When I was a board member of an educational institution, we were tasked with mapping out the organization’s future in the wake of potential industry disruptions. As a strong advocate of using strategic planning to determine how to address future growth, I strongly urged the group to start the session with a typical visioning exercise, which would provide us with a beacon to follow. There was one problem with my advocacy: we were only able to base our speculations on past and current trends. Consequently, putting together a vision without first agreeing on these trends was akin to putting the proverbial cart before the horse.
Instead, we chose to use scenario planning. We identified several various scenarios that “could” exist, based on the major trends that we detected. Then, we examined the most important elements of each scenario that would need to be incorporated into our strategic plan. As I was participating in this activity, it dawned on me that the strategic planning process is not always the right approach to mapping out the future of a firm.
Peter Drucker once said: “The best way to predict the future is to create it.” Strategic planning and scenario planning both try to anticipate the myriad variables that might interfere with an organization’s growth— in some cases, even its very survival. As you try to set your talent management firm on the right path, it’s important to identify the differences between scenario and strategic planning. To do this, let’s look at the respective purpose, process, and payoff of each approach.
Purpose: Strategic Planning
The primary objective of strategic planning is to ensure business growth at the top and bottom lines. Typically, this involves establishing specific measureable targets. In performing this sort of planning, leaders must analyze many variables using traditional SWOT, ABCDE, or some other popular analysis method. (Just for kicks, I Googled” Strategic Planning” images and got a site that included more than 400 models, all purporting to be “THE” strategic planning model.) Simply stated, the main goal of strategic planning is to create a reasonable path to both short- and long-term successful growth.
In a previous blog, I detailed a basic strategic planning model that begins with a full understanding of the mission, vision, and values of the business. The process then proceeds through a number of steps, resulting in a specific plan with milestones, required resources, and timelines to execute the plan. One of the advantages of this approach is that the outcome assigns accountabilities to respective senior-level leaders who are expected to deliver on the plan. In addition, it allows for frequent tracking, follow-up, and any as-needed revisions dictated by the environment.
Purpose: Scenario Planning
While scenario planning can lay the ground work for developing a strategy, its main objective is to identify what lies ahead—any hurdles or barriers that the organization must overcome to move forward. In essence, scenario planning provides a way to prepare for different situations that may occur as a result of changes to the business environment and any other external forces. In many ways, it is designed to help navigate through or around potential industry disruptions.
Ultimately, scenario planning and strategic planning can deliver the same end product, but scenario planning might be better executed prior to a fully built-out strategic plan. Although scenario planning is seen by some as more of a technique than a model, it can be used in conjunction with other models to ensure that leadership incorporates strategic thinking into the process.
Process: Strategic Planning
The traditional strategic planning process tends to focus on specific variables: strengths, weaknesses, threats, and opportunities. These data are used to inform the decision-making process. However, the planning process almost always begins with a discussion and agreement on certain key questions:
- Who are we?
- Why do we exist?
- Who do we serve?
- How do we behave?
- What are our mission, vision, and values.
Answers to these questions become the critical building blocks for developing a strategic plan. In general, the components of the basic strategic planning process include:
- identifying the purpose of the organization and developing a mission statement
- creating general goals for the organization to accomplish the mission
- identifying specific action steps to implement each goal; and 4) evaluating and updating the plan over time.
Process: Scenario Planning
Whereas strategic planning typically starts with agreement on the vision of a firm, scenario planning ends with the vision. One way to develop future scenarios is to single out and assess trends that are most likely to occur and which trends are most important to the success of the organization. These trends become the focus of the planning process.
The initial trend analysis lays the foundation for speculating which scenarios require the most in-depth planning. A vision is then created (or validated) that aligns with the scenarios most likely to occur, and then altered accordingly. For example, if the firm’s vision is to be the leader in instructor-led classroom learning experiences, but a likely scenario highlights the proliferation of MOOCs (Massive Open Online Courses) that could obviate the need for in-person classroom experiences, then either the vision might change or steps need to be put in place for alternative delivery methods.
Bottom line: once major trends are identified (with any accompanying implied issues), leaders need to create an action plan to address them. These high-level action plans can then be integrated into one large strategic plan to address all interconnections.
Payoff: Strategic Planning
The real payoff for conducting a strategic planning process is a detailed execution plan. This plan is based on an analysis of the current state of the business—as a gauge into its future. The plan will not only identify the critical strategic imperatives and success criteria for the business, but also pinpoint exactly who will own how the organization navigates each imperative. These folks are responsible for any milestones and deadlines along the way, as well as the necessary resources for executing the plan.
Payoff: Scenario Planning
The payoff for the scenario planning approach is somewhat different. While it may inform a strategic plan, its main result is to create a big picture view of the future, given any number of possible situations. The factors likely to contribute to these future scenarios, along with their likely impact and certainly, can help the organization navigate toward a successful future.
Final Word
At the end of the day, both approaches have merit. They differ in timing, though. Strategic planning typically focuses on a three- to five-year timeframe; scenario planning is probably more useful for long-term planning perhaps as many as 10+ years.
How have you thought about your future as a business, from both strategic planning and scenario planning perspectives? Do you have both in place?
To learn more, check out my book The Complete Guide to Building and Growing a Talent Development Firm.
