New projects are a powerful way to help your business grow and expand.
But, choosing which projects to pursue when is no walk in the park.
Every project your organization starts is an investment. But, they aren’t all the best investments you could be making right now.
Thinking about the what-ifs down the road can feel daunting, especially after an unexpected year like 2020.
With so much uncertainty, where do you even start?!
Put away your crystal ball; we’ve got something better.
Meet: scenario planning.
This classic financial modeling strategy can help you take on long-term planning with confidence. Scenario planning can impact every level of an organization — from individual projects, to your program, to your whole business.
In this article, we’ll show what scenario planning is and how to incorporate it into your project planning.
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What is scenario planning?
Business moves quickly, and being able to adapt to changing circumstances is a superpower many companies underestimate. But, when you’re prepared for just about anything, your team can move forward with confidence and shift priorities at a moment’s notice.
Thankfully, you don’t need to predict the future to prepare for it. Scenario planning can help you prioritize business goals and project plans so you can flow seamlessly no matter what happens.
Basically, scenario planning is when you identify and analyze situations that could happen in the future.
Think of scenario planning like making multiple contingency plans for the same event. But, while a contingency plan is often meant for emergencies, scenario planning can account for more gradual or predictable factors, like market changes, opportunities, or trends.
Plus, scenario planning has a vital role at every level of an organization.
For example, project managers can use scenario planning to prepare for unexpected budget cuts or losing a key team member.
Portfolio managers can use scenario planning to plan project strategy based on what their competition is doing. Meanwhile, CEOs can use scenario planning to prioritize high-level initiatives and values to drive that year’s business decisions.
By defining scenarios, analyzing their impact on the project or company, choosing how you’ll respond if that scenario happens, and consistently refining those plans, you can start to build out potential responses to any threat or opportunity.
After seeing the havoc the COVID 19 pandemic wreaked on so many industries, scenario planning is more relevant than ever. Scenario planning can help you gain insight into potential futures, making it easier to move forward and make decisions if that future becomes a reality.
22% of CEOs say the biggest challenge facing digital transformation is a lack of insight into the future. While scenario planning can’t predict the future, it can make it easier to prepare for unexpected situations.
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How can scenario planning benefit my business?
Being an agile company (whether or not you use Agile project management methodology) is the key factor to leading any industry.
After all, 68% of US CEOs say that being agile is imperative for companies to avoid becoming obsolete. Preparing for anything can mean the difference between if your business thrives or flops.
But, to move quickly, your company needs to be able to innovate and shift priorities without warning.
Creating alternative plans for future what-ifs cements your priorities and helps your team better understand your strategic goals. Scenario planning paves the way for employees to pivot quickly and capture opportunities even when the original plan changes.
Understanding the overarching goals of a project, program, or company strategy can empower your whole team to find new, innovative solutions when something doesn’t go according to plan.
Drawing out scenario plans clarifies goals and shows suggested routes that anyone can follow.
While scenario planning may require more upfront work, it can strengthen company culture and offer better strategic follow-through.
Even beyond the project or program you planned for, the act of building scenarios can have far-reaching effects on your team.
Some of the greatest innovation opportunities can come from scenario planning. Prepping for different scenarios can give you the insight to recognize a hidden opportunity and the agility to jump into action to seize it.Better planning reduces business risk, too. When you expect potential roadblocks and create a reaction plan, you’re less likely to be blindsided because you’ve already developed a strategy to handle the worst-case scenario.
Plus, creating alternative scenario plans and incorporating multiple scenarios into your project or portfolio doesn’t need to be hard.
How do you build scenarios?
Creating scenario models may seem intuitive, but it’s more involved than you think.
It’s easy to get off on a runaway train without a strategic planning process. Not every situation needs a full reaction plan, especially if it’s unlikely to happen.
While it helps to brainstorm many possible futures, the most effective scenario plan consists of the 4 most probable and relevant outcomes.
Here’s the scenario planning process to help you design practical contingency plans.
