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.
Download a business framework on scenario planning used by top tier consulting firms here at Flevy.
Steps in Scenario Planning
- 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.
Strategic Planning Reference Documents
Strategy Planning and Deployment
Hoshin Kanri - a strategic planning methodology
Strategic Business Planning
Success Is System, Failure Is Component Framework