Scenario Planning

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Learning about the future in which a corporate strategy is formed. Explanation of Scenario Planning.

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What is Scenario Planning? Description

Scenario Planning is a model that can be used to explore and learn the future in which a corporate strategy is formed. It works by describing a small number of scenarios, by creating stories how the future may unfold, and how this may affect an issue that confronts the corporation.

Royal Dutch Shell, one of the first adopters, defines scenarios as follows: Scenarios are carefully crafted stories about the future embodying a wide variety of ideas and integrating them in a way that is communicable and useful. Scenarios help us to link uncertainties about the future to the decisions that we must make today.

The scenario planning method works by understanding the nature and impact of the most uncertain and important driving forces affecting the future. It is a group process which encourages knowledge exchange and development of mutual deeper understanding of central issues that are important to the future of your business. The goal is to create and craft a number of diverging stories by extrapolating uncertain and heavily influencing driving forces. The stories, plus the processes to create them, have a dual aim: to increase the knowledge of the business environment and to widen both the receiver's and participant's perception of possible future events. The method is most widely used as a strategic management tool, but it is also used for enabling group discussion about a common future.

Steps in Scenario Planning. Process

Identify people who will contribute a wide range of perspectives.
Comprehensive interviews/workshop about how participants see big shifts coming in society, economics, politics, technology, etc.
Group (cluster) these views into connected patterns.
Group draws a list of priorities (the best ideas).
Create rough pictures of the future, based on these priorities. Stories and rough scenarios.
Add further detail to get impact scenarios. Determine in what way each scenario will affect the corporation.
Identify early warning signals. Things that are indicative for a particular scenario to unfold.
The scenarios are monitored, evaluated and reviewed.

Some traps to avoid in Scenario Planning

Treating scenarios as forecasts.
Constructing scenarios based on too simplistic a difference. Such as optimistic and pessimistic.
Failing to make the scenario global enough in scope.
Failing to focus the scenarios in areas of potential impact on the enterprise.
Treating scenarios as an informational or instructional tool rather than for participative learning and/or strategy formation.
Not having an adequate process for engaging management teams in the scenario planning process.
Failing to put enough imaginative stimulus into the scenario design.
Not using an experienced facilitator.

Scenario Planning Special Interest Group

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Scenario Planning Forum

Recent User Comments

    			 
  			   Tommie Bryant - USA
  	       
  		     Uses of Scenario Planning
  	  		 "What exactly can we use scenario planning for? I mean what are common applications, purposes of scenario planning?"
  			   
    	  		 2

    			 
  			   Owen Skae - Switzerland
  	       
  		     Decision makers disagree
  	  		 "One is always dealing with perceptions. One technique I have found quite useful is to populate a matrix with objective/subjective 'lens' on the one side and finance/non-finance 'impact' on the other. The subjective and non-financial quadrant is where the most difficulty in articulating the future is encountered. By attempting to be objective in evaluating it, and openly sharing ideas about what to do, you can avoid colleagues taking positions."
  			   
    	  		 2

    			 
  			   Henriette - Netherlands
  	       
  		     Impact upon mental models of decision-makers
  	  		 "A valuable insight by Pierre Wack on his pioneering work at Royal Dutch Shell was that scenarios had to connect with managers' assumptions, beliefs and concerns for the future in order to be of real use to them. In other words, scenario practice had to impact upon the mental models of decision-makers. Wack wrote "From the moment of this realization, we no longer saw our task as producing a documented view of the future business environment five or ten years ahead. Our real target was the microcosms of our decision makers: unless we influenced the mental image, the picture of reality held by critical decision makers, our scenarios would be like water on a stone...". (Source HBR 1985, vol 63, no 5 Scenarios: Uncharted waters ahead)."
  			   
    	  		 7

    			 
  			   Henriette - Netherlands
  	       
  		     What is a Scenario?
  	  		 "A scenario is a description of a plausible future context in which a firm might find itself. Scenarios are typically presented as a small set of stories about how the surrounding environment might have evolved into the future. They are produced by carefully analysing and structuring relevant and challenging possibilities  (Source: Ramirez, Selsky and van der Heijden 2008: Business Planning for Turbulent Times, p. 4)"
  			   
    	  		 4

    			 
              - UK
  	       
  		     Time Frame in Scenario Planning?
  	  		 "A scenario consist of a statement of an end state and a story explaining how the end state has developed, together with the underlying logic of external environment and internal forces in the industry / firm.

