August 15, 2013

Where Pointy Heads Meet Pointy Pencils: Scenario Planning and Market Modeling

FSG’s Peter Kennedy and Robert Avila have collaborated on a case study of a hybrid approach to country risk and market planning.  The article, which is entitled, “Decision Making Under Extreme Uncertainty: Blending Quantitative Modeling and Scenario Planning,” appears in the current issue of Strategy & Leadership and chronicles their experience consulting for a major automotive manufacturer in Brazil.  The authors describe both successes and lessons learned in helping the client deal with fundamental uncertainties it faced in a market undergoing disruptive change.  Among the key takeaways from this experience is focusing quantitative modeling on shorter-term market forecasting while using the scenario-planning tool to look expansively at longer-term structural changes in the market – political, economic, financial, regulatory, and so forth.  These are typically the kinds of “forces for change” that cannot be reliably modeled. But understanding their potential impacts is essential, not just for risk-management purposes, but for competitive analysis and opportunity identification purposes as well.