Scenario Planning for IT

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McKinsey just published a good piece on how to do scenario planning in our current, very uncertain environment. We often advocate scenario planning as part of our IT strategy projects; it is a great way for IT organizations to prepare for various business and technology forces even if they don’t have clear strategic direction from their business partners. Scenario planning seems to be a hot topic these days; we’ve had several clients recently express particular interest in including scenario planning in their strategy. While many of the basics are still relevant, what is a little different in today’s environment is that scenarios are likely to play out in a much shorter time horizon, where past versions of scenario planning focused more on longer term directional changes or disaster planning.

Anyway, there’s a lot out there on the basics of scenario planning and McKinsey does a good job of explaining how business leaders should be thinking about scenario planning in this environment, so I won’t rehash any of that, but I will add a few thoughts related to how IT organizations can apply scenario planning to their IT strategy and governance processes:

  1. Forget “Business Strategy”; Utilize Scenarios. IT organizations must get comfortable operating with an unclear and/or constantly changing business strategy. We’ve heard the griping for years, “We can’t build an IT strategy without clear direction on the business strategy.” It is time to get over it and take some leadership. IT must work with its business partners to understand scenarios, and then map IT strategies to these scenarios. This will help IT be more proactive amidst the uncertainty.
  2. Prioritize Projects Based on Scenarios. IT must take leadership as part of the governance process to help its business partners make scenario-based decisions. Projects that map closest to multiple futures or the most likely futures should be prioritized higher. Project launches may be triggered by various scenarios, or indicators as described by McKinsey.
  3. Overhaul Annual Planning. Organizations that follow a rigorous annual planning around IT projects and capital spend will likely need to overhaul their process. Most companies are minimizing spending until uncertainty is reduced. The new financial planning process will have to incorporate fluctuating spending targets throughout the year, as well as changing priorities within that spending “pie”. Annual planning can and should still be done, but it must be paired with an ongoing, agile prioritization and resource allocation process.
  4. Make the Case for Worthy Investments. These days, it will be hard to get anything approved and the temptation will be to just hunker down and ride out the storm. But there will be projects out there that are justifiable regardless of scenario. IT must help its business partners identify and understand these projects so that wise investment decisions are made. Otherwise, crucial business strategies will be held up due to the long planning and delivery timeframe of most IT projects.