How scenarios support strategic early warning processes

Abstract

To survive and grow in an era of uncertainty, companies should strive not only for a single visionary view, which most likely corresponds with their expectations, but instead they should try to acquire multiple views that describe the whole ”window of opportunities”. The development of external market scenarios to assess current strategies is the usual way of coping with these uncertainties. Today this traditional scenario approach has to be extended in four directions: the use of market scenarios to systematically develop future‐robust strategies, the use of alternative strategy scenarios to address uncertainties within an organization, the use of scenarios as a basis for strategic early warning processes and the combination of performance measurement and strategic early warning in a scenario‐based future scorecard. In conclusion it is shown that scenarios could significantly help to bridge the gap between strategy implementation and early‐warning processes.

Monitoring the future. Building an early warning system for the Dutch Ministry of Justice

“…According to [16], a 'strategic early recognition system' is capable of detecting changes in the environment at an early stage, investigating what the consequences of those changes will be and predicting their long-term development. As a result, [16] argues, such a system is a part of the initial phases of strategic planning (see also [17]). On the basis of a number of definitions of EWSs, [18] argue that there are two possible perspectives: detected changes in the environment are threats or opportunities that are not mutually exclusive.…”

Functions of scenarios in transition processes

“…Third, some authors mention the possibility that scenarios can provide reasonable input for modelling [7,66], thereby serving as input data for the analysis of impacts on specific variables, sub-systems, corresponding systems, etc., that have not (yet) been integrated into the scenarios. This modelling sub-function can potentially provide the basis of early warning systems [89]. Furthermore, such a process can be carried out within a quantitative approach (e.g., system dynamics), as well as within a qualitative approach (e.g., qualitative impact assessment).…”

Strategic planning and organizational flexibility in turbulent environments

“…Scholars developed forecasting tools for managing uncertainty at the level of innovation projects (Chapman and Ward, 1996;De Meyer et al, 2002) and capital budgeting and capital structure policies (Bromiley, 1986;Graham and Harvey, 2001;Leland, 1998). More generally, scholars developed future-oriented tools aimed at enhancing decision-making at the level of business and corporate strategy (Alsan and Oner, 2003;Fink et al, 2004;Porter et al, 2004). Some of the most popular techniques are environmental scanning, product and technology roadmaps, scenarios and real options (Porter et al, 2004;Voros, 2001).…”