Using Scenario Analysis for IT Planning

Updated:  August 3, 2013

What is Scenario Analysis?

Scenario planning is a forward-thinking analytical process, using predictable circumstances and related consequences in order to plan for the future. Scenario planning is used to stay ahead of the curve, where events and responses are anticipated and managed in order to maximize positive opportunities and minimize negative results.

In the IT environment, "scenario planning analysis" can be used to meet multiple management needs:

1.  Projects:  To anticipate risks, assumptions and constraints for project selection, definition, governance, oversight and review.

2. Disaster Recovery Planning: To anticipate the events and conditions qualifying as "disaster" in order to minimize operational disruptions, and provide operational continuity.

3. Problem Management: To plan proactive "responses" to potential failures in critical technology systems.

4. Organizational Planning: To anticipate changing business needs and plan related changes in IT staffing, budgets, services and strategies.

5. Strategic Planning: To anticipate changing technology needs, capabilities and alternatives for short term and long term "technology" planning.

Considering these varied uses, scenario planning offers a wide range of benefits:

1. Scenario analysis promotes long range planning.
2. Scenario analysis promotes creative thought and "outside the box" solutions.
3. Scenario analysis reduces risk through advance preparation and contingency planning.
4. Scenario analysis promotes the "IT/business" alignment, linking the IT mission with business goals.
5. Scenario analysis builds credibility for the IT "performing organization".

Scenario planning success depends upon the ability to effectively define, analyze and prioritize relevant scenarios according to four primary elements:

1. Circumstances: defining the specific scenario conditions to be evaluated and analyzed. Examples: What if our operational budget is cut by 20%? What if the hardware order is delayed? What if the web site is down for more than 24 hours?

2. Consequences: defining the likely consequences (impact) of a given scenario condition. Scenario impact can be positive, negative, or even a bit of both. Positive impact scenarios are opportunities (i.e. these scenarios must be encouraged and developed). Negative impact scenarios are threats (i.e. these scenarios must be avoided and minimized).

3. Timeframe: defining scenario proximity - when is this scenario likely to occur? Proximity is a factor of "scenario" prioritization, determining planning needs and priorities.

4. Probabilities: defining scenario probability - is the scenario likely or unlikely to occur? Probability is also a key factor in scenario selection and prioritization. Scenario planning should not be used as an exercise in futility, or as an attempt to predict the future. When time is short and needs are pending, scenario planning should be used as strategic planning tool, enhancing your ability to respond and react to ongoing change.

Eight Steps for Scenario PLanning And Analysis

1. Identify the need - what is the goal of your scenario planning process? As noted above, scenario planning can be used in a number of varying situations, including projects, disaster recovery planning and IT operational planning. As such, the scenario "subject matter" will determine the nature, complexity and urgency of the planning process.

2. Gather your resources - who will be involved in the scenario planning process? Scenario planning is a team effort, benefiting from collaboration and diverse perspectives, including technical, operational and management points of view. In addition, the "scenario analysis" team must also include individuals with a clear authority to make decisions, and those with a defined stake in the outcome of the scenario planning process.

3. Identify your method - how will you execute the scenario planning process? The "team" approach is most effective, where resources and perspectives are pooled to enable a comprehensive, collaborative approach. That said, structure counts. In order to properly execute any scenario planning process, all critical "execution" elements must be considered, including team organization, methods of communication (meetings, conference calls, surveys), scenario tracking tools (i.e. databases, spreadsheets) and related process documentation.

4. Identify and analyze potential scenarios. As noted above, the specific scenarios under consideration will vary based on the subject matter (project risk, disaster recovery, etc.), and the related individual needs and conditions.

5. Set scenario priorities. As scenarios are identified and analyzed for circumstances, consequences, timeframe and probability, key priorities must be established. Priority is an equation determined by the likelihood of occurrence (probability), likely impact (positive or negative) and the scenario proximity (long term or short term).

6. Plan scenario responses. Once scenarios are identified and prioritized, potential responses must be developed to answer the basic "what-if" question at hand .... "If scenario X were to occur, what will we do? In addition, as scenario responses are planned, warning signs must be identified. Warning signs are event indicators, signifying that an identified scenario is about to occur, and action must be taken.

7. Take action. The timing and urgency of "next step" actions will depend largely upon scenario proximity. Short term scenarios (those likely to occur at any time) require immediate attention. Long range scenarios must be put in proper perspective as other planning needs and activities are considered.

8. Review and revise "scenarios" on a regular basis. There is one undeniable factor in IT management - things change. And, as the underlying circumstances of "scenario planning" change, so must the corresponding results. In order to maintain the forward motion of any scenario planning initiative, analytical results must be continually tracked, evaluated and reviewed. The circumstances of this "ongoing review" will vary based on the scenario planning subject matter. For example, in a fast tracked project environment, ongoing scenario review will take place as part of the oversight phase.

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