Scenario Planning
The basic method of scenario planning is
that a group of analysts generate simulation games for policy makers.
The games combine known facts about the future, such as demographics,
geography, military, political, industrial information, and mineral
reserves, with plausible alternative social, technical, economic and
political (STEP) trends which are key driving forces.
Scenario planning or Scenario
thinking is a strategic planning method that some organizations use
to make flexible long-term plans. It is in large part an adaptation
and generalization of classic methods used by military intelligence.
Scenario planning can include anticipatory thinking elements that are
difficult to formalize, such as subjective interpretations of facts,
shifts in values, new regulations or inventions.
These combinations and permutations of fact and related social changes
are called "scenarios." The scenarios usually include plausible, but
unexpectedly important situations and problems that exist in some small
form in the present day. Any particular scenario is unlikely. However,
future studies analysts select scenario features so they are both possible
and uncomfortable. Scenario planning helps policy-makers to anticipate
hidden weaknesses and inflexibilities in organizations and methods.
When disclosed years in
advance, these weaknesses can be avoided or their impacts reduced more
effectively than if a similar real-life problems were considered under
duress of an emergency. For example, a company may discover that it
needs to change contractual terms to protect against a new class of
risks, or collect cash reserves to purchase anticipated technologies
or equipment. Flexible business continuity plans with "PREsponse protocols"
help cope with similar operational problems and deliver measurable future
value-added.
Zero-sum game scenarios
Strategic military intelligence organizations also construct scenarios.
The methods and organizations are almost identical, except that scenario
planning is applied to a wider variety of problems than merely military
and political problems.
As in military intelligence,
the chief challenge of scenario planning is to find out the real needs
of policy-makers, when policy-makers may not themselves know what they
need to know, or may not know how to describe the information that they
really want.
Good analysts design wargames so that policy makers have great flexibility
and freedom to adapt their simulated organizations. Then these simulated
organizations are "stressed" by the scenarios as a game plays out. Usually,
particular groups of facts become more clearly important. These insights
enable intelligence organizations to refine and repackage real information
more precisely to better-serve the policy-makers' real-life needs. Usually
the games' simulated time runs hundreds of times faster than real life,
so policy-makers experience several years of policy decisions, and their
simulated effects, in less than a day.
This chief value of scenario
planning is that it allows policy-makers to make and learn from mistakes
without risking career-limiting failures in real life. Further, policymakers
can make these mistakes in a pleasant, unthreatening, game-like environment,
while responding to a wide variety of concretely-presented situations
based on facts
Scenario planning is also extremely popular with military planners.
Most states' departments of war maintain a continuously-updated series
of strategic plans to cope with well-known military or strategic problems.
These plans are almost always based on scenarios, and often the plans
and scenarios are kept up-to-date by war games, sometimes played out
with real troops.
This process was first
carried out (arguably the method was invented by) the Prussian general
staff of the mid-19th century.In the 1970s, many energy companies were
surprised by both environmentalism and the OPEC cartel, and thereby
lost billions of dollars of revenue by misinvestment. The dramatic financial
effects of these changes led at least one organization, Royal Dutch
Shell, to implement scenario planning. The analysts of this company
publicly estimated that this planning process made their company the
largest in the world. (See Schwartz, below).
However other observers
of Shell's use of scenario planning have suggested that few if any significant
long term business advantages accrued to Shell from the use of scenario
methodology. Whilst the intellectual robustness of Shell's long term
scenarios was seldom in doubt their actual practical use was seen as
being minimal by many senior Shell executives. A Shell insider has commented
"The scenario team were bright and their work was of a very high intellectual
level. However neither the high level "Group scenarios" nor the country
level scenarios produced with operating companies really made much difference
when key decisions were being taken".
The use of scenarios was
audited by Arie de Geus's team in the early 1980s and they found that
the decision making processes following the scenarios were the primary
cause of the lack of strategic implementation, rather than the scenarios
themselves. Many practitioners today spend as much time on the decision
making process as on creating the scenarios themselves.
Use of scenario planning by managers
The basic concepts of the process are relatively simple. In terms of
the overall approach to forecasting, they can be divided into three
main groups of activities (which are, generally speaking, common to
all long range forecasting processes):
 ENVIRONMENTAL
ANALYSIS
SCENARIO
PLANNING
CORPORATE
STRATEGY
The first of these groups quite simply comprises the normal environmental
analysis. This is almost exactly the same as that which should be undertaken
as the first stage of any serious long-range planning. It should be
noted, however, that the quality of this analysis is especially important
in the context of scenario planning.
The central part represents the specific techniques - covered here -
which differentiate the scenario forecasting process from the others
in long-range planning.
The final group represents all the subsequent processes which go towards
producing the corporate strategy and plans. Again, the requirements
are slightly different but in general they follow all the rules of sound
long-range planning.
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