Yesterday we began a week-long series on how to plan through this current pandemic. We identified four steps that every organization should be taking within the context of three planning horizons. Today we are looking at Scenario Planning.
But first we need to understand what is true about each of the three planning horizons.
The first timeframe is the “right now” – between today and when lockdowns start to ease and operations can start returning to “normal.” Planning for the “right now” is all about survival and will focus on critical scarcities. Most organizations have limited cash on hand and revenue sources have dried up, so planning will be focused on getting cash to last through the pandemic. For other organizations, demand may be outpacing supply (either raw materials, fixed infrastructure, or people for operations), and for these, planning will be focused on how to maximize output with minimal inputs.
The second timeframe is the “restart” – the transition period that starts when the lockdown ends. Employees and customers can return, but we can’t yet call this period “normal.” People will still be (rightly) wrestling with fears. Every business in the ecosystem will also be in transition. Partners and suppliers will need time to be fully supportive of our businesses. Business customers will take time for their demand to return to “normal.” Many that we do business with will also be in a cash crunch, impacting their needs and expectations, and sadly, some organizations will not have survived this crisis.
The third timeframe is the “new reality” – for planning purposes it probably makes sense to think of this starting at the beginning of 2021. This is “business as usual” but it’s probably not the “normal” we knew in 2019.
As Proverbs 16:9 tells us “The heart of man plans his way, but the Lord establishes his steps.” We are to plan, but only God perfectly knows the future. We can’t accurately predict any of these three planning horizons. There are simply things that, at this point, we can’t know. How long will our markets be in lockdown? When can employees return? When will customers return? Will it make sense for us or our customers to adopt a distributed model more permanently? Have customers’ needs and desires changed through this experience?
Scenario planning provides a way to simplify these uncertainties to get to a few manageable and representative future scenarios around which you can plan. Traditionally scenario planning involves choosing the two most impactful uncertainties (e.g. “When can employees return?” and “When will customers return?”). While those uncertainties may have an infinite number of possible realities, for planning purposes, choose two – perhaps an optimistic and a pessimistic value (e.g. “May 1” and “November 1”). Those two values for each of two uncertainties creates four possible scenarios you can then plan around. It helps to assign likelihoods of each scenario, as well as writing a narrative to describe each scenario. It’s also very helpful to assign a name to each scenario to simplify planning and communicating plans to all stakeholders.
Top Photo by Mark Fletcher-Brown on Unsplash