Scenario Planning Model

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Introduction
Many researchers have emphasized the higher reliability of scenarios in comparison to the reliability of forecasts. Whereas forecasts describe the future using information about what currently exists, scenarios envision possible futures based on gaps missing in today’s information or experience. Scenarios, without recommending a favorite, provide the gamut of opportunities that the future holds for the company (Cornelius, P., Van de Putte, A., & Romani, M. (2005). This article applies information in existing research to create and test a scenario and trend convergence model.

Research Findings
The study by Anthony Scott et al (2005) differentiates the leverage of disruptive technologies and the power of incumbency. Disruptive technology promising better and cheaper products and services are a threat to incumbent companies within an industry. But existing businesses in an industry are favorably better positioned for competition if the battle over market share is predicated on solutions or innovations that already exist in the market.

Ovanesoff et all (2011) concludes that competition in business will continue to increase and challenge managers to become more innovative in thinking and fast in responding to the rapid changes. Companies that leverage their core competencies with operational excellence are favored to continue to lead in the market space.

Cornelius et al (2005) and Frynas et al (2018) project the value of leveraging scenario planning with data-based forecasts so that companies can make the best investments. Forecasts are limited in the sense that they predict based on what is known today. Scenario planning on the other hand offer insight into various areas of opportunities that data-based forecast is blind to.

Stout (1998) reaffirms the “out-of-the-box” feature of scenario planning. Scenario planning involves the team and provides an opportunity to cover all ideas that indicate the possible future. No threat to planning (because there is no right or wrong), no suggestion is considered the right one. Rather consideration is given to all scenarios and management can supplement those views with real option investment decisions.

Expert Scenario Planning Model
The expert scenario model is based on the plan work of a single individual acting as the strategist. It is assumed the strategist is skilled in the area of the business and in the industry. The planner here, an expert works alone, plans and controls the process, presents the model and decides on the scenario best suitable for making investment decisions.

Model
The model is designed by a hypothetical expert for Tesla Inc. The intention is to understand the most profitable and best consumer-value delivering opportunities for the companies Tesla Model 3.

Description of Model
The model considers three scenarios – one in which Tesla’s Model 3 production is boosted for overseas sales. The second scenario considers another electric car maker taking advantage of Tesla’s slow production and distribution of Model 3 and producing an alternative that is cheaper, readily available and feature loaded. Scenario 3 considers Tesla collaborating with Lyft – a hail riding company – targeting Lyft’s drivers and marketing a clean energy production to Lyfts customers.

Applying the Model
The planner starts out with three scenarios and for each scenario indicates the potential impacts or outcomes from investing in that alternative. Each route is evaluated against known data or forecasts and a decision is made on the best alternative. Once an alternative is adopted, the process can be further reviewed for possible additional scenarios. This process causes refining of the scenarios until all blinders are taken off from the thinking efforts going into the planning process.

Summary
The scenario planning model is not a replacement for forecast or goal setting, rather it is a tool and process that supplements the planning process with insight into the possible future for which data might not be currently available. The expert model is much preferable for low-level or low-impact planning, or for simple sole-proprietorships. The real power of scenario planning lies in collective ignorance as well as collective wisdom – both of which should be properly leveraged for the planning process.

References

Anthony, S. A., & Christensen, C. M. (2005). How you can benefit by predicting change.

Financial Executive, 21(2), 36-44. Retrieved from http://library.capella.edu/login?qurl=https%3A%2F%2Fsearch.proquest.com%2Fdocview%2F208906404%3Faccountid%3D27965

Bilbeisi, K. M., & Kesse, M. (2017). Tesla: A Successful Entrepreneurship Strategy. B>Quest,

1–6. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=122682289&site=ehost-live&scope=site

Cornelius, P., Van de Putte, A., & Romani, M. (2005). Three Decades of Scenario Planning in

Shell. California Management Review, 48(1), 92–109. https://doi-org.library.capella.edu/10.2307/41166329

Frynas, J. G., Mol, M. J., & Mellahi, K. (2018). Management Innovation Made in China: Haier’s

Rendanheyi. California Management Review, 61(1), 71–93. https://doi-org.library.capella.edu/10.1177/0008125618790244

Ofek, E., & Wathieu, L. (2010). Are You Ignoring Trends That Could Shake Up Your Business?

Harvard Business Review, 88(7/8), 124–131. Retrieved from http://search.ebscohost.com.library.capella.edu/login.aspx?direct=true&db=bth&AN=51603093&site=ehost-live&scope=site

Ovanessoff, A., & Purdy, M. (2011). Global competition 2021: Key capabilities for emerging opportunities. Strategy & Leadership, 39(5), 46-55. doi:http://dx.doi.org.library.capella.edu/10.1108/10878571111161525

Stout, D. (1998). Use and abuse of scenarios. Business Strategy Review, 9(2), 27. https://doi-org.library.capella.edu/10.1111/1467-8616.00063