Scenario Planning Methods

Strategy is all about anticipating and creating a desired future. To prepare for this, it is essential to understand the Futures Cone, outlining five types of future. There is no such thing as “the future.” It all depends on what we mean, how far we look ahead and on whether we are trying to predict or create the future. One of the most helpful tools to understand this is Hancock and Bezolt’s (1994) “Futures Cone.” It describes five different types of future. They are PROJECTED FUTURE The future we tend to get when we simply stick to business as usual and extrapolate the current baseline strategy. It’s more of the same and contains the least uncertainty. PROBABLE FUTURE The future that most likely is going to happen, taking into account trends and developments within and outside the organization. It’s a bit more uncertain, but still quite predictable. PLAUSIBLE FUTURE The future that could happen according to our current knowledge. This is broader than just the probable future and includes futures that we could foresee rather than just expect. POSSIBLE FUTURE The broadest type of future, including everything that might happen. This is the realm of our imagination and extends beyond our current knowledge, tools and technologies. PREFERABLE FUTURE The future that we want to happen. This is different from the four above as it reflects our desires, preferences and intentions rather than what we cognitively can anticipate. As the image illustrates, the Preferable Future often deviates from the Projected Future (business as usual) or Probable Future (following the trends). This means it requires active imagination and bringing in our desires and intentions to imagine a future that is different. At the same time, it also shows that the Preferable Future should mostly reside within the boundaries of the Plausible Future with perhaps a touch of the Possible Future. Otherwise the gap between where you are today and how you want your future to look is too big. This is where the distinction is made between organizations that make smaller, incremental changes, and those that create breakthrough innovations. The further you can stretch your Preferred Future away from the Projected Future towards the Plausible and Possible Futures, the more visionary you need to be, and the more you will be an industry leader. Here’s the question for you: where is your Preferred Future targeted—more of the same (Projected or Probable) or at creating something new (Plausible and Possible)? — For more useful strategy and leadership content, join my Soulful Strategy newsletter: https://lnkd.in/eKjb8Uss #forecast #futureinsight #impactleaders

The best CEOs plan for 3 different scenarios at once (this transformed my approach to uncertainty): I used to create one "realistic" forecast each year. Then spend 12 months explaining why we missed it. Everything changed when I learned this framework from a mentor who'd scaled multiple companies: Plan 3 scenarios. Execute 1. Adapt quickly. 📊 BASE CASE (95% likely) "What happens if we maintain current performance?" - Focus on core strengths - Maintain spending discipline   - Protect 12+ months runway 🎯 STRETCH CASE (50/50 shot) "What can we achieve with focused execution?" - Expand into 1-2 new areas - Invest in proven ROI initiatives - Keep 6-12 months buffer 🚀 BOLD CASE (25% moonshot) "What's possible if everything goes right?" - Transform multiple areas - Accept lower margins for growth - Operate with 3-6 months runway The magic isn't having 3 spreadsheets. It's what happens when reality unfolds: Q1 tracking to BASE? → You've already planned for efficiency → Team knows exactly what to protect → No panic, just execution Q2 hitting STRETCH markers?  → Green light those strategic hires → Unlock the growth investments → Everyone knows the playbook Q3 approaching BOLD territory? → Time to accelerate aggressively → The plan is already approved → Full speed ahead Instead of surprising your team with pivots, they know all 3 paths from day one. Instead of emergency board meetings, you just point to which scenario you're tracking. Instead of reactive decisions, you make proactive moves based on clear triggers. The result? - Your team trusts the plan - Your investors respect your risk management - You sleep better knowing you're prepared Most importantly: You stop being surprised by reality. And start being ready for it. Every successful scale-up I know uses some version of this. Because uncertainty isn't the enemy. Being unprepared for it is. P.S. Ready to build your 3-scenario plan? Download my framework free:  https://lnkd.in/dhn9y3zq ♻️ Repost to help a leader in your network. Follow Eric Partaker for more planning insights. — 📢 Want to lead like a world-class CEO? Join one of my FREE TRAININGS THIS WEEK: "How to Develop the Mindset Shared by the World's Best CEOs" Wed, July 16th, 12 noon Eastern / 5pm UK time https://lnkd.in/dJRpFXnb "How to Successfully Scale Your Company & Become a World-Class Leader" Fri, July 18th, 12 noon Eastern / 5pm UK time https://lnkd.in/djt83NUz 📌 LAST CHANCE TO APPLY for the CEO Accelerator cohort, starting July 23rd. Learn more here and join 40+ Founders & CEOs: https://lnkd.in/dbE5rkYB

