Tips on Creating a Business Scenario
The business world is rife with uncertainties, consequently it can be difficult to make plans for the future. Scenario planning offers a solution to the uncertainty of the environment. Traditional planning involves creating a single plan based on future expectations. In scenario planning, multiple future possibilities are considered. In order to improve their scenario planning, managers should follow four key tips when creating scenarios.
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Define the Scope
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In order to create business scenarios, it is necessary to first define the scope of the scenarios. This means that managers need to decide which factors are most important when creating scenarios; there are too many factors to include them all, so a manager should choose the ones that will impact the firm the most. For example, a condominium developer might consider factors like the number of condominiums sold, the price of materials and real estate prices.
Construct a Database
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In order to properly understand all of the information, it should be placed in a database. This can be as simple as a spreadsheet document that allows a manager to sort all the data. Based on the scope that has been defined, a manager can enter data into the database. For example, if one of the factors being considered is the price of materials, then the manager should enter the expected range of material prices (for example, the highest, lowest and most likely prices).
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Narrate the Scenarios
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A database can provide a great deal of information, but information alone is insufficient to understand business scenarios. Managers should create scenarios by narrating the story told by the data. This narration should explain the relationship between various factors, for example the effect that a decrease in sales will have on the price of condominiums. Narrating the data makes it possible to create scenarios that are well thought out and make logical sense.
Scenarios
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A business scenario alone is not of any use. The use of scenarios is important in formulating a strategy to deal with these scenarios. For example, if your scenarios indicate that there are a wide range of possible outcomes in your industry, you will want to create a flexible strategy that allows to to adapt to this variety of possibilities. If your scenarios indicate that there are few differences to be expected, then it is possible to develop a more rigid strategy.
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