Create an Agile Strategy for Navigating Change with Scenario Modeling

By: Kari Moeller

We have always believed that scenario-thinking plus the right data plus automation equals a truly powerful business tool – but since there’s been a lot of discussion in recent months about the importance of scenario modeling, simulation, and asking ‘what if’ more often, we wanted to share our perspective as to the value they can deliver in terms of planning, agility and driving the best execution path for results.

How scenario modeling can help your business plan for the unexpected 

As the widescale disruption of 2020 shows no signs of abating, it’s clear that we haven’t been asking ‘what if’ enough. The habit of simulating potential situations using scenario modeling technology must become more prevalent across all industries. 

Data and analytics leaders are tasked with ensuring these techniques become mainstream and are used in a wide range of applications to gain efficiencies in a rapidly evolving world.

This business landscape we are now living in since the onset of the Coronavirus pandemic is unfamiliar to all of us. Many areas of our lives, and our business operations, have been protracted as a result of social distancing, national lockdowns, and restrictions on international travel. In many cases, decision-making and strategizing is more difficult because historical data and the familiar approaches we are all used to are obsolete or less reliable or practical than they were before the pandemic.

It is obvious to most that there are lessons to be learned from COVID-19 and all that 2020 has brought upon us, in that most businesses lacked preparation and failed to adequately plan for such widescale disruption. Hindsight may be 20/20, as they say, but how useful would it be to have that same clarity before making decisions or taking actions?  

Scenario-modeling can revolutionize the way we plan for the future 

To help aid decision-making, businesses must be able to create and iteratively model a range of options to help them gain insight into the potential impact of their choices. It’s this tantalizing prospect of turning hindsight into foresight that means ‘what-if’ analysis and scenario modeling are becoming more important within a broader variety of disciplines. From micro to macro factors affecting your business, scenario-modeling can become an every-day business activity that can inform a broad range of business decisions and strategies.

With many enterprises seeing their carefully constructed strategic direction derailed by disruption, there’s no choice now but to turn to adaptive strategic planning to navigate the crisis and reset the overall strategic direction of your business.

Global research and advisory firm Gartner has stated that companies must reset their business strategy following the COVID-19 pandemic, and that this reset should take place in 3 stages: Respond, Recover and Renew.

In their press release, Gartner identified that in the recovery phase it’s important to discover exactly where and how the crises of 2020 have stretched and broken existing models to identify risks and opportunities. They recommended that business leaders should collaborate around an agile, options-based scenario-planning protocol that they can use to identify and evaluate uncertainties.  

This recommendation does not represent a one-time solution, but rather to ‘renew’ their business post-2020 companies need to continuously use these techniques to prepare for future disruption and avoid such widespread struggles in the future. 

Preparation is everything 

Organizations should prepare to navigate through future moments of instability. Moments of instability can be economic, geopolitical, environmental, social, or competitive. During business instability, it can be commonplace for corporations to opt to stay on course and weather the changes, however this often leaves opportunities and risks missed. The organizations that triumph in these circumstances often behave the most aggressively, and research has shown that a small number of organizations that anticipated the future and developed comprehensive action plans before the Global Financial Crisis were rewarded with a sustained advantage over their competitors since.

Scenario-thinking during uncertain times can enable businesses to consider their options with truly data-led clues as to the results. Having this process automated, and therefore simple, fast, and flexible can open up a world of opportunity and enable businesses to act quickly and confidently in times of crisis. Scenarios can be developed using what-if techniques then compared and analyzed – turning the role of analytics on its head. After all, should we be more invested in discovering what has already been or divining what is to come?

Scenario modeling can help your business focus on the future 

With multiple applications, scenario-modeling capabilities can generate value for a business in the following areas:

  • Achieving regulatory compliance more efficiently, by reviewing scenarios and understanding how to efficiently match legal and compliance commitments to demand. Scenario modeling can assist in determining what should be prioritized in terms of legal and compliance support.
  • Identifying risk and discovering opportunities. Once the implications, risks, and opportunities are identified, scenario-modeling can then give insight into adjustments that need to be made and the potential impact of them, using this information to inform decisions.
  • Businesses can test the effectiveness of potential changes without the expense or risk of actually implementing them. Removing the need for trial runs, and at essentially zero costs, businesses can explore alternatives, test different demand or product flow scenarios, and make refinements before committing any capital. The potential for accelerating the deployment of new processes and the impact on taking changes or new products to market is exponential.
  • Driving efficiency and value. With belts tightening across the world, it’s more important than ever to focus on the bottom line and cash flow, maximize working capital wherever possible.

The Gartner research about COVID-19 recovery and the part scenario-modeling plays in achieving recovery and growth is exciting, and for us underpins the passion we have for this technique. More than just trying to predict the future, our scenario-modeling function provides the opportunity to explore different possible versions of the future and comparing them to understand the differences between them and how to achieve them. It’s about data analytics that provides more than forecasting, but the chance to explore the future – and even to compare real-life results with the previously modeled scenarios post-event. Find out more about our scenario modeling and simulation capabilities here.

Did you know, BusinessOptix was identified as the only vendor in Gartner’s 2020 Market Guide for EBPA that could currently offer scenario modeling capabilities as part of our suite of Business Process Analysis software?

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