One of the most important applications of GenAI is in foresight. A new report from Paulo Carvalho at IF Insight & Foresight on "How Generative AI Will Transform Strategic Foresight" provides wide-ranging perspectives on the possibilities. Here are some of the most interesting action-oriented frames I found in the report. 🔍 Real-Time Environmental Scanning: Use GenAI to conduct continuous scanning of emerging trends, weak signals, and disruptions across diverse sources. This real-time, dynamic approach allows organizations to stay agile, proactively adjusting strategies as new insights unfold. 🌐 Immersive Scenario Simulations: Utilize GenAI to create interactive VR/AR scenarios that bring potential futures to life. These simulations engage stakeholders deeply, helping them visualize and emotionally connect with complex strategic choices, fostering stronger alignment with future goals. 🔄 Adaptive Scenario Planning: Move from static to adaptive planning by integrating live data into foresight models. Continuous updates based on geopolitical, economic, and technological shifts ensure that scenarios remain relevant and actionable over time. 💬 Enhanced Strategic Conversations: Use GenAI-powered virtual agents to facilitate dynamic "what-if" conversations, helping stakeholders explore a range of possible outcomes. This deepens strategic insights and encourages a proactive approach to complex decision-making. ⚙️ Modeling Complexity and Emergent Behaviors: Use GenAI to simulate complex systems and emergent behaviors, enabling organizations to anticipate interconnected, cascading effects. This prepares them for resilience in the face of unpredictable challenges and non-linear changes. 📊 Multimodal Data Integration for Richer Insights: Leverage GenAI’s capacity to analyze diverse data types (e.g., text, images, audio, video) to gain a nuanced, comprehensive view of trends and risks. This multimodal approach captures intricate patterns that single-source analysis might miss. 🌍 Embrace Multiple Perspectives and Plurality: Design foresight processes that incorporate a wide array of perspectives, blending cross-disciplinary and cultural insights. This inclusive approach creates more robust, innovative scenarios that account for diverse worldviews and challenges assumptions. 🤝 Facilitate Participatory and Co-Creative Approaches: Use GenAI to build interactive platforms that invite diverse stakeholders to co-create and refine scenarios. Real-time collaboration enhances the relevance and inclusivity of strategic models, making them more reflective of shared goals and values. I'll be sharing some of my thoughts on this very important topic in the next little while.

📢 The UK’s AI 2030 scenarios are out – why education must plan for multiple futures. Today, the UK Government released an important update to its Frontier AI: Capabilities and Risks paper by publishing the AI 2030 Scenarios Report (Annex C), which sets out five very different futures for how AI could reshape society by 2030. The paper states that these scenarios 'are designed to help policy makers, industry, and civil society test actions that might mitigate risks and navigate to a more favourable future'. The thinking behind the report is clear: 🔹 The future of AI is highly uncertain and fast-moving 🔹 Each path carries different risks, opportunities, and challenges 🔹 We must build resilience and adaptability across every sector, including education The tone is serious and pragmatic. Some futures offer innovation and prosperity. Others raise real concerns about disruption, misuse, and fragile governance. The five scenarios are: 1️⃣ Scenario 1: Unpredictable advanced AI Open access to powerful AI models leads to breakthroughs – but also unexpected harms. 2️⃣ Scenario 2: AI disrupts the workforce Narrow AI automates many jobs, triggering unemployment and public backlash. 3️⃣ Scenario 3: AI “wild west” Fragmented AI development fuels misuse, misinformation, and weak regulation. 4️⃣ Scenario 4: Advanced AI on a knife’s edge A highly capable general AI boosts prosperity but creates serious governance and safety risks. 5️⃣ Scenario 5: AI disappoints Progress slows; AI adoption is patchy and public interest fades. 🧠 Why has this report been produced? It marks a shift from prediction to preparation. The UK Government is encouraging all sectors (including education) to build flexibility, critical thinking, and ethical leadership into their strategies now. The future of AI is not guaranteed or smooth. Being ready for multiple futures is essential. 🎓 For education, the message is clear: ➡️ We cannot assume a smooth or predictable journey. ➡️We must prepare students (and ourselves) for multiple futures, not just one. ➡️Critical thinking, adaptability, ethical reasoning, and resilience must be central to how we teach, lead, and learn. This leaves me wondering...are we preparing students for a single future, or for the many futures AI could bring? The link to the Annex and the full report are in the comments.