Did a write up on scenario planning but got it confused at a point with forecasting through provision of historical data... Found it kind of convenient to predict the future based on the occurences in the past.

I would appreciate if someone that has a hands on experience of scenario planning explains, how do you arrive at the time frame determination and how specific are their scenarios about the future. Many thanks, Ade"
  			   
    	  		 3

Best User Comments

    			   
    			     Dave - USA
  	         
  				   Embracing Complexity
  				   "Scenario Planning is a strategic tool which can be used to understand or even embrace complexity, rather than avoid or neglect or scare away from it."
    			   
        	  		 0

    			   
    			     Dave - USA
  	         
  				   Scenario Thinking and Learning
  				   "Recently you can also encounter the terms scenario thinking, scenario analysis and scenario learning. These terms are reflecting the change in perspective from a strategic planning approach to a cognitive process for context generation."
    			   
        	  		 0

    			   
    			     Jamie - USA
  	         
  				   Decision makers disagree
  				   "As scenarios are "monitored, evaluated, and reviewed", a decision maker who is attempting to persuade his colleagues that a certain scenario is the best may not himself be very enthusiastic about the scenario. How is this situation handled?"
    			   
        	  		 -5

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Scenario Planning Education & Events

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More Management Methods, Models and Theory

12manage for:

	● Rosie Vega (US)	Testing Strategic Assumptions	"We use scenario planning to investigate and challenge assumptions in the heads of policy makers / strategists / decision makers. Both individually and collectively as a group."
	● Gregory Manning (UK)	Widening Strategic Perspectives	"Scenario Planning can also be used for widening strategic views or perspectives. By collecting additional information about unclear areas and discussing developments from multiple angles / disciplines."

● (New Zealand)	Change managers' view of reality	"Scenario planning is to help managers change their view of reality, so as to align it more closely with reality as it is and as it is going to be. An end result therefore, is not an accurate predictive picture, but better decisions about the future."
● Greg Kington (USA)	Goal of Scenario Plannning	"Pierre Wack's comments are more correct in Grahan Cowle's wordings in that the goal is to assist critical decision-makers with imagining and taking seriously, futures they are currently missing, that COULD BE, based on current trends, before their competitors do. Many executives see things as they ARE. Witness General Motors' recent reliance on SUV profits."
● Samuel (USA)	Change View of Top Management	"Scenario Planning should aim to change the view top management has of the world / external environment, in order to enable them to make better strategic decisions. Changing this view is often more challenging than actually developing the scenarios."

● Jozef (Netherlands)	Scenario Planning Criteria	"A scenario always has an end stage and a begin stage. In between are either steps or a continuum, say “stages”. Every stage always has 4 dimensions: time, place, quality and quantity. When comparing scenario’s, write down the criteria first. Vary only ONE dimension per scenario, thus avoiding results that can not be tracked down to a singe variable. Painstaking labour? Yes. Profitable? Often!"
● Feigelbinder (Germany)	Scenario Planning and Story Telling	"It's a good idea to combine Scenario Planning with Story Telling."
● Greg Kington (USA)	Scenario Plannning - avoid forecasting	"One way to avoid forecasting is to explain at the beginning that no-one knows the future. And that the purpose of scenario planning is NOT to forecast, but to expand thinking about how current trends, if they continue, COULD affect the business environment and how the business might BEGIN acting today in order to best take advantage of the opportunities presented in the each scenario at the target scenario date. One part of the exercise is to attempt to develop indicators for each plausible scenario in order to know which one (if any) actually comes about. The trick is finding senior execs who will make sure the scenario plan is not put away in a file and ignored, but regularly updated. Good luck!"

                       
                        ●  (Bulgaria)
                        
                      SP is a powerful strategic tool
                      "I agree with the opinion that scenario planning is a powerful strategic tool, which not only supports the strategic learning process but creates options based on a pro-active approach."