In this brief paper we will outline four steps needed to turn scenarios into a value-added component of your strategy execution plan:
The question posed in the title is a natural one for any executive. The exercise of creating scenarios,i.e., alternate and plausible futures, is exciting stuff. By themselves scenarios create value in organizations because their existence facilitates discussions about something other than the ‘official future’ which most forecasting-based strategic plans define. In that way developing scenarios helps to open minds to better see what might come. But using scenarios will also help you to decide and
act proactively. So, while there is value in the scenario development exercise, the real payoff comes for organizations which systematically link their scenarios to management decisions and actions through real options. In this brief paper we will outline four steps needed to turn scenarios into a value-added component of your strategy execution plan: (1) stress test your current business and wind tunnel your plans and goals, (2) generate real options to deal with scenarios, (3) create real options and (4) monitor how the future unfolds while you exercise your options. Then we will describe how you can integrate scenarios in your investment analysis.