This is a pivotal time for business leaders to apply strategic foresight and systems thinking. Go beyond tariffs and stock market trends and consider the broader, longer-term impacts: 1. How might a trend toward AI deregulation in product safety affect the AI products my business relies on? 2. In what ways could shifts in immigration policy influence my workforce strategy for maintaining a competitive edge with emerging technologies? How could these policies reshape PhD talent pipelines? 3. How will evolving U.S. geopolitical relationships impact my third-party suppliers and global partnerships? 4. With the increasing influence of techno-politics, what new considerations emerge for my business strategy? Scenario planning is key in moments of change and uncertainty.

"Should we hire or should we cut?" is a question I'm hearing often from small business owners right now, which is fair given the mixed economic signals. Some clients are seeing their best quarters ever. Others are watching pipelines thin out. Everyone seems to be asking, "How do we plan for what we can't predict?" This is where scenario planning becomes your survival tool; not just hoping for the best, but modeling the reality of different futures. Here's what we walk our clients through: 🌳 The Growth Scenario: For example, if revenue is expected to be up, we’re looking at potential team expansion and higher overhead. Looking at what that does for cash flow given the changes to expected expense changes. 🌱 The Steady Scenario: Where flat growth is expected and we plan to maintain current team, we’ll want to optimize margins and prepare for inevitable per team member increases. There will likely be some percentage increase YOY but we expect the core costs to stay the same. 🍃 The Contraction Scenario: On the other hand, if revenue is expected to go down, we want to look at strategic cuts that allow the team to run efficiently while preserving cash. For our clients, this is usually a mix of team, professional services, and travel. We also want to ensure that the resources kept are used efficiently. Each scenario gets its own financial mode where we map out cash flow, runway, and break-even points for 3, 6, and 12 months ahead. The command center for this? Fathom. We've been using Fathom since the beginning of Little Fish Accounting and it lets us build the scenarios in real-time with clients, showing exactly how each decision ripples through their financials. No more spreadsheet gymnastics or gut-feeling guesses. Ultimately, the founders who survive uncertainty aren't the ones with crystal balls—they're the ones with clear models and decisive action plans. And we're glad to be the builders 🧱

🌍 New Report Alert: Building a Policy Compass – Navigating Future Migration with Anticipatory Methods 🌍 👉 Migration is a dynamic, multifaceted challenge influenced by climate change, political upheavals, economic volatility, among other drivers. 👉Migration policies often play catch-up, reacting after crises unfold. ➡️ How to develop more proactive, evidence-based strategies that anticipate migration trends and challenges before they escalate? 📖 Our latest report, published for the Big Data for Migration Alliance (BD4M), offers policymakers an overview of methods and tools that can enable forward-looking decision-making. See: https://lnkd.in/ex5Tkamn ➡️ Key Elements: ✅NEW TAXONOMY: To simplify the selection of anticipatory methods, the report introduces a new taxonomy: Experience-Based Methods: Grounded in lived experiences. Expertise-Based Methods: Driven by expert knowledge. Exploration-Based Methods: Encourages creative problem-solving for unforeseen challenges. ✅ COMPARISION: We assess in-depth three methods: 🔎 Scenario Planning: Prepares for multiple migration outcomes by analyzing drivers but requires robust data and unbiased interpretation. Best for medium- to long-term policy planning. 🚨 Early Warning Systems (EWS): Uses real-time data to respond to sudden displacements. A powerful tool but challenges include data privacy concerns and the risk of overreaction. 🔗 Cross-Impact Analysis (CIA): Offers insights into how migration drivers interact, helping policymakers understand cascading effects. Highly data-intensive but invaluable for systemic policy design. ✅ CHECKLIST: Every migration context is unique. The report provides eight criteria for selecting the best method, from data availability and policy goals to stakeholder involvement and resource constraints. ✍️ Co-authors: Sara Marcucci and María Esther Cervantes 🙌 Thanks to the BD4M Alliance contributors: Martina Belmonte (JRC), Damien Jusselme (GMDAC ), Anna Maria Rosinska, Ph.D. (JRC), and Alina Menocal Peters (IOM - UN Migration), for their insightful reviews and contributions. 📥 Download the full report here: https://lnkd.in/ex5Tkamn 💻 More on Big Data for Migration: https://lnkd.in/dR6zuis #MigrationPolicy #AnticipatoryMethods #DataForGood #PolicyInnovation #BigDataForMigration

