The past few years have truly taught us that anything can happen and it can happen unexpectedly with extensive consequences. So how do we make sure our projects are secure and teams are making the most informed decision during these increasingly uncertain times?
The answer: Scenario Planning.
In this blog, you can get an introduction to scenario planning, its benefits and how you can start using it for your project management needs today.
What is Scenario Planning?
Scenario planning is the collective series of analyses that helps teams understand the different uncertainties or scenarios a project or organisation can face to help identify the different choices available that allow the team to adapt and mitigate their potential impacts.
Scenario planning goes by many different names, from what-if analysis to portfolio modelling, and it fundamentally looks at what can happen and how teams can prepare for such future potentialities. As a result, it looks at several critical elements that can influence or trigger a potential scenario outcome, those elements being social, technological, economic, political and environmental elements.
As a valuable planning and risk management tool, scenario planning can be applied to various areas and levels of the business, from assets to products to projects and portfolios. The scenario planning process typically requires pulling from historic data to calculate and generate various options for your projects, program or portfolio that also define the various implications of said option on the overall organisation
Benefits of Scenario Planning
Scenario planning is a highly valuable tool for any organisation for various reasons, including its ability to:
Prepare teams for potential future risks
Scenario planning starts with first identifying potential situations or assumptions that could have a potentially lasting impact on the project or organisation. Once a scenario is built, teams often analyse and identify the various impacts or consequences of such a scenario occurring, allowing them to identify potential risk areas within their projects or the organisational structure.
Gives organisations greater agility during uncertainty
Scenario planning can also be understood as multilevel contingency planning. By mapping out different scenarios, their outcomes and the necessary actions to mitigate such outcomes, teams can quickly and promptly respond to changes as they occur. During times of uncertainty, organisations can be wasting precious time and resources if they fail to prepare themselves and make the necessary actions to adapt to the new situation.
Supports informed decision making
In the same way, you would not plan a camping trip without looking at the weather forecast, teams should not be making important decisions without understanding the different consequences and alternative options available to them. Scenario planning gives teams valuable and accurate information to help make better decisions that not only benefit the project but the organisation as a whole.
Improves project predictability and performance
Scenario planning is based upon reliable and continuous data. It encourages frequent checks on assumptions, processes and overall project progress to produce the most accurate estimations. As teams learn more about their projects, they are more likely to improve project predictability and can make the appropriate actions to adapt the project to accommodate those predictions. This ultimately can have the extended effect of improving project performance over the long term.
Identifies potential risk themes or pain points in the organisation
If teams are frequently running into the same risks or consequences after running various scenarios, the problem likely stems from internal practices or structures. The scenario plan can help teams identify potential areas that are repeatedly vulnerable or ineffective that can be impacting overall project or organisational success and allows them to make the appropriate actions to solve or mitigate these issues.
Scenario Planning Process
Building a proper and realistic scenario plan takes time, patience and consistency. It is not a one time task that is conducted at the beginning of a project and only truly finds value when it is actively updated, analysed and adapted to real-time circumstances.
As an inherently flexible and adaptable process, there is no ‘textbook’ perfect guideline for conducting your scenario planning activities. However, there are some common steps teams often take within their scenario planning process.
Step one: Define the core issues the organisation is facing
Before you start jumping into building scenarios, you need to understand why you are building a scenario plan in the first place. Clearly defining the critical issues that an organisation is facing will help make sure the scenario planning activities are all aligned with achieving specific strategic objectives for the organisation.
In our increasingly competitive marketplace, organisations often need to consider these factors when building their strategic objectives. These factors include underlying organisational principles, market competition, monitoring market and project complexity, ensuring appropriate leadership and tracking global environments. Understanding which factors are impacting the organisation helps teams understand what needs to be improved and the potential drivers that can worsen or trigger certain consequences.
Step two: Identify and prioritise the key drivers or influencers of specific scenario outcomes
Once you know what needs to be improved, teams can start identifying the different factors or drivers than can positively or negatively influence the outcome of the scenario. While these drivers can possess many different characteristics, they can typically be categorised into the following groups:
- Internal drivers: factors or drivers that the organisation can control such as internal policies and structure.
