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Scenario Forecast
by Robert W. Barner
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SUMMARY: The scenario forecast shows you how to
move beyond straight-line trend extrapolation and envision alternative paths into the
future. This essay offers an eight-step method for teams to create a scenario forecast.
cenario Forecast encourages your team to think outside the
box by trying to anticipate a variety of large-scale changes that could affect your
organization and team. It goes beyond the simple, straight-line extrapolation of a
company's projected performance to show how different factors can interact to produce
powerful change scenarios. When done correctly, this technique forces management teams to
develop business plans that can accommodate a variety of interacting change factors. It
also provides a valuable tool for building alignment among managers on future
opportunities and threats. Still another benefit is that scenario forecasting helps team
members better understand how their disagreements on key issues are often based on very
different assumptions about the future.
During the first three steps of this process,
it's important to obtain input from those who can expose your top leadership team to
different assumptions and inputs. These individuals might include technical leaders who
have a reputation for accurately tracking industry trends, industry leaders, and even key
customers and vendors. This is an area in which a trained outside consultant can often be
helpful in testing those assumptions and providing needed facilitation support for your
team discussion. The following example outlines the steps taken to create a scenario
forecast for a hypothetical strategic planning team operating within a U.S. petroleum
company.
One of the most potent applications of scenario
forecasting is to help a team look far into the future to consider the implications of how
different change scenarios might affect its performance. One such implication involves the
types of competencies that will be required of a team.
How to Complete a Scenario Forecast
1. Identify influencing factors: With your
team, brainstorm a list of external factors that are likely to shape the business
environment in which your company operates. For example, a strategic planning team for a
U.S.-based petrochemical company might include factors such as changes in environmental
regulations pertaining to petrochemical removal, disposal, and transport; domestic
gasoline consumption levels; and petrochemical production levels in other countries,
including OPEC members.
2. Rate influencing factors: Rate each
factor on a scale of 1 to 10 (with 10 being the highest) in terms of degree of impact and
scope of change. "Degree of impact" refers to how intensely changes in this area
may affect your company's performance. A score of 10 means this factor could have a major
impact on your business performance. "Scope of change" refers to the amount of
change this factor is likely to undergo over the next two years. A rating of 10 means that
you believe a factor will change substantially over the next two years.
3. Identify key influencing factors:
Multiply each factor's rating for degree of impact with that for scope of change. You
should have a scoring range that extends from 1 (1x1=1) to 100 (10x10=100). Select from
your list the two factors with the highest overall scores. These are your key influencing
factors.
4. Create alternative scenarios: Describe
two other possible scenarios for each factor. For the petrochemical company, domestic gas
consumption is a key influencing factor. As a result, one future scenario might be
"increased business and leisure travel create a 15% increase in gasoline consumption
over the next two years," while an alternative might be" domestic economic
pressures cause a 20% reduction in business and leisure travel over the next two
years." Create optimistic and pessimistic scenarios, but avoid highly improbable
scenarios.
5. Combine scenarios: Integrate your
scenarios into a combined scenario matrix. Next, create a title that best describes the
combined scenario represented in each cell of the matrix. For instance, the petrochemical
company created a "Golden window" cell to indicate the window of opportunity
created for increased gasoline sales, given a strong increase in domestic gasoline
consumption and a simultaneous decrease in worldwide production.
6. Describe each combined scenario: Create
a one- to two-page summary describing the details of the combined scenarios in the four
cells, including the sequence of actions that would likely lead to each combined scenario.
7. Assess probability: Use all available
information to assess the relative probability for the occurrence of each combined
scenario. For example, the petrochemical company assessed an estimated probability of 16%
that the Golden Window scenario will occur during the next two years.
8. Assess the implications: Ask team
members to jointly identify the implications of the four combined scenarios for your
business strategy.
Excerpted with permission of the publisher from Team
Troubleshooter: How to Find and Fix Team Problems by Robert W. Barner. 2001. 326
pages. Paperback. $32.95. Davies-Black Publishing, 1-800-624-1765, www.daviesblack.com.
Team Troubleshooter by Robert W.
Barner may be ordered from Davies-Black Publishing (www.cpp-db.com or call 1-800-624-1765) or from the World Future
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