Scenario Planning For the Post-COVID World
Posted by | Christian Schena
One thing is certain. The economy will continue to evolve in the aftermath of COVID-19, just as it did during the pandemic itself. Without any certainty about what it will look like, however, it’s hard to settle on a strategy that will guarantee success. Will businesses remain subject to every erratic and fickle change in the wind, like falling leaves with no idea where they will land?
Not with adequate scenario planning.
While we can’t predict the future, we can consider — with concrete evidence — a range of realistic possibilities. Scenario planning is a structured framework that helps your business react to unpredictable (but possible) disruptions in the market with speed and effective strategic action. By shaping potential future outcomes into divergent but plausible scenarios, stakeholders can easily link strategic imperatives to on-going market monitoring for risk/opportunity identification.
And it works. As HBR reported in the wake of the Great Recession, a survey of 77 large companies at the time demonstrated four critical values of strategic foresight:
- Enhanced capacity to perceive change
- Enhanced capacity to interpret and respond to change
- Influence on other actors
- Enhanced capacity for organizational learning
“Scenarios provide the right framework for appreciating fundamental long-term choice, which is not the same as next year’s annual plan.”
Where Are We Headed?
Current indicators suggest that another shutdown, a third of fourth surge, is growing increasingly unlikely. The uncertainty now centers around the question ‘what is the new normal?’ The height of the pandemic provoked numerous changes in the way consumers behave, what they buy, where they buy and how much they are willing to spend on consumer packaged goods (CPG) in essential versus discretionary categories.
Consumer spending in the pandemic gravitated towards certain product groups and services. Electronics, video games, books, delivery of food, for example, all saw increased sales. Other product groups (e.g. apparel, footwear, and those that require in-store interaction) fell behind.
Coming out of the restrictions in place during the pandemic, these are some of the areas that could, and even now are beginning to see change. We’re likely to be asking ourselves questions such as:
- Will we have a world where people move dramatically towards more discretionary items, having lived with essentials for a year and a half?
- Will people return to smaller shops in droves, consciously making an effort to support them?
- Will services take up a larger share of the wallet again (restaurants, travel)?
Change Is Inevitable. Be Prepared.
The point is that the recovering market will almost certainly continue to change in significant ways.
While there are elements of your business strategy that you’ll adhere to in all situations, others will need attention and a flexible plan of action that can be activated if and when a scenario evolves. Mass shifts in consumer behavior may require more agility than you’ve been accustomed to in the past.
Nobody can predict the future, but it’s possible—and valuable—to prepare for a narrow set of likely possibilities with robust analysis and adequate scenario planning. Your carefully designed plans A, B, and C should all be ready to trigger as events evolve and the path becomes clear.
We invite you to access the full article for deeper insights into the observations, drivers, and hypotheses that drive the scenario planning process as well as a list of actionable examples and targeted planning tips.