This post first appeared on Forbes.com
Over the past few months, our world has been rocked by crisis after crisis. In the face of this uncertainty, the CEO and board of directors want answers to vitally important questions: How will we respond to emerging threats and new competitors? Where do we look for growth? A strategy used to be about predicting the future but now it’s about planning for a future that can’t be seen. This is doubly important for CIOs who must balance how to weather the current storms and make technology decisions and investments today to prepare for a “new normal” that will emerge years down the road. By then, everything may have completely changed.
One of the most powerful tools to plan a strategy in the face of uncertainty is scenario planning, but in most organizations, CIOs are approaching it the wrong way and end up with sub-optimal strategies—or, even worse, a strategy that is flat out wrong. Here are the reasons why traditional scenario planning isn’t working in this environment and how CIOs need to rethink the approach if it’s going to be of any use.
The case against scenario-planning-as-usual
Scenario planning has been around for decades, pioneered originally by oil companies like Shell to plan for long-term investments. But in the face of Covid-19, many organizations are using this tool in ways that do not help CIOs. They are:
- Myopic versus long-term. The CIO is one of the few C-Suite executives whose responsibilities require long-term planning, but short-term, urgent needs such as how to reopen safely or investments for business continuity keep many scenarios in six- to-12 month time frames. That may be an appropriate time horizon if you’re the COO, but the CIO must push for scenarios that look out at least 18 months, and ideally 36 months, into the future.
- Risk-mitigating versus opportunity-seeking focus. Most scenario planning is used to mitigate short-term risk and conserve cash—top priorities for CFOs and business continuity. CIOs must not only prepare for short-term challenges but also rise to meet the longer-term opportunities. Taking an investment mindset requires developing scenarios that have fundamentally different trigger points—ones determined by changing customer needs and shifting competitive landscapes.
- One-offs versus continuous. Scenario planning requires substantial resources and commitment—which is why in the face of a crisis like the coronavirus they tend to be developed at the start of disruption and rarely revisited. CIOs must make scenario planning a continuous part of the strategic planning process, constantly revising the scenarios and revisiting the trigger points to make sure they are still relevant.
For all of these reasons, CIOs should work closely with strategic planning teams to ensure that any scenario planning work that is being done will also serve the long-term IT needs of the organization. Don’t get sucked into accepting the wrong scenario planning process!