🔍 𝗜𝗻𝗱𝗶𝗮’𝘀 𝗘𝗻𝗲𝗿𝗴𝘆 𝗙𝘂𝘁𝘂𝗿𝗲 - 𝗜𝗘𝗦𝗦 𝟮𝟬𝟰𝟳: 𝗩𝗮𝗿𝗶𝗮𝗯𝗹𝗲𝘀 𝘁𝗼 𝗩𝗶𝘀𝗶𝗼𝗻 🎯 How will India meet her development goals while staying on course for Net Zero? India Energy Security Scenarios (IESS) 2047 v3.0, developed in 2023 by NITI Aayog in collaboration with IIT Bombay, is a scenario-based energy modelling tool designed to simulate India's long-term energy pathways across demand and supply sectors till 2047. It enables dynamic, user-driven scenario building by adjusting assumptions related to: ✔️ GDP growth and sectoral mix ✔️ Population and urbanization ✔️ End-use energy efficiency ✔️ Technology adoption (EVs, Hydrogen, CCS, WHR, etc.) ✔️ Supply-side transitions in fossil and non-fossil energy 🔧 Each sector is modelled through “levers” with four (4) levels: 🔹 Level 1 – Pessimistic: Status quo continuation 🔹 Level 2 – Business-as-Usual (BAU): Trend-aligned progress 🔹 Level 3 – Optimistic: Ambitious but achievable pathways 🔹 Level 4 – Heroic: Technically aggressive transitions 📊 The tool spans both 𝗱𝗲𝗺𝗮𝗻𝗱 sectors (industry, transport, buildings, agriculture, telecom, cooking) and 𝘀𝘂𝗽𝗽𝗹𝘆 sectors (fossil fuels, renewables, nuclear, hydrogen, bioenergy, CCS). 🚗 𝗥𝗲𝗮𝗹-𝗪𝗼𝗿𝗹𝗱 𝗘𝘅𝗮𝗺𝗽𝗹𝗲: 𝗜𝗻𝗱𝗶𝗮’𝘀 𝗘𝘁𝗵𝗮𝗻𝗼𝗹 𝗕𝗹𝗲𝗻𝗱𝗶𝗻𝗴 𝗣𝗿𝗼𝗴𝗿𝗲𝘀𝘀 A powerful illustration of the IESS framework in action is India’s ethanol blending journey. According to a PIB release of 24 Oct 2024, the country has seen a sharp rise in blending - from 1.53% in 2014 to 15% in 2024 - reflecting its commitment to cleaner fuels and energy security. This trend aligns with IESS v3.0, which recorded 10.2% blending in 2022. The Business-as-Usual (Level 2) pathway projects a modest increase to ~11.3% in 2024. In contrast, the Heroic (Level 4) scenario envisions achieving the 20% target as early as 2024, sustaining it through 2047 - enabled by strong policy support and rapid infrastructure rollout. Co-benefits include reduced oil imports, better farmer income via crop residue use, and lower GHG emissions. At 20% blending, India could reduce her crude import bill by $4 billion annually. 𝗞𝗲𝘆 𝗙𝗲𝗮𝘁𝘂𝗿𝗲𝘀: ⚙️ Integration of recent policies – Green Hydrogen Mission, ECBC, FAME, etc. ⚙️ Simulates emissions, cost, water, and land use ⚙️ Infinite user-defined pathways + pre-loaded Net Zero and Aatmanirbhar Bharat scenarios ⚙️ Interactive web interface with visualization tools 💡More than a model, IESS v3.0 is a strategic platform for evidence-based policymaking, investment planning, and cross-sectoral dialogue for an energy-secure, low-carbon India. 𝙄𝙣𝙙𝙞𝙖 𝙞𝙨 𝙖𝙘𝙩𝙞𝙫𝙚𝙡𝙮 𝙚𝙣𝙜𝙞𝙣𝙚𝙚𝙧𝙞𝙣𝙜, 𝙣𝙤𝙩 𝙟𝙪𝙨𝙩 𝙛𝙤𝙧𝙚𝙘𝙖𝙨𝙩𝙞𝙣𝙜 𝙝𝙚𝙧 𝙚𝙣𝙚𝙧𝙜𝙮 𝙛𝙪𝙩𝙪𝙧𝙚 🏭 🔗 Explore: www.iess2047.gov.in #IESS2047 #EnergyModelling #India2047 #NetZeroIndia #NITIAayog #Sustainability #CleanEnergy #Decarbonization #GreenHydrogen #CCS #ClimateAction #EnergyTransition #IITBombay

