Strategic Scenario Modeling
In industries facing major changes, it’s axiomatic that it’s no longer business as usual. Decision makers find that ‘visibility’ is more limited than ever…right at the time when they need it most. Scenario modeling goes beyond predicting the future; it's a way of framing and monitoring the dynamics that will produce the future.
What are scenarios?
Scenarios are detailed descriptions of alternative feasible versions of the future. They are not science fiction, but rather evidence-based descriptions of how a competitive landscape is likely to evolve. At best, they are dynamic, and reflect likely changes in competitive market conditions.
When are scenarios most effective?
Scenarios are closely related to forecasts, but different in key ways. When you have a defined number of quantitative input and output variables, forecasting is a more appropriate approach. However, sometimes you face what planning expert Kees Van der Heijden calls irreducible uncertainty—directional signals contradict each other and forecasts, even those from experts, diverge widely. This tends to occur more frequently during periods of extreme change.
That’s where scenarios work best, since they allow you the flexibility of a less deterministic, more sense-and-respond oriented model. Other differences between forecasts and scenarios are outlined in the table above.
What we do
TKA creates a ‘scenario engine’ designed to model inputs, outputs, and outcomes in a specific competitive market situation.
- Inputs consist of macro competitive drivers—the overall size and attractiveness of a market, for example
- Outputs consist of responses of key players in that market—consumers and distribution channels, for example
- Outcomes consist of individual competitr responses within the context of the other factors
In most cases, we find that this creates such a clear picture of the trends and dynamics of a competitive situation that management is suddenly able to ‘see’ what is happening, and to make more positive, informed decisions.
Questions we answer
- How is the overall market likely to evolve?
- What are the key ‘macro’ drivers of this?
- How are specific rivals likely to react? What new companies are likely to enter the market?
- Are the rules of competition likely to change? How?
- Whom will these changes favor? Whom will they leave at a disadvantage?
- How well is your organization prepared to compete under the new rules?
- What, if anything, can you do to influence which scenario actually develops?