A scenario plan is a forward-focused document that deals with possible shifts in a business's operating environment. It is designed for long-term strategic development and works to identify key forces outside the company's control. The plan examines several possible scenarios for the company. The challenge for management is to identify and focus on indicators that can help the company prepare for different eventualities. Successful scenario planning enables a company to adapt and survive.

Step 1

Focus the attention of the management team on an important issue facing the company or a decision that must be made. This defines the scope of a particular plan. An example might be to reach an understanding of what would impair the ability of customers to finance purchases from the company.

Step 2

Identify what will determine success or failure in the scenario-planning process. Assess the key factors that will influence the final decision -- for example, what the planners need to know, conditions that will determine success or failure, or critical assumptions.

Step 3

List the driving forces that will influence the key factors. Driving forces under the company's control might be outstanding customer service, on-time delivery of projects or excellent technical support. Factors outside its control might be society and the economy, customer behavior in the company's market, technology and innovation in the company's industry, and competition.

Step 4

Rank the key factors and driving forces by importance and degree of uncertainty. Make up stories for alternate futures that could impact the decision that has to be made. One such scenario might involve the impact of a credit crunch on the company's sales. Assume that widespread defaults on home mortgages could cause banks to reduce all lending. This could restrict the ability of the company's business customers to finance purchases of the company's products.

Step 5

Decide how to deal with each scenario and document your plans. In the example of the credit crunch, the company's leading indicator of possible problems with business customers' borrowing ability would be widespread problems in home mortgages. Upon recognizing that indicator, the company could begin reducing inventory and plan for reductions in sales and marketing staff.

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