Futures Thinking and Scenario Planning
Nobody has a crystal ball. So, how do you plan for an uncertain future?
The answer is through futures thinking and scenario planning. When used correctly together, these two tools can help prepare you for the unexpected and put you in a position to achieve the best potential outcomes.
This is possible because of how futures thinking and scenario planning work together.
Futures thinking activates the imagination at individual and organizational levels, encouraging leaders and stakeholders to anticipate industry changes, uncover hidden assumptions, and identify inflexibilities and weaknesses in their operation.
Scenario planning, on the other hand, is a tool that makes futures thinking more practical, helping organizations prepare for all possible futures in order to stay more agile and resilient.
Let’s go over futures thinking and scenario planning, as well as how you can use the two to improve business decision-making and get on a more sustainable path.
What is Futures Thinking?
Futures thinking doesn’t involve looking into a crystal ball. It’s not a free-form exercise where you ask, “What will the future be like?” There’s more to it and there’s a specific process to follow.
Futures thinking is a structured way of anticipating and even shaping the future. It helps your organization answer questions like:
- What will occur in the next 5, 10, or 20 years in our industry?
- What are the most important emerging trends and issues in our marketplace?
- What actions, strategies, and policies can help create desirable outcomes and prevent undesirable ones?
At a glance, contemplating and preparing for the future may seem like a monumental task, especially when you have present issues to consider.
However, if you don’t start preparing today, you won’t be ready when tomorrow arrives.
The Futures Thinking Process
Jamais Cascio, a well-known futurist, has a clear strategy for performing futures thinking. Here are the steps he advises:
- Ponder the question: This exploration should stem from a narrow concern. For instance, if you run a manufacturing plant, you may analyze the impact of automation.
- Gather information: Futures thinking involves nonstop information gathering. Let’s return to the example of the manufacturing plant. If you want accurate info on how automation will shape the future and impact your business, you could consult with experts to get more viewpoints and read relevant news from sources such as Manufacturing Automation magazine. Scanning the world can show you what drivers, or factors, could affect the question you’re trying to answer.
- Map the potential scenarios: There’s isn’t a single possible future. That’s why we do scenario analysis. To prepare for various potential futures, you must ready your organization for a wide range of outcomes. When performing futures thinking, you could start with three or four base-case futures:
- Best-case scenario
- Worst-case scenario
- Base-case scenario
- Surprise scenarios
Surprise scenarios could be events outside your control, such as natural disasters or geopolitical events. The COVID-19 pandemic would fall into this category.
- Ask follow-up questions: Now, it’s time to address questions such as:
- What actions and strategies can lead to the best-case or at least an acceptable future?
- What actions and strategies can lead to the best-case or at least an acceptable future?
- What obstacles are keeping you from taking the necessary steps?
- What are competitors doing?
- Formulate strategies: This is where you lay out a concrete plan. What choices and changes do you need to make to get to an acceptable future? What policies and actions do you need leaders and stakeholders to agree to and adopt?
Why Scenario Planning Can Help Futures Thinking
Within the futures thinking process, scenario planning can serve as a tool to test different assumptions and identify strategies, policies, and actions that will most likely lead to a better future.
Research into 77 large companies has proven that futures thinking and scenario planning improve:
- The ability to perceive change
- The ability to interpret and respond to change
- The ability to influence stakeholders
- The ability for organizational learning
Some leaders may not place too much value on futures thinking, as they may assume it’s a guessing game or that it’s a waste of resources to analyze an endless range of futures.
But bring in scenario planning, and you can dig deeper into plausible futures using facts-based research and data. Such analysis will:
- Provide stories of the future that can contribute to the strategic conversation
- Expose assumptions that may leave the business blind to future challenges
- Acknowledge uncertainty and employ intuition and subjective judgment, along with data, to make decisions about the future
- Enable testing of future narratives so the impact of decisions and trends can be seen in numbers
- Foster quick adaptation when a crisis hits (what if you were ready for a pandemic in early 2020?)