𝗛𝗲𝗿𝗲'𝘀 𝗵𝗼𝘄 𝗖𝗙𝗢𝘀 𝗰𝗮𝗻 𝗶𝗺𝗽𝗹𝗲𝗺𝗲𝗻𝘁 𝗳𝗼𝗿𝗲𝗰𝗮𝘀𝘁𝗶𝗻𝗴 𝗮𝗻𝗱 𝘀𝗰𝗲𝗻𝗮𝗿𝗶𝗼 𝗮𝗻𝗮𝗹𝘆𝘀𝗶𝘀. CFOs are constantly looking to forecast better and run more scenarios to improve decision-making. How do you best do that though? Here are 8 steps to implement forecasting and scenario analysis 👇. 1️⃣ Objectives Identify the specific questions or decisions that need to be addressed through these processes. For example, it could be assessing the impact of different market scenarios on cash flow or evaluating the financial feasibility of a strategic initiative. 2️⃣ Assumptions Identify the key variables and assumptions that drive the financial forecasts and scenarios. These variables could include market trends, customer behavior, cost drivers, or regulatory changes. 3️⃣ Analytical tools Gather historical financial data, market data, industry benchmarks, and any other relevant information. Implement suitable financial modeling and analytical tools to facilitate accurate and efficient analysis. 4️⃣ Develop models Utilize statistical techniques, time-series analysis, regression models, or other appropriate methodologies based on the nature of the data and the objectives of the forecasts. Continuously refine and validate the models based on historical data and feedback. 5️⃣ Sensitivity analysis Perform sensitivity analysis impact of changes in key variables on financial outcomes. Vary the assumptions within a range and assess the resulting financial impact. This helps identify the most critical variables. 6️⃣ Scenario ranges Consider best-case, worst-case, and moderate-case scenarios to cover a broad spectrum of possibilities. Assign probabilities or weights to each scenario to reflect their likelihood. Align the scenarios with the organization's risk appetite. 7️⃣ Analyze scenarios Assess the impact of different scenarios on financial statements, cash flow, profitability, and key performance indicators. Identify risks, opportunities, and trade-offs associated with each scenario. 8️⃣ Communication Provide clear and concise reports highlighting the assumptions, methodology, key findings, and implications of each scenario to all relevant stakeholders. Seek feedback and engage stakeholders in discussions to gain their insights and perspectives. ---------- Do you agree that this 8-step process is a great way to implement forecasting and scenario analysis? Anything you'd add, take away, or change? #cfo #finance #accountingandaccountants #careers ---------- 🎧 Listen to our #FinanceMaster Podcast here: https://bit.ly/3NLSt73 📰 Sign up for our newsletter here: https://bit.ly/TrendsInFnA 🧑🎓 Learn how we can help your finance team here: https://bit.ly/3prsWXH 🤝 Book a discovery call with me here: https://lnkd.in/eJWAub9r

What happens to a company’s financial health when the economy takes a turn for the worse? Imagine: A business starts the year with a healthy cash reserve and manageable debt. But As the market shifts, they’re forced to dip into their revolving credit line. The cash cushion starts to shrink, and by the end of the forecast period, it’s gone. Meanwhile, current liabilities and short-term obligations that must be paid within a year remain high, putting added pressure on their liquidity. Now, Here’s where it gets tricky. Even though the company was paying dividends every year, their retained earnings were growing thanks to steady profits. But under this downside scenario, profits turn into losses. Retained earnings reverse course, and equity erodes. The balance sheet starts to tilt: liabilities rise, equity falls, and the company edges closer to breaching financial covenants. The lenders aren’t blind to these risks. They lower the loan-to-value (LTV) ratio meaning the company can borrow less against its capital expenditures. In the best-case scenario, they could secure 75% financing. But as the risk climbs, the LTV drops to 65%. Lenders also shorten the debt repayment period, ensuring they get their money back faster. This shift in capital structure is a stark reminder of how quickly financial stability can unravel. It underscores the importance of scenario planning in financial modeling preparing not just for growth but also for the storms that might come. According to a recent survey, 77% of CFOs identify liquidity management as their top priority during economic downturns. And yet, many companies still underestimate how quickly their cash position can deteriorate under pressure. This is why building a robust forecast, stress-testing your financials, and maintaining a proactive dialogue with lenders are more critical than ever. Have you experienced a shift in your company’s capital structure during challenging times? How did you navigate it?