Future-proof strategies: What-if analysis to anticipate changes

What-if analysis is an essential tool for exploring hypothetical scenarios and anticipating the impact of long-term business decisions. Traditionally, many companies rely on static models to analyse historical data and project the future. This approach, however, risks failing to take into account the complexities of modern markets, where geopolitical, technological and economic variables change rapidly.
Key strategic decisions, such as expanding into new markets or realigning resources, can benefit enormously from what-if analysis. For example, a company planning to enter the Asian market might ask, ‘What would happen to our global sales if within five years 25 percent of our sales came from Asia? “ or ”What is the impact on margins if production costs in China increase by 15 per cent due to new regulations?’

With the advent of artificial intelligence (AI) and probabilistic simulations, what-if analysis has turned into a powerful strategic planning tool. Thanks to modern decision intelligence software, companies can perform dynamic simulations that incorporate economic, technological and political variables in real time. Using predictive algorithms and complex models such as Monte Carlo simulations, it is possible to accurately assess the likely impact of various scenarios.
For example, if an energy company is considering investing EUR 500 million in renewables, it could use what-if analysis to answer questions such as ‘How would our margins change if the price of oil collapses by 30 per cent in the next two years? “ or ”What would be the impact on revenues if the adoption of renewable energy in emerging markets grows 20 percent faster than expected?’ In this way, the company can compare different scenarios and make more informed decisions.

• Real-time forecasting: Companies can make strategic decisions based on up-to-date data, ensuring more accurate and reliable forecasts.
• Risk reduction: Simulating multiple scenarios allows companies to assess risks related to economic, regulatory and market factors and develop plans to mitigate them in advance.
• Resource optimisation: Identifying the scenarios with the greatest positive impact allows company resources to be allocated more efficiently, improving overall effectiveness.

What-if analysis can be applied in a variety of strategic contexts, including, as example:

• Expansion into new markets: A food company might ask: ‘If we were to enter the Asian market and 15 percent of our global sales were to come from there within five years, how would this affect our supply and distribution chain?’. The what-if analysis would allow the company to simulate various growth scenarios, assessing operational costs and associated risks.
• Investment in emerging technologies: A technology company could use What-if analysis to simulate the impact of significant investments in new technologies, asking, ‘What would be the impact on long-term turnover if we invested EUR 100 million in artificial intelligence over the next five years? “ or ”How would a 15 per cent reduction in technology costs over the next three years affect overall profitability?’. These simulations help to assess the return on investment and to plan development strategies.
• Portfolio diversification: An energy company considering diversifying its product portfolio towards renewable energies might ask: ‘What impact would a 20 per cent increase in solar energy investments have on global revenues over the next ten years? “ or ”What would happen if the price of oil dropped by 30 per cent within two years?’ What-if simulations provide a clear view of how such decisions could affect long-term performance.

What-if analysis, enhanced by AI and probabilistic simulations, offers companies a powerful tool to tackle complex strategic decisions. The ability to simulate future scenarios makes it possible to reduce risks, optimize resources and prepare for an increasingly uncertain future. Using these decision intelligence tools enables companies to develop resilient strategies, ready to face the challenges of tomorrow.