In today's business world, where the only constant is change, traditional strategic planning—based on linear projections and static assumptions–—has become increasingly obsolete. Economic uncertainty, disruptive technological changes, and unexpected geopolitical events force us to rethink how we define and execute our strategies.
In this context, scenario planning is an indispensable tool for navigating uncertainty and making informed strategic decisions. It is not about predicting the future accurately, but about exploring different possibilities and preparing for them. It is a responsible and rigorous exercise that allows us to anticipate changes, identify risks and opportunities, and design flexible and adaptable strategies.
Scenario planning involves an in-depth analysis of the environment, identifying the key factors that could affect the company's future. From this analysis, several plausible scenarios emerge representing various combinations of these factors and their possible impacts on the business. Each scenario must be evaluated in detail, analyzing its strategic and financial implications, and developing specific action plans for each one of them.
Once the scenarios and action plans have been defined, it is essential to identify the shared actions among the different scenarios, as well as those that may be subject to changes in the environment. This allows the company to establish a solid basis for strategic actions, while maintaining the flexibility to adapt to changes that may arise.
However, scenario planning does not end with the definition of action plans. It is an ongoing process that requires constant monitoring and a periodic review of scenarios and strategies. As surroundings change, it is necessary to adjust the plans and make agile decisions to stay on course toward the company's objectives.
Some insights from current studies demonstrate the need for a flexible and adaptive approach such as scenario planning:
In today's environment, the average lifespan of a business strategy is just 18 months
80% of executives consider scenario planning a valuable tool for strategic decision-making
Companies that use scenario planning are 25% more likely to achieve their strategic objectives
At Summa, we have helped numerous companies successfully implement scenario planning. Recently, we worked with an FMCG company that was facing high uncertainty due to market volatility and changing consumer habits. Through a rigorous process of analysis and scenario building, we identified the main uncertainties and their potential impacts on the business. This enabled the company to design flexible and adaptable strategies that enabled it to maintain its competitiveness and take advantage of new growth opportunities in a challenging environment.
Scenario planning is not a crystal ball, but a compass that guides us through the storm of uncertainty. By taking a proactive and flexible approach, companies can anticipate change, minimize risk, and maximize opportunities in an increasingly complex and volatile business environment. At Summa, we are committed to helping our clients develop resilient and adaptable strategies that will enable them to achieve long-term success, no matter what challenges the future holds.
About the author
Ricardo Sonneborn is a partner at SummaPartners and has more than 20 years of experience in strategic consulting and corporate finance.