In today's environment, companies need to rethink their approach to strategic planning. Many firms continue to rely on very traditional planning exercises. Frankly, most of these processes assume that managers can accurately predict the future. Many plans are characterized by high amounts of false precision in forecasting and budgeting.
Scenario planning represents a useful tool for reshaping the planning process given the turbulence and ambiguity in today's world. This technique involves imagining different ways the future may unfold and challenging some of our most basic assumptions and tenets of conventional wisdom. We envision multiple, differentiated scenarios and then build strategies to fit those environments. Finally, and most importantly, we think about early warning signals or leading indicators that we should monitor becuase they may help us detect the emergence of one of these scenarios at an early stage. For more on the usefulness of this technique, see this short video.
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