What is Scenario Planning?

Malcolm Tatum

Scenario planning is the strategy of identifying and projecting the different sequence of events that could occur should a particular decision be made or a specific process implemented. By walking through the potential repercussions of the decision, it becomes possible to plan scenarios that meet any potential challenge as well as maximize the ability to take advantage of any secondary benefits that could arise. This process of future studies is used extensively in many industries, often coming into play with production and manufacturing as well as developing marketing plans or establishing short term and long term goals for the business.

Businessman with a briefcase
Businessman with a briefcase

The focus of scenario planning is to investigate what could happen if a given decision is implemented. In order to make sure that every potential scenario is identified and addressed, the process usually begins with defining all relevant factors that could lead to both positive and negative consequences. In some cases, those factors are internal, such as the quality of production equipment or assets the company owns. Outside factors such as the state of the economy, political situations, and weather conditions are also taken into consideration.

Scenario planning is based on the premise that for every choice taken, there are several possible outcomes. By accurately identifying and preparing for each of these alternative scenarios, it is possible to be reasonably sure that the initial action was the correct one, and that the company will gain something from the process, although that gain many be tangible or intangible. This level of strategic foresight allows for the creation of contingency plans that can be activated immediately, if the situation calls for action of that type.

By using scenario planning to predict potential outcomes, it is possible to prepare in advance for the several potential outcomes rather than simply meeting them as they come along. The advance preparation can often save a great deal of time and money, as well as provide the company with intelligence that helps to defuse negative situations while maximizing the benefit from positive ones.

Along with businesses, non-profit organizations are also likely to engage in the process of scenario planning. Employing the basics of futures studies can help the organization be prepared to continue operations and provide services even in the event of an economic downturn or loss of a major contributor. The ability to accurately identify and address possible future events that stem from one decision can often make the difference between the survival of the non-profit and its failure.

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Discussion Comments


@ceilingcat - You're right that people can't anticipate every future event. Still, I feel like in a lot of instances, you can definitely anticipate enough to make a solid plan.

For example, say a store has too much stock of a product that isn't selling. They decide to put it on sale at a deep discount to get rid of it and not restock that product.

A few things could happen: they could sell all the product, or not sell very much of it. In that event, they would have to decide what to do with the remaining stock.

Yes, the store could burn down, or a flood could happen. But those two things aren't as likely as the other two things I mentioned. I feel like scenario planning is still valid even if you can't plan for every single possible outcome.


I think scenario planning must be very difficult. I don't see how you could possibly anticipate all the things that might happen in the future with a certain situation, you know?

Even if you could decide on a few possible outcomes for a situation, it's always possible something really unforeseen could happen and throw everything off!

I mean, I think it makes sense to try to plan for the future but people should definitely take into consideration that it might not always be an accurate plan!

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