Speaker 1: So now we're going to talk about scenario planning as part of the strategic planning process. Scenario planning can help you create multiple scenarios for the future, in which case you predict the future and create multiple different environments or realities in which the future is going to occur, and that will help you mitigate risk in the future and create plans at different points to help guide your decision making. So by now you would have looked at some of the threats and opportunities as part of your SWOT, you would have also done some trend analysis as part of your environmental scan, and you may have identified some risks and roadblocks as part of your plan, and now we're going to create some scenarios in which the future of your organization will be determined and so that you can create decision points in the future. So it all starts with key uncertainties about the future, and I've highlighted some behind me, so we'll go through them and I'll walk you through the full process. So when we talk about key uncertainties, there are things that you don't know about. Some of the examples that I've put up here, and again they're different for every organization and your organization, but some uncertainties might be commodity price. We don't know where the commodity price is going to be in the future. We don't know what government stability is going to look like. That might mean in your own region, so either your city, state, province, country, or even another country that you do business in. Consumer trends. You may not know what consumers care about or value in the future. Technology adoption. At the pace that technology is right now, we have no idea where it's going to be in the future. Savings level. Depending on your type of industry, savings level might be a key indicator and a key factor into people's decision making. Population growth. We can say it's going up, but we don't exactly know what that looks like, and it could be going down depending on where you are. Customer adoption. That could mean the adoption of your product, the adoption of your service, the adoption of a certain technology. Renewable energy availability. I just put that in because renewable energy, a lot of people are talking about it right now, and again it's one of those things we don't know exactly where it's going. Traffic density. For example, if you're talking about a city or a retail store, traffic density might be a factor to your decision making. And then overall economic growth. Again, these are just some examples. The important part is to think of uncertainties that exist in your business and in your industry, and then to map them out and identify them. Don't worry about anything else other than just identifying things that you don't know where they're going to be in the future. So the next step is charting these uncertainties and doing a bit of brainstorming as to what that might look like. So one way you could look at it, you could look at it, okay, what are these uncertainties going to look like one year in the future? And you could do it 10 years in the future. Now, you should do this in a process. So start looking, what are the commodity prices going to be in a year? What is the savings level going to be in a year? What is the traffic density going to be like in a year? And those are probably pretty certain. Still uncertain because you don't control them, but because the timeframe is so close, you will have a pretty good idea of what that looks like. You know, get the ball rolling as to guesstimations as to how to concretely measure that and figure out what that's like. The longer timeframe, however, 10 years, or you could go 25 years depending on your planning cycle, will take a little bit more creative thinking and it'll take a lot more brain work to say, okay, well, in 10 years, commodity prices might be double what they are, technology adoption, flying cars might be all over the place, and everything will be a self-driving car and such and such. Economic growth, again, they're guesses, but this is where we start the art and the math of putting together long-range planning. It's not exact science, but it will help you create mitigation plans for the future. So, again, look at that 10-year timeframe and try to guess what that might look like. And then compromising in the middle of somewhere like a five-year timeframe. So, it's not so far that you're guessing, but it's still uncertain in the sense that it's still five years away and a lot of things can affect it. So, next we're going to move into putting these uncertainties into the scenario planning matrix. So, you would have gone through this process with your team and looked at the uncertainties that affect your organization, and now is the time to pick two uncertainties that are going to have the biggest effect on your business and then create different scenarios or different realities in which they exist. So, you can take any one of these and put them together. They should ideally make sense. But one that we can look at right now is, let's say, economic growth and savings level.

Speaker 2: So, we come over here and say, let's take economic growth and then we'll put savings over here.

Speaker 1: So, we have economic growth on this axis and savings on this axis. So, in this area, we have high economic growth and high savings. So, depending on your industry or if this is the scenario that you came up with, there will be, you can name it, and say this is, we'll just say, oh yeah, everybody's making money. So, we'll just call it money. And what does the world look like? What are some things that are happening around us? Because there is a high growth rate and a high savings rate. Conversely, you can say that there's low economic growth but high savings rate. And then we can call that hoarding. Because people know the economy is not going well and so they're keeping their money just in case. They don't want another recession or they don't want to have another subprime mortgage crisis or what have you. And it's going to affect things like spending. Consumer spending may go down because of low growth but high savings. In fact, it's almost certainly going to do that. So, you have to look at those things and say, okay, well, what are the things that are going to happen as a result of this scenario in the future? Five years in the future, 10 years in the future, 25 years in the future. We have high economic growth but low savings. So, that means that we're going to say spending, spending fast. So, you can call them whatever you want. It's just a way for you to guide the understanding within your organization. So, everybody is spending fast, which means that new cars are going off a lot, which means manufacturing is high, which means people have a lot of jobs, which means unemployment is low. What does that mean to your organization? How is that going to affect how you do business and how you operate on a day-to-day basis? Again, so we go here. So, low economic growth and low savings rate. So, we're just going to call it doom. It's probably not that bad. But low growth, low savings, what's going to happen? People, there might be higher EI. There might be less pensions. I mean, retirement might go longer. It means that there isn't enough good talent for your workforce, so on and so forth. And it might mean that people start outsourcing to third world countries or what have you. But all of these things in the future are going to affect your business. So, you can see up in the corner here. So, we have now. This is where we are right now. Okay. And then the future is where we've built out these scenarios from. The future is, you see there's multiple points up there. This is a possible future. This is a possible future. This is a possible future. And this is a possible future. We don't know what it's going to be. And we don't know what we're going to do if those things happen. So, what we look at now. And then in the future, between this time and where we are now, you're going to be faced with decisions. You're going to have to say, okay, we're looking at this. And one of these or two of these is becoming more and more likely. So, now we're going to pick a strategy to address it. So, when we talk about risk identification and mitigation. This is part of risk identification and mitigation. You're looking at what might be happening in the future, where you are now. And the decision that you need to make that are going to steer you closer to one or many of these realities. Now, the reason we do strategic planning and the reason we do risk identification is so that you can have the time. And you can mobilize the resources that you need to make effective decisions, both in the near term and in the long term. So, just to recap, for scenario planning, you list the key uncertainties in your business. Now, again, they have to be uncertainties. They can't be things that you're pretty certain of. Uncertainties. So, you identify all the uncertainties in your organization. And then you pick the two most effective ones. The ones that are going to affect your organization the most. And then you put them in the scenario planning matrix from high to low. You take your uncertainties on the X and Y axis and put them in here on either a 10 year or 5 year time frame, for example. And then for each, you name the scenarios as to what those scenarios are going to look like. And then you describe them as if you were transported there in the future. So, this high economic growth, high savings. This is what's happening. This is what people are doing. This is how organizations are reacting. This is how businesses are acting. This is where investment is being. This is what people are doing. This is what people care about. These are the things that are in the news. And then you make scenarios as part of your strategic plan. Saying, okay, if this happens, we're going to do this. If this happens, we're going to do this. Obviously, these being so long term, you won't make a plan, a mitigation plan for each. However, you've identified that in the future, you're going to need to make a decision. And since you've taken the time to identify this, these alternate realities, then you can be more prepared, which means you're going to spend less money reacting to things. It means you're going to be ahead of trends in the marketplace, and you're going to be ahead of competitors when it comes to decision making and planning. And that means you're going to get an advantage, and you're going to be more successful long term. So I hope this helped you understand a bit about scenario planning. And please do check back to the documents for a written explanation of how to do scenario planning and why it's useful for your organization. So I look forward to sharing with you in the next video, and we'll talk to you soon. Take care.