Overall, combining futures thinking and scenario planning helps leaders become comfortable with ambiguity. We don’t know what the future will look like. But we might know and we can certainly map out all the possibilities. This way, we can plan for that range of futures and solve problems and capture opportunities in the most efficient way.
How Futures Thinking and Scenario Planning Work Together
The best way to plan for the future is to analyze all the potential scenarios and have plans for each. This requires not only an agile, adaptive approach, and a capacity to perceive and respond to change, but also a collaborative culture, diversity of thought, and continuous research.
To ensure you keep moving in the right direction, your team needs structured processes and advanced financial modeling tools.
When combined, futures thinking and scenario planning can give your business insights into challenges that may come. This way, you’re not blindsided or unaware and you can get out ahead of a problem or opportunity.
To begin, you should go through the futures thinking process and use it to bring to life different possible futures. Through the futures thinking exercise, you should:
- Have a grasp of what drivers or factors have the greatest possibility to impact your industry and organization.
- See all the “doors in the hallway” of the future (some good, some bad, some neutral, and some surprising).
- Know about potential risks to avoid as well as emerging ideas and opportunities you can capitalize on.
- Understand what changes and actions you need to take to position your company in the best possible way.
Once you’ve generated these insights from your futures thinking, you can perform scenario planning. This analysis involves testing assumptions, decisions, plans, and factors outside your control. By putting it all into numbers with scenario analysis, you can arrive at reasonably reliable predictions.
Additionally, your findings should be easy for C-level decision-makers and stakeholders to understand. Futures thinking and scenario planning aren’t useful if the consequences of today’s decisions aren’t clear.
Example of Futures Thinking and Scenario Planning
Let’s say you own a restaurant chain. Through futures thinking, leadership has begun to seriously consider the implementation of robot servers. To see whether the decision will yield a desirable return on investment, you perform scenario analysis.
The scenario analysis process includes:
- Defining the problem or question: Should we invest in robot servers? What factors could affect that investment’s success?
- Separating certainties from uncertainties: While costs such as rent and food supplies may not change, some variables could change because of this decision. For instance, robot servers may increase dining capacity during a pandemic. On the other hand, robot servers may not provide as good of a dining experience and therefore could reduce the number of diners.
- Develop scenarios to account for all uncertainties: Will technical difficulties make it necessary to have staff manage the robots? Will you still need a human server? What’s the cost of maintenance? Will the cost of robot servers decline in the next few years?
From there, you can begin running scenarios in your spreadsheet. To see your return on investment, you could perform a discounted cash flow analysis (DCF) so that you can see how the value of the investment changes as assumptions change. This will provide clarity on what you can control and what decisions will create the best future.
Your analysis could result in you deciding to go with all robot servers, a mix of robot and human servers, sticking with only human servers until the cost of robots declines, etc.
Create Clarity Amidst Uncertainty
Now that you understand how futures thinking and scenario planning can empower you to take control of the road ahead, there’s only one thing left to do: ditch the spreadsheets!
Spreadsheets are time-consuming and prone to human error. They’re also one-dimensional and incapable of visualizing the full range of possibilities. Analysts using spreadsheets have to constantly reconcile data across different versions and alter underlying math, which is always risky. This cumbersome process also eats up resources and doesn’t give you much confidence.
At Synario, we’ve created a scenario planning tool for futures thinking that eliminates the constraints of clunky spreadsheets. Through pre-mapped algorithms, patented multidimensional layering technology (including intuitive on/off switches and value sliders), real-time updates, and more, you can test countless combinations and permutations for every scenario. This allows you to see every possible outcome of your choices—all in one dynamic financial model.
With Synario, your futures thinking can achieve clarity and consensus. More importantly, you’ll feel more comfortable and confident with your decisions, even in the face of uncertainty. That’s because you’ll have the tools to make the right decisions, no matter what the future brings.