How to maximize the value of your scenario planning

As a business owner or people leader, looking past your organization’s immediate circumstances and concerns to see the bigger picture is your responsibility. If COVID taught us anything, it’s the importance of being ready for unexpected situations, and of monitoring trends that could impact your strategy and operations. Scenario planning is the process through which you can protect your business from negative externalities and crises, while also preparing to make the most of whatever opportunities the future holds. 

Unfortunately, it’s human nature to spend most of our time dealing with what is right in front of us, while spending comparatively little time stepping back to think about long-term goals and strategies. Few organizational leaders dedicate the time and effort needed to maximize the benefits of scenario planning. 

What scenarios you should plan for

Many leaders have thought about doing scenario planning, but don’t know where to start. You can focus your discussion by asking the right questions and being open to outside-the-box ideas and conversations.

In the most recent Business Outlook Survey from the Bank of Canada, businesses expressed a high level of concern about scenarios that are largely beyond their control: higher interest rates, declining real estate prices, the possibility of a recession in Canada, inflation, weakening demand, labour capacity, and more.

While preparing for these types of circumstances is crucial, it’s also important to remember that scenario planning doesn’t have to be all “doom and gloom”, where all you talk about is potential crises or negative trends.

Start by identifying the five or six trends that are most likely to have an impact on your business; it’s important that the list is meaningful and material. Then consider the worst-case and best-case manifestations of each trend. Ideally, the team should build a set of three “stories” that describe the positive and negative extremes for the full set of scenarios and then work toward the middle. What would your world look like? How would you react? When thinking about responses, we recommend thinking through each of the major functions of your organization: Sales, Marketing, Operations, Finance and HR.

Variables like your industry and your region will determine what you should plan for; however, there are some scenarios that should be considered across just about every organization. Below are some examples:

Near-term scenarios

Technological advancement

Regardless of what industry you’re in, it’s hard to escape the headlines regarding the new capabilities and potential of artificial intelligence. Digital twinning, augmented reality, and other forms of automation are also on the horizon. Have you dedicated the time to discuss with your leadership team how these could impact, threaten, or improve your organization? 

Immigration

While this may seem like a long-term trend to keep an eye on, Canada’s ambitious immigration targets are already in play, and the plan is to continue bringing in record numbers of newcomers to Canada until at least 2025. How will this impact your workforce and your ability to secure talent? How will you adjust to the needs of a shifting consumer or client base?

The potential for a recession

The occurrence, timing, and severity of a potential recession in Canada are by no means guaranteed. But today’s economic uncertainty is showing organizational leaders the need to be prepared for anything. How will you maintain agility and stability if economic conditions turn for the worse? How would you react if you see weakening consumer demand or spending?

Long-term scenarios

Age demographics

This may not be a scenario that will dominate the news headlines in Canada, but it is almost guaranteed to impact your organization gradually: the average age of Canadians is increasing, and birth rates are decreasing. This will have ripple effects on healthcare, education, and the workforce. How will the profile of your staff and consumers look 10 or 20 years from now? Can your organization improve its marketing or product placement to accommodate an aging population and capitalize on this trend?

Climate change

Thinking about climate change means considering not only the impacts of climate change itself, but also the increasing regulations that will come with it. Canada has set long-term and shorter-term objectives to ultimately reach net-zero by 2050. Are you ready for increased regulations, scrutiny, and disclosure mandates between now and then? How will your business protect itself if droughts, extreme weather, and natural disasters become more frequent or severe?

Consumer preferences

What your customers want and expect is unlikely to change overnight. But staying on top of slower-moving trends — the desire for more transparency in business and leadership, consumers seeking out organizations that align with their values, expectations of data privacy, and the importance of ESG — will improve your organization’s long-term performance and reputation. Does your organization’s purpose and values align with key stakeholders? To what degree should your organization and its leaders speak or act on social issues?

This is by no means an exhaustive list, but it’s designed to spark your own thoughts as you launch your scenario planning sessions.