- External drivers: factors or drivers that are outside the control of the organisation such as new government regulations or competitor strategy.
- Local drivers: factors that are regionally-based but have a significant impact such as employee availability.
- Global drivers – factors that can influence the scenario but are not geographically bound such as a global economic downturn or new technological advancements.
- Inevitable drivers: factors that have a high degree of certainty regardless of how the scenarios are adapted such as population growth
- Critical uncertainties: factors that have no clear level of probability and a often closely related to inevitable drivers.
Once all the influencing drivers have been identified, teams need to rank these drivers in terms of their importance to the scenario and the likelihood of them occurring.
Step three: Create the scenarios
The core activity is to start developing a narrative that explains how the different influencing drivers identified in the previous step may interact and impact one another. The key task of the scenario writer is to clearly describe and communicate the ‘possible future’ succinctly. Here are some general guidelines when creating your scenarios:
- Make sure the scenario is both challenging but plausible and realistic.
- Explore different scenarios and go beyond the typical route of simply developing three – best, worst and most likely scenarios. However, remember too many scenarios can be challenging to monitor and may make the over process redundant.
- Makes sure your scenarios clearly outline pre-existing assumptions, risks and threats.
- You can develop more scenarios as you get more information. However, make sure to remember the previous tip and do not overload on scenarios.
Step four: Identify the interrelations between scenarios
Once the scenarios have been created, teams will review the original issues and objectives identified in step one and evaluate how effectively those issues are addressed through each scenario. At this point, it is also valuable to analyse the interconnections and relations between various scenarios that may not have been apparent in earlier stages. New issues or drivers can be added to the scenario planning process to make sure the scenarios are as detailed and accurate as possible.
Step five: Select the right scenario indicators to monitor
Much like contingency plans, the key benefit of building out multiple scenarios only arises if you know when to implement them. By identifying specific scenario indicators or triggers, teams will be alerted when the scenario starts to unfold. Teams can then easily monitor or track these indicators to make sure they can respond as quickly and promptly as possible.
Step six: Actioning the strategic plans
Once a scenario indicator is triggered, teams and key decision-makers can start identifying and executing projects or other business initiatives that are aligned with the approved strategic plan.
Challenges of Scenario Planning
Here are some key challenges teams may face when building their scenario plans.
Creating scenario plans that are not challenging enough
This does not mean that every scenario has to be challenging. However, people often make the mistake of building scenarios that build off pre-existing positions or perceptions and fail to encourage the deep thinking and brainstorming that leads to real business decisions. Ensure that scenarios are all developed with clearly defined criteria and standards to prevent making the entire process redundant.
Keep the team focused and alert
Teams can easily fall into a false sense of security when their projects and portfolios are ploughing through their roadmaps and hitting every milestone. It is during this ‘high’ that teams can often become careless or over-relaxed believing that their prepared scenarios have come to pass and are no longer relevant. But things can change quickly and suddenly. Making sure that senior decision-makers are actively monitoring and engaging the necessary stakeholders throughout the process is critical to prevent any potential information gaps or hiccups when changes arise.
Maintaining data accuracy, consistency and quality
Effective scenario planning is dependent on extensive data collection from many different fields. From business data to industrial, technical, political, economic and more, teams need to be able to pull from a wide range of data and ensure it is accurate and consistent with real-life conditions. Being able to effectively collect, manage and monitor all this data can be a challenge without the proper tools. Make sure to look for a cloud-based integrative solution that will allow teams to connect data from different platforms in real-time and make sure there are strong practices in place to make sure the data is consistently monitored.
How pmo365 can help take your scenario planning activities to the next level
Scenario planning involves a lot of data and a lot of calculations. Rather than manually calculating the various impacts and statistics for every scenario, why not have a smart tool that does it all for you? Lucky for you, that is exactly what pmo365 provides!
With the help of our portfolio analysis tool, our solution can automatically calculate different scenario outcomes and impacts on the spot. With its extensive integrative capabilities, pmo365’s solution acts as your organisation’s single source of truth and consolidates all your project management data onto a single platform that can supply your scenario planning activities with more accurate data. Better data, better scenario plans!
If you want to see it all in action, make sure to book a free trial with our PPM experts today!