1. Examine which assumptions drive your current plan
Often, we plan for the future based on what’s happening now. Taking a step back and acknowledging what you’re assuming will help ground your plan and open up new scenarios.
For example, 33% of CEOs expect less than 2.5% of growth in the next 3 years. That assumption may be informing how they approach their project, program, or portfolio management.
It’s easy to get stuck thinking that each year will be the same as the last. Breaking down the assumptions and key drivers behind your plan can help you see alternative futures you may otherwise miss.
List out every key factor that you think impacts your plan. Then, get curious about what would be different if those driving forces suddenly reversed course.
Don’t forget to ask other team members what they think might happen, too. Part of challenging assumptions is looking from a new viewpoint.
Reviewing your project roadmaps can help with this step.
2. Discover the uncertainty
Looking beyond your scope can be challenging, but as you start your scenario analysis, some situations may begin to look more probable.
Changes in global or domestic financial markets, new or existing product success, and other factors can create critical uncertainties that lead to derailed projects.
Look at your plan and think about what outcome could set it off track. Then, consider if any situations would put your project in a position for unexpected growth.
From there, analyze how likely each scenario is and the impact it may have on your plan.
While it may seem like your plan is the most plausible scenario, there may also be a preferred scenario to plan for. Likewise, there may be a significant risk to consider in another possible outcome.
While many situations are possible, it’s usually not the best use of your planning time to draw out a reaction plan for every situation. Choosing the most probable scenarios with the highest impact can help you prepare to pivot if and when the time comes.
You can capture all of your risks, and potential scenarios in a risk register like this one:
3. Brainstorm alternative scenario reaction plans
Deciding ahead of time how you’ll react to probable scenarios empowers your employees to move forward quickly and with confidence when a plan goes off track.
Even if your response plan isn’t fully fleshed out, a driving intention and next steps reduce analysis paralysis when the unexpected strikes.
Most effective scenario plans focus on 4 main scenarios
- the baseline expected scenario,
- a second scenario based on the most prominent single driving force,
- a third scenario where a different key factor takes the lead,
- and a fourth scenario that accounts for both driving factors.
For these 4 scenarios, you can even add your alternative reaction plan to your program risk register or project plan to be ready for implementation.
staging-mondaycomblog.kinsta.cloud can help you create workflows so you’re ready to act no matter what happens.
4. Find themes in your scenarios
Keeping your scenarios at the strategic forefront will help better define the themes driving your business. Validating these themes and sharing them with everyone in your organization can help develop resiliency.
The value in scenario planning is not necessarily the plan itself, but the process of planning.
Getting clear on the strategic goals and business priorities through scenario planning can help you better define budgets, choose projects, and innovate when the time is right.
Throughout your plan, reexamine your scenarios and amend them when driving forces change. This can help you develop an even stronger relationship to the themes driving your projects and your business.
staging-mondaycomblog.kinsta.cloud can help your business prepare for anything
Having the right resources matters when you’re planning a project, managing a portfolio, or even running your whole business. A powerful work OS like staging-mondaycomblog.kinsta.cloud can help you position your company so you’re ready for anything.
Many of our customers saw how the right project management support made a huge difference during the pandemic.
staging-mondaycomblog.kinsta.cloud offers the flexibility businesses need to react quickly to changing priorities and scenarios.
Developing alternative workflows in your contingency plan template can help your team act fast when the unexpected happens.
Plus, having your contingency plan, project plan, and risk register all on one dashboard helps you stay organized and ready to pivot at a moment’s notice.
Be ready for the unexpected
Even the best plans fall short sometimes. Scenario planning comes in handy for creating contingency plans and deciding how to pivot when the unexpected happens.
With the right reaction plans, your business can stay agile and prepared in any situation.
Start planning today so you can innovate when the perfect moment comes. Sign up for a free 14-day trial today and develop your scenarios with staging-mondaycomblog.kinsta.cloud.
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