All fiction is, or should be, character driven. The details of the plot should arise from the decisions the characters themselves make, and from the changes that occur within the characters as a result of those decisions. If you allow your characters to drive the story, the question of what happens next is easy enough to answer. You simply have to determine what your characters would naturally do next. You must keep your character in character.
The range of possible reactions of a single character will not be the same as the range of possible reactions for all characters everywhere. To illustrate this point, think of two people you know, two very different people. Propose a scenario, perhaps getting fired at work for no good reason. What are the possible reactions for each person? They'll likely be quite different. This must also be true of fictional characters. What your characters do and how they react to any given stimuli should be a direct result of personality. The personality of the character. Keep that in mind.
Think of your story, short or long, as a series of decision points. The decision points guide the story, and each decision made is a result of the personality of a given character. I'll use my first book, Arianna's Tale, as an example of this. At the beginning of the novel, Arianna sees a man in the ocean. This man has dark hair and a dark complexion, so he's obviously an Imperial. Arianna's people are at war with the Imperials. She should leave him be, letting the ocean swallow him. But, as a healer, she simply can't do that. She has to save him. Not doing so was never an option. If she hasn't save him...well, let's just say the novel would have been quite different.
If you've ever said the story was writing itself, or complained that the characters had taken over, then you already know what it feels like to allow the characters to drive the story. If you know your characters well enough, this simply happens. You don't have to think about what happens next because it really is obvious. This applies to dialogue as well as plot, by which I mean you don't have to agonize over every line of dialogue. The characters speak the way they speak, and they never speak out of character.
If, however, you don't really know your characters, you're in for a long haul. The story will get bogged down, the plot ends up going nowhere, and the dialogue falls flat. If this is happening to you, take a close look at your characters. Get to know them. Find out their backstories, write monologues in their voices, and maybe even interview your character.
Ack! Interviewing your own character? Yep. Sit down and ask them questions, both relating to the story and totally independent of it. How would each character answer these questions? This may take some careful thought, but it will be well worth the effort. Once the characters are truly alive for you, once their have realized their own voices, they'll have more power in your story. Your plot will benefit from it, and you'll have a better than even chance than even chance that readers will connect with your characters.
You could always go the other way and force the characters to go where you want them to go, but the story will forever have a false feel to it. Plot and character are too deeply connected to isolate from each other. If your characters aren't right, the plot will also be off.
Remember, the plot only makes sense if the character can deliver it effortlessly. So keep your characters in character.