“The future ain’t what it used to be.” —Yogi Berra
“Change is the law of life. And those who look only to the past or present are certain to miss the future.” —John F. Kennedy
Two items for the record:
- This article has nothing specifically to do with personal financial planning.
- If you are beginning to read this article, I expect that you are already somewhat ahead of your peers.
You see, the majority of people I meet are so wrapped up in their day-to-day concerns about the goings on in their personal and professional lives that thinking about the long term has almost become extinct. Today, long-term planning seems to be considering what you’re going to do after lunch.
It’s easy for some to say: “What’s the usefulness of planning? Whatever will happen will happen.” I ask you to resist that fatalistic temptation for a moment.
If we aren’t willing to exert influence over our future actions, in essence, we are relegating ourselves to acting like puppets, hoping that someone will pull our strings in ways we like. I have a hard time accepting that proactive executives would ever want to operate that way.
Scenario planning or scenario analysis is an adaptation of the strategic planning method used by the US military intelligence to make flexible, long-term plans. At its core, it combines known facts (relative to your marketplace) like demographics, unemployment rates, interest rates, zoning regulations, commercial real estate occupancy rates, and industrial capacity information with some assumptions about the future. It is designed to identify some key drivers that could have a significant impact on your business or life and therefore would require a quick change of objectives and tactics. In other words, scenario planning is not just random dreaming.
Think “what if…”
Start by visualizing what future conditions or situations are probable and think through potential personal, professional, and organizational impacts.
The most common trends to think through usually fall into the buckets of social, technical, economic, environmental, and political changes (STEEP), as well as regulatory/legal changes, demographic shifts, and marketplace fluctiations.
Today, sophisticated organizations have already begun thinking through the potential impacts of the following areas. These are just some of the 22 trends that are affecting to all of us today—whether we are conscious of them or not. These shifts impact firms serving both business-to-business and business-to-consumer markets in the Meadowlands Region.
- Generational shifts
- Internet of Things (IoT)
- Modern family and multigenerational living
- Cyber consciousness
- Future of food
- Social activists
- Consumerization of health and wellness
- Dynamic retail
- Sensorial branding
- Digital blur
- Smart surroundings
- Inside-out health
- Curated lifestyle
- Future of travel
In case you’re wondering about my intent, I’m not asking you to predict and control “the” future. That has proven time and again to be a daunting task with more downside than upside for the effort expended. I am asking you to think through multiple possible futures so you can anticipate change, quickly capitalize on the opportunities that surface, and mitigate risks soon after you identify them.
This type of planning gives you a chance to rehearse the future. It also gives a more than adequate supply of Plan Bs to consider when something suddenly appears in your field of vision. You won’t lose time to your competitors while you and your team sit around a table scrambling to put together a flawless plan and hoping you’re guessing correctly.
Your brain is your best friend or worst enemy
Our brains automatically revert to a reptilian response when under stress (think fight or flight), cutting off access to higher level thinking within the amygdala or neocortex. So, you are literally be setting yourself up to lose by creating undue levels of stress caused by a lack of advanced planning. At the time it’s most urgent for you to think clearly, it is least likely to happen. This is exactly why military and airline pilots spend so much time in simulators. They train their brain to automatically respond to achieve the desired outcome.
When is this approach most helpful?
A scenario-based approach to management decision-making is particularly useful when:
- Decisions or issues at hand are highly uncertain and involve a range of complex factors that the company cannot control and that will play out over time.
- There is a clear question about the future, but expert opinions vary and research is not yet definitive due to the evolving and complex nature of the underlying issues.
- Management decisions need to be made sooner vs. later, but clarity surrounding the issue is evolving over time, and a robust yet flexible fact-gathering process may help minimize risk.
What’s the process?
- Decide on the key question or questions to be answered initially.
- Decide on the timeframe and scope on the table for discussion.
- Identify the major stakeholders involved or impacted.
- Reach agreement on which basic trends and driving forces can impact the key question.
- Where possible, clump together the trends or driving forces to reduce the number of items that must be solved for simultaneously.
- Uncover the key uncertainties that are truly important to be discussed.
- Identify the extremes of the outcomes to be considered while taking into account plausibility and the time frame being considered.
- Define two to four scenarios. Avoid the tendency to only create best- and worst-case scenarios.
- Write out the scenarios, giving each a catchy name. Describe the circumstances that created them. Include the rationale to make it easy to revisit these in the future.
- Objectively assess the scenarios: are they relevant?
- Identify what needs to be researched further.
- Develop methods to capture the research needed and create models that will clearly show those results.
- Build consensus on what fundamental issues and areas need to be planned out and executed well going forward.
- Assign a champion that will make sure this stays on everyone’s radar until the plans are completed in sufficient detail to be able to take action.
What’s the endgame?
Done well, scenario planning helps leaders better understand areas of vulnerability and minimize their risk while opening up avenues of opportunities to explore and capitalize on.
Speaking personally, I wouldn’t want to be on a plane or spaceship where the captain said to me: “Don’t worry about a thing, I’ll just figure it out as we go.” Would you?
Doug Brown is CEO and chairman of Paradigm Associates, LLC, based in Cranford and is a consultant to the Meadowlands Chamber Board of Advisors. Paradigm Associates provides tailored consulting, assessment, and coaching solutions that improve business results and create a sustainable competitive advantage. Paradigm helps firms: think and plan strategically; assess and coach their executives and key people; develop leaders and managers more effectively; increase revenues via sales training and development; keep loyal customers; develop a culture of employee engagement; and increase operational effectiveness by improving processes. Visit www.ParadigmAssociates.US or call (908) 276-4547 for more information.