Building Change Tolerance into Your Organization:
The Uses of Scenario Planning
© 2005 By Donna Fitzgerald
Introduction
The problem with most planning exercises is that they are both linear and single path. Judgments are made based on opinions or unconscious assumptions and everything flows from there. Using the concepts of scenario planning, a minimum of three possible futures is outlined. The tactical work that the company wishes to accomplish in the next year is then examined against these assumptions. Does project A only make sense in a steady state environment? Does Project B begin to make more sense in the context of multiple scenarios because while it’s higher risk it’s higher payback in two out of the three possible futures?
One way to view this approach is that it is equivalent to risk planning in project management. Basic PERT scheduling techniques would have us prepare three versions of our schedule to understand our aggressive, most likely and pessimistic. Scenario planning offers a similar risk technique. Instead of planning just one version of the future assuming everything will go as planned. By planning for various outcomes it is much faster to adjust to the inevitable impact of change.
Scenario Planning
What types of scenarios could you derive? One scenario that must be looked at each year is what trends or indications exist that the future might unfold in a direction that eliminates the need for the products or services that the company currently offers.
Most IT shops start their planning process with the following assumption:
“A new technology emerges causing rampant replacement of existing capital assets and the need for new software.”
So a logical place to start with scenario planning would be to reverse your standard assumptions. What would happen if you don’t have to change out your desktops every two years? This would obviously drive some of the anchor companies in the high tech industry into the sea, which will impact the whole industry, which might reduce demand for your own company’s product. What happens if Oracle is right and ASP (ed. note: this is Application Service Providers) absolutely becomes the future? Desktops become less important. Servers predominate, customization of base code stops and applications become more end user configurable. Requirements for technical folks goes down in the organization, reducing staffing problems, but business analysts are still needed because you still need to make sure you’re solving the right problems.
Divergence Isn't a Strategy
A couple of very obvious things should have hit you after reading the above paragraph. The first is that every good project team in your organization does it’s own scenario planning. The CRM team believes the ASP future, your capacity planning people believe hardware will continue to swap out every two years, and your development staff believes that XML is the second coming and that the inter-relationship between all systems will change and that you should be letting them recode now.
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And you thought that you only needed to worry about best practices and benchmarking and the quality of projects in terms of on time and on budget. If you’ve ever asked yourself how multi-million dollar projects fail, you’ve started to see a glimmer and yes it could happen on your watch.
So where has our wandering conversation led us? We now see that the average IT organization is a group of good capable people pulling in about 17 different directions. Some of those different directions are absolutely appropriate based on their functions or lines of business but the others are simply a result of sub-optimization.
Getting Convergence
So what to do? Step One is adopt a structuring paradigm or an over arching mental model to quote Senge’s fifth discipline. This is what your scenario planning will accomplish for you. It conveys to the entire staff that IT has looked forward. Identified a number of possible futures, and chosen one that they feel is most likely. But because IT understands risk management they have also “set up monitoring systems” to make sure that adjustment is possible if required. It also has the somewhat less obvious benefit of truly positioning you and your staff as leaders and not just managers.
An additional benefit of this type of planning that often isn’t overtly recognized is that it unifies diversity. In conventional planning approaches the first thing organizations are told to do is to conduct an alignment process where in opinions are polled on business drivers and then once consensus is reached they are ordered to change their opinion.
In scenario planning differences of opinion as to what’s happening in the future become the basis for the different scenarios. While one scenario will still be picked as the basis of the operating plan, the other scenarios remain visible and the advocates of these scenarios become the natural advance guard looking for warning signals that the future is cycling in their direction rather than the “planned” direction.
Your Planning Horizon
What should you use as a planning horizon? Traditionally we’ve all done 5 year plans but in today’s environment of rapid change we’ve begun to consider that the 5 year time frame is too short for scenario planning. It turns out it’s very easy to convince oneself that what ever is happening today will continue for the “foreseeable” future (remember that boom in the stock market?). Moving your scenario horizon out 7 to 10 years doesn’t increase accuracy but it does free up thinking.
You don’t absolutely have to incorporate scenario planning into your project portfolio management process. In fact I don’t usually recommend building it into the initial process but once you’ve reviewed your portfolio a few times and have tackled some of the most critical process issues, adding in a process of scenario planning increases the usefulness of the portfolio review process and helps to ensure that the projects in the portfolio meet the long term goals of the company.
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Editor's Note: Donna Fitzgerald is asapm's past Director of Education,
and in addition to managing her own Project Management Consulting firm, www.knowth-consulting.com, she
runs NewGrange, asapm's official list serve, the "hottest place
on the web to discuss project management", at www.newgrange.org. |
