Scenario Planning for Fun and Profit

By Mal Warwick

Copyright © 2006

If you’ve been following this column, you know I’ve been sharing a proven approach to strategic planning called “scenario planning.” In the last installment, I described the initial steps in the process, designed to identify the biggest uncertainty your organization faces and to collect the information you need to begin exploring how that uncertainty might play out in the future.  Meanwhile, let’s continue the story with the fourth of six steps in the scenario planning process.

 
4. Determine how broad trends in society might influence your decision

Analyze what scenario-planners call the “driving forces” – the factors that can make a life-or-death difference in the way things turn out. They’re the Big-Picture events and activities that have the potential to upend our lives overnight—to make the world a different place. These driving forces include the following four categories (at a minimum):

 Social dynamics
 Economic forces
 Political issues
 Technological developments

These are factors that could affect any or all of our three hypothetical nonprofits. In practice, scenario planners look into each of these categories in depth, one at a time. In the limited space and time available to us here, we can only hint at the complexity of the issues involved—and of the need to sort through the complications:

 The Weedunotes Philharmonic could find itself out of business if the economy turns sour . . . if Congress and the city council completely eliminate financial support for the arts . . . if new technologies in home entertainment undermine ticket sales . . . or if sharply increasing crime and violence keep people alone in their homes. If, instead, any or all those trends suddenly veer off in the opposite direction, what might that mean for the orchestra?

 The Safety Net Center may live or die with changes in the federal tax code, demographic shifts in its client population, or dramatic improvements in teaching technologies.

 Prospects for Save the Universe will brighten considerably – regardless of global climate change – if the U.S. economy thrives . . . if the spirit of voluntarism, encouraged by changes in the tax code, gains greater strength among the American people . . . or if scientists discover ways to blunt the impact of climate change.

Now comes the fun part. This is where you actually get to tell stories.

5. Write several sharply contrasting stories to illustrate what the world will look like if the worst happens . . . or the best

These stories, or scenarios, will portray possible – but unlikely – futures. For example, one story may represent the state of things to come if some current major trend continues unchecked . . . another if some unanticipated change, perhaps political or technological, reshuffles the deck of reality . . . a third if “things just keep getting worse” . . . and a fourth if “things pretty much stay the same as they are.”

If you work at this task as a group, you’ll come up with a bunch of scenarios. But a bunch is too many. You’ll need to settle on two or three, or at most four, scenarios if you’re to have any hope of understanding (much less explaining) the consequences of the strategic choices you face.

So, next, merge or modify the scenarios you’ve constructed. Select two or three significantly different portrayals of the future.

For instance, the scenario planners at each of our three hypothetical nonprofits might narrow down their alternative pictures of North America in 2005 to positive versus negative . . . prosperous versus poor . . . peaceful versus violent. They might call the optimistic scenario “The New Gilded Age.” Their label for the more pessimistic view: “Hard Times.”

Having envisioned these possible (if improbable) futures, the scenario planning team at each organization will carefully review the consequences they anticipate from each scenario in the event that it proves valid.

6. Test strategic choices in light of these contrasting scenarios

Once you’ve written your stories and pondered their potential impact on your organization, it’s time to try answering that big strategic question you started with. Use “What if . . .” reasoning to think through the consequences of the alternative choices you face. Consider how each strategic choice will play out in each of the scenarios you’ve constructed.

The objective here is to test how well a given strategic choice will hold up in two or more alternative futures. Don’t worry if these “futures” seem unbelievable, or even a little silly. If you’ve done a good job writing scenarios, you’ll have two or three stories that represent the extreme possibilities the future holds. If a particular strategic choice looks as though it ought to hold up better than other choices—no matter which scenario proves closest to the truth—then you may have saved the day—not today, but the day after tomorrow.

Here, for example, is how the planners at one of our three hypothetical organizations – the Safety Net Center – might conduct that analysis:

 An era of unparalleled generosity – the New Gilded Age – will bring generous dividends to the Safety Net Center because of its board’s difficult and costly decision during the previous decade to invest big in donor development. From this future vantage point, this looks like anything but luck. After all, the leadership of the Safety Net Center might have decided to embark instead on a course of austerity, cutting back on program staff and eliminating what then seemed like marginal fundraising efforts. If the board had pursued that course, it’s highly unlikely the Center would now be positioned to tap the reawakened spirit of voluntarism that characterizes this new era.

 Similarly, in Hard Times, the Safety Net Center might well no longer be in existence if its board had chosen to cut back on individual fundraising. With government funding limited in this hardscrabble scenario, human service organizations are dependent largely upon private support. The Center’s earlier decision to invest in donor development has positioned it well to compete for available funds, even in Hard Times.

So, what choice would you make as board chair of the Safety Net Center? Isn’t it obvious? Under the two scenarios now facing us, the best we can hope for from a cut-it-to-the-bone strategy is sheer survival. Only by investing in a major donor development effort can the Center flourish.

Think for a minute. Would this technique help your organization get a tighter fix on its future pitfalls and possibilities? If you think it’s worth a try, drop me a line at mal@malwarwick.com, and I’ll email you the worksheet I use as a guide to apply the scenario planning method to nonprofit organizations.

 
But keep your eyes on this space. In subsequent columns, I’ll put the scenario planning method to work to envision three possible and widely divergent futures for the world of philanthropy and fundraising twenty years from now – a world that is likely to bear little resemblance to today’s reality.