Combining Scenario Management and Business Model Thinking: Why Strategic Agility is the new Way to Define your Corporate Strategy
Strategy implementation often turn into strategy justification - the necessary questioning of changes in the environment or the exploration and testing of alternative options is not perceived as invigorating but as disturbing.
For the past decades, companies have been defining their strategy following a traditional approach: On the one hand, they analyzed trends, selected the most relevant ones, and designed their strategy based on a “clear view of the future”. On the other hand, they created a one-dimensional strategy which – at best – provided a clear direction, but often gave the company's development little room to breathe. Therefore, strategy implementation often turned into strategy justification - the necessary questioning of changes in the environment or the exploration and testing of alternative options was not perceived as invigorating but as disturbing.
With the COVID-19 pandemic being part of our lives for a much longer time than expected, this worldwide crisis has shown strategists the limits of traditional strategic thinking. On one hand, uncertainties still are and will remain very high. Even if some changes such as environmental protection, the rise of digital communities or the circular economy reaching maturity are clearly establishing as the new standards, it is no longer sufficient to consider only one future. Various possibilities are being thought through within the framework of alternative scenarios. On the other hand, the complexity of corporate development makes it almost impossible to work with a single, homogeneous strategy over a longer period of time. Instead, new business models have to be developed, tested and integrated into the corporate strategic framework again and again. The strategy becomes a portfolio of different, coordinated business models.
Both approaches – scenarios and business models – have been successfully applied in practice for many years: ScMI has used Scenario Management in more than 500 scenario processes in various industries since the 1990s. The BMI Lab, a spin-off of the University of St. Gallen, enables companies to build sustainable new business using innovative business models – combining scientific excellence with practical experience.
ScMI and BMI Lab have now combined this long-standing expertise in a joint approach, which changes the way of seeing and developing corporate strategies: Existing or new business models – the basics for the strategies – are tested for their robustness with the help of existing or new scenarios. And new scenarios are developed in such a way that new business models can be derived. As a consequence, uncertainty is no longer ignored and new opportunities are consistently sought and included. This is what we call strategic agility.
A workshop to get started
Scenarios and business models - workshops and entire projects can be filled with each individual approach. How is it possible not only to present both approaches in one day but also to combine them? The new introductory workshop offers exactly that: a quick and well-founded insight into both topics as well as a first application and linking in your own context. To do this, you go through four steps:
Business model review (Step 1):
Having a clear understanding of the context is crucial for the success of this approach. Therefore, the first step consists of analyzing and discussing the relevant business model(s) to be evaluated. To achieve this, the business model(s) is described in its four core dimensions (WHO-WHAT-HOW-VALUE), a concept broadly used in the process of business model innovation.
Scenario evaluation (Step 2):
Scenarios are composed of several influencing factors, which are the starting point of the robustness evaluation. Therefore, before starting the evaluation process, it is necessary to choose the set of scenarios that should be used and evaluate which ones are relevant for the process. Considering that the post-COVID-19 era is the subject of this approach, it is recommended to use ScMI’s work on this topic.
Robustness evaluation (Step 3):
To analyze the impact of the selected scenarios on the given business model, the business model robustness score is a tool that highlights how the business model is going to evolve under a specific scenario and assesses its potential future performance under consideration of the influencing factors described in the scenario.
Strategic interpretation (Step 4):
The final step of the approach gives the possibility to make a deep interpretation of the impact of a scenario on each dimension of the evaluated business model. This interpretation leads to the definition of potential actions to be taken: improving a business model that could lose customers in the future, consolidating a value chain that could be stressed by increasing demand, or preparing to scale the entire business model to meet the upcoming untapped potential of the market are some examples of results.
With this compact workshop, the BMI Lab and ScMI are offering companies and public organizations the opportunity to easily learn how to deal with uncertainties and business models by applying effective tools, which, when combined, enable specific decision-making regarding the future of business.
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A new approach to long-term success
It's logical: you can't develop your own scenarios or design new business models in a workshop that lasts just one day - and a workshop is certainly no substitute for a successful long-term strategy process. But the fundamental thinking taught in our workshop can be the basis for such a process. This then includes four further elements:
Analysis of business model landscape:
In a complex environment, a company rarely follows a single business model. Rather, several business models coexist, and strategic success lies primarily in aligning these business models in a meaningful way. Recognizing and understanding these interrelationships is an essential foundation.
Scenario development:
While existing scenarios will be used in the workshop – currently mainly the Post-Covid scenarios – it will be necessary for the long term to develop own scenarios to describe the specific framework conditions. What is needed is a “map of the future” of our own, so to speak.
Design of new business models:
As part of the strategic interpretation of the existing business models, there are requirements for scaling, strengthening, or superseding business models. The design of new business models is therefore an essential part of the joint approach - as is their integration into the overarching strategy.
Scenario monitoring:
In the robustness check of business models, mainly those scenarios are considered that have high probabilities. However, these expectations change continuously, which can result in changed interpretations - as well as fundamentally new scenarios. Observing and updating scenarios is therefore an essential component of strategic agility.
Using scenarios to evaluate the robustness of business models helps to actively design the future instead of reacting once events occur.
For more information about the approach, download our brochure.
Georg von der Ropp
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