It is useful to remember that scenario planning, when done systematically can certainly drive a strategic mindset within a company and enable informed risk management and strategic focus.

I found an interesting article in The Wall Street Journal noting how companies are once again turning their attention to scenario planning. The article describes how scenario planning has helped JDS Uniphase more rapidly respond to the the industry downturn. JDS Uniphase is now using the same strategic scenario planning techniques to plan for the eventual business upturn as well.

Of course, scenario planning never really went away. Like any strategic tool, it can get worn by misuse or lack of clarity as to how it can add value. As an example of this, in the comments section of the WSJ article one person summarizes scenario planning as creating worst case, best case, and most likely case scenarios…while such scenarios may be better than nothing, these three scenarios would not be the output of widely accepted approaches to scenario planning. However, it is unclear how rigorous was JDS Uniphase’s use of scenario planning since the article only mentions a “worst case’ revenue scenario.

Given that scenario planning was developed as a way to manage uncertainty, it is not surprising that scenario thinking is making a come back today. Scenario planning picks up where modeling loses relevance. It should not be viewed as a replacement for more quantitative strategic and financial modeling techniques. Rather, scenario planning can be used to help develop the input to these other planning tools. Ideally, a scenario planning process should lead right into an industry monitoring process so that probabilities can be updated in real time.

More about scenario planning:
Scenario Planning Executive Training
Scenario Planning articles and books