16.6 Tools: Scenario Planning

One of the challenges with an evolving game is that even if you see a game changer coming, you're never completely sure how it will change the rules of the game. Why not, you ask? Answer, because the impacts are in the future—and you don't have a crystal ball! What does that mean for you? In a world filled with potential game changers, you need to constantly ask, "What if . . .?" This simple question is at the heart of scenario planning.

What exactly is ? Figure 16.3 summarizes scenario planning. Shell Oil Company has been developing scenarios since the early 1970s to help with strategic planning. Shell describes its efforts as follows:

Scenarios are stories that consider “what if?” questions. Whereas forecasts focus on probabilities, scenarios consider a range of plausible futures and how these could emerge from the realities of today. They recognise that people hold beliefs and make choices that lead to outcomes. Our scenarios team considers changes such as in the global economic environment, geopolitics, resource stresses such as water, greenhouse gases, and energy supply and demand to help business leaders make better decisions.1

To paraphrase, if you consider the right "what if?" scenarios, you will be able to make better decisions. If you are paying attention to the right game changers, you are more likely to explore the right "what if?" scenarios.

Figure 16-3: Scenario Planning in Action

Scenario planning is part art, part science. Scenarios are built on the facts you know and the possibilities you can imagine. The key is to identify "alternative views of the future and create plausible stories around them." Scenario planning can be described as consisting of three core phases:

  • Phase 1: Identify Drivers. Scenario building begins with a careful evaluation of both the facts and the uncertainties. That is, you have to meticulously identify the "drivers" of the future state. You might start with the game changers we discussed earlier in our discussion. Open brainstorming is vital to this identification process. Everyone on the scenario team must take ownership of coming up with plausible drivers. Sticking Post-It Notes to a blank wall invites open participation. As ideas are shared, you and your colleagues are likely to see commonalities or trends emerging. You can place these Notes in clusters. Everyone should feel free to move the Post-It notes around, placing them in emerging clusters. Once a "consensus" is achieved, you can discuss what the drivers really mean for the future. Importantly, this process "invites" you and your colleagues to think differently.

  • Phase 2: Create Scenarios. At first, build as many mini scenarios as makes sense. Don't limit your ideation. As you thoughtfully discuss each scenario, you will begin to see themes that enable you to reduce the scenarios to the most-likely scenarios. However, be careful not to get stuck on a single scenario—especially early in the process. Settling on a single view of the future limits the discussion and exploration that you need to become aware of important issues and challenge conventional wisdom.

  • Phase 3: Define the Issues. As you thoroughly examine each of your core scenarios, you will begin to identify the issues and the tradeoffs that will affect future performance. This discussion becomes a valuable input into your strategic planning.

Scenario planning should not be limited to scenario teams. You should create compelling narratives around your scenarios and communicate them across your organization. The desired result: You want to generate active conversations about the future. The outcomes of these conversations will work their way into strategic plans, helping you better allocate resources and develop needed capabilities. Scenario planning can help you adopt and execute Peter Drucker's advice: "The best way to predict the future is to create it!"

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