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