Scenario Planning in 2020: What You Should (and Shouldn’t) Be Doing

By Scott Kirsner |  July 6, 2020

Are you devoting too much energy for a return to something like the normal we knew in January 2020? Matt Ranen thinks so.

Matt Ranen

The business and societal impacts of the coronavirus pandemic will be “more like World War I or the Great Depression,” says Ranen, a scenario-planning consultant based in San Francisco. “It’s a good idea to think about how much change there was then.”

Ranen also suggests that you need to be planning for three horizons: the immediate near-term, the longer-term before a vaccine is developed, and the longterm post-vaccine. His list of clients includes Hershey’s, Visa, Toyota, and Gilead Sciences.

We interviewed Ranen as part of our research report, “What the Future Looks Like.” Edited highlights from the conversation are below. 

What’s Happening to Your Target Customers? 

Most large companies used to be able to go after the mainstream market. But [today], you almost have to start choosing who your audience is, and what part of the market you’re going to play in. With so much income inequality [in the US], are you participating in the low-cost, cash-flow sensitive economy, or the luxury economy, which is getting more expensive and more exclusive? The Dollar Stores have grown tremendously, and they’ve said, “We’re just serving that former group.”

There’s a lot of spin about “the world is going to do this” and “the world is going to do that.” But who do you care about in your market — and do you understand them? Play out the future from their perspective, as opposed to [trying to craft] a generalized worldview.

The act of writing out scenarios forces you to be logical, and to tell a story about what you would have to assume for these grand predictions to actually come to fruition. 

Second, the act of writing out scenarios forces you to be logical, and to tell a story about what you would have to assume for these grand predictions to actually come to fruition. You almost have to peel the onion to understand all the assumptions that would have to be true [for a scenario to play out].

Timeframes are important. Disruptions are going to be in different parts of their cycle. For some new behaviors, they’ll be early — they will expand the awareness and the dabbling [with a new product or technology], but not the conversion. But for many other products or segments of the population, we’re already dabbling, and this is going to convert us. So with certain things, is there a chance that 30 percent of the customer base changes and the other 70 doesn’t yet?

Thinking Along Three Time Horizons

In many companies, there’s a tactical set of scenarios and issues you need to be thinking about — like preserving cash and thinking critically about where your core is most defensible. Maybe there is a three-month time horizon for those scenarios, and a bunch of decisions you have to make within the next few months before you have to make those decisions.

The basic science…says, at a minimum, we’re not going to have a vaccine for 24 months. So what will be the behaviors in that timeframe? Maybe the way I address those is temporary, and not permanent. You’re putting some more eggs in that basket of the next two years. But then there’s two-to-10 years out, which is the classic scenario planning timeframe, where you’re asking, “How will industries fundamentally restructure themselves?”

So we’re talking about three time horizons: immediate, pre-vaccine, and post-vaccine.

‘We’re Past the Possibility of a V-Shaped Recovery’

Strategy and innovation is a portfolio of bets about the future. If you’re a big company, you should always have multiple bets going on at once. A startup has to bet the farm that there’s going to be a particular future. But most big companies have to take a core and a side bet mentality. Side bets could be, “We need to be doing a little bit more in security.” Or, “We should be thinking about multi-nationals, and not global company structures, so let’s start contingency planning around that.” Another could be risk-averse — “maybe we could find a partner to joint venture something with to spread the risk, and still play” — as opposed to pulling the plug completely on something. Over time, you [need to have] a very regular process to monitor and adjust that. There should never be a permanence to these bets; they should be constantly fluid and adjusted every few months. Your leadership needs to be constantly reassessing and adjusting as new information arises.

I think we’re past the possibility of a V-shaped recovery at this point. All money should be moving toward U-, L-shaped, and W-shaped recoveries.

Comparing 2020 to 2001

After 9/11, there was a lot of scenario work done for a few years, and then it kind of petered out again. This will create more appreciation around uncertainty, and people will start doing it again. There’s almost a fear of thinking that the future could be different. There’s a lot of bias. You know — “we built these things, and the last thing I want to do is open up a conversation that the things we built aren’t going to be worth as much in the future.” Unless there’s a real incentive for change, most people want to believe that what they’re doing is good. If they’re an incumbent…there’s a lot of pride.

Whoever tells you they know what will snap back from this is lying to you. 

Whoever tells you they know what will snap back from this is lying to you. But trying to do a “day in the life” can be useful. Innovators have traditionally been good at ethnography work and design thinking. Scenario planning is essentially ethnography from the future. Spend some time in the shoes of people who are different from you to understand questions like what will change and what people want to go back to. Start to understand how their aspirations, needs, and wants are changing. What if they’ve been unemployed for a year or two? Desperation often leads to extreme behavior change very quickly.

9/11 was not as widespread as this. Back then, I was thinking about travel and security. Security got heightened, and then it slowly backed down – but not for everybody, and not everywhere. You eventually got things like TSA PreCheck, but think about how long that took.

This is more like World War I or the Great Depression. It’s a good idea to think about how much change there was then. Did people snap back to say, “I want to ride horses again?” No, they were all for modernization.