themselves are upended. As more businesses find their feet again, the most important lesson to be learned is to avoid being caught off-guard twice. The scenario planning framework can help to protect a business’s operations, its employees, and ultimately, its end-customers. The future is coming and fast; are you prepared for when it arrives?