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Scenario planning makes a comeback

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in Leaders & Managers

The year after a flood, everybody buys flood insurance. After a crisis, executives turn to scenario planning.

Consider this: The year after the 9/11 attack, use of scenario planning rose to 70% of executives, up from 30% in 1999, according to consultants Bain & Co. The numbers will likely be high again this year because of the recession.

At one firm, JDS Uniphase, scenarios have been part of the annual planning process since 2004. As stock prices began to fall early last year, JDS execs crafted a worst-case scenario in which sales would fall twice as steeply as normal.

By fall, “we started to pull the levers,” says Dave Vellequette, chief financial officer.

JDS was able to take swift steps because it had already envisioned them: It killed products, combined segments, shifted manufacturing to contractors and shut three factories.

It’s now using scenario planning to plot responses to an upturn.

— Adapted from “Pendulum Is Swinging Back on ‘Scenario Planning,’” Cari Tuna, The Wall Street Journal.

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