Scenario planning

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Scenario planning , also called scenario thinking or scenario analysis , 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 .

The original method was a group of analysts would generate simulation games for policy makers . The games combines known facts about the future, such as demographics , geography , military , political , industrial information, and mineral reserves , with key driving forces identified by social, technical, economic, environmental and political (STEEP) trends.

In business applications, the emphasis on gaming the behavior of opponents has been reduced (shifting more towards a game against nature). At Royal Dutch / Shell for example, the evolution of the world in the exogenous part of the world, prior to formulating specific strategies.

Scenario planning may involve aspects of systems thinking , specifically that of many factors that can be combined into complex ways to create sometime surprising futures (due to non-linear feedback loops ). The method also permits the inclusion of factors that are difficult to formalize, such as novel insights about the future, or deep shifts in values, unprecedented regulations or inventions. Systems thinking in the context of causal relationships can be demonstrated. In these cases, a scenario is integrated with a system thinking approach to scenario development, it is sometimes referred to as dynamic scenarios .

Crafting scenarios

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 vulnerabilities and inflexibilities in organizations and methods.

When disclosed in such a way, these weaknesses can be avoided or their effects are similar to that of similar real-life problems. For example, a company may discover new opportunities to protect against a new class of risks. 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, when they really want to know what they need to know .

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 more than just real life, so the policy-makers experience several years of policy decisions, and their simulated effects, in less than a day.

This chief value of scenario planning makes it possible to make mistakes in the future. Further, policymakers can make these mistakes in a safe, unthreatening, game-like environment, while responding to a wide variety of concretely presented situations based on facts. This is an opportunity to “rehearse the future”, an opportunity that does not present itself in day-to-day operations where every action and decision counts.

How military scenario planning or scenario thinking is done

  1. Decide on the key question to be answered by the analysis. By doing this, it is possible to evaluate the scenario is preferred over the other methods. If the question is based on a small number of elements, other more formalized methods may be more useful.
  2. Set the time and scope of the analysis. Take over consideration how quickly changes in the past, and try to assess to what degree is possible to predict common trends in demographics, product life cycles. A usual timeframe can be five to 10 years.
  3. Identify major stakeholders. Decide who will be affected and have an interest in the possible outcomes. Identify their current interests, whether and why these interests have changed over time in the past.
  4. Map basic trends and driving forces. This includes industry, economic, political, legal, and societal trends. Assess to what degree will affect your research question. Describe each trend, how and why it will affect the organization. In this step of the process, brainstorming is commonly used, where it can be thought of before being evaluated.
  5. Find key uncertainties. Map the driving forces on two axes, evaluating each force on an uncertain / (relatively) predictable and important / unimportant scale. All driving forces are considered unimportant are discarded. Important driving forces that are relatively predictable (eg demographics) can be included in any scenario, so the scenarios should not be based on these. This leaves you with a number of important and unpredictable driving forces. At this point, it is also useful to assess any linkages between driving forces exist, and rule out any “impossible” scenarios (eg full employment and zero inflation).
  6. Check for the possibility to group the possible forces and if possible, reduce the forces to the two most important. (To allow the scenarios to be presented in a neat xy-diagram )
  7. Identify the extremes of the possible outcomes of the two driving forces and the dimensions for consistency and plausibility. Three key points should be assessed:
    1. Time frame: Are the trends compatible within the time frame in question?
    2. Internal consistency: do the forces describe uncertainties that can construct probable scenarios.
    3. Vs the stakeholders: are any stakeholders currently in disequilibrium compared to their preferred situation, and will this evolve the scenario? Is it possible to create probable scenarios when considering the stakeholders? This is most important when creating macro-scenarios where governments, large organizations et al. will try to influence the outcome.
  8. Define the scenarios, plotting them on a grid if possible. Usually, two to four scenarios are constructed. The current situation does not need to be in the middle of the diagram, and possible scenarios can keep one (or more) of the forces relatively constant, especially if using three or more driving forces. One approach can be created in a different scenario, then refining these. In the end, try to avoid pure best-case and worst-case scenarios.
  9. Write out the scenarios. Narrate what has happened and what can we do for the proposed situation. Try to include good reasons for this change. Finally, give each scenario a descriptive (and catchy) name to ease later reference.
  10. Assess the scenarios. Are they relevant for the goal? Are they internally consistent? Are they archetypical? Do they represent relatively stable outcome situations?
  11. Identify research needs. Based on the scenarios, where more information is needed. Where needed, get more information on the motivations of stakeholders, possible innovations that may occur in the industry and so on.
  12. Develop quantitative methods. If possible, develop models to help quantify the consequences of the various scenarios, such as growth rate, cash flow etc. This step requires a significant amount of work compared to the others, and may be left in the back-of-the-envelope-analyzes.
  13. Converge towards decision scenarios. Retrace the steps above in an iterative process. Try to assess upsides and downsides of the possible scenarios.

In military applications

Scenario planning is also extremely popular with military planners. Most states’ department of war maintains a strategic review of strategic plans to cope with well-known military or strategic problems. These plans are almost always based on scenarios, and are often kept up to date by war games. This process was first carried out (arguably the method was invented by) the Prussian general staff of the mid-19th century.

Development of scenario analysis in business organizations

In the past, the strategic plans have often considered the “official future”, which is usually a straight line of current trends in the future. Often the trends were generated by the accounting department, and lacked discussions of demographics, or qualitative differences in social conditions.

These simplistic guesses are surprisingly good, but fail to consider qualitative social changes that can affect a business or government. Scenarios focus on the joint effect of many factors. Scenario planning helps us understand the various strands of a complex tapestry. When you just list possible causes, you can find a fault in one. But when you explore the factors together, you realize that certain combinations could impact each other’s impact or likelihood. For instance, an increased trade deficit may trigger an economic recession, which in turn creates unemployment and domestic production. Paul JH Schoemakeroffers a strong managerial case for the use of scenario planning in business and had wide impact. [1]

Scenarios planning starts by dividing our knowledge into two broad domains: (1). The first component – trends – casts the past forward, recognizing that our world possesses considerable momentum and continuity. For example, we can safely make assumptions about demographic shifts, and perhaps, substitution effects for certain new technologies. The second component – true uncertainties – involve indeterminable such as future interest rates, outcomes of political elections, rates of innovation, fads and fashions in markets, and so on. The art of scenario planning in the world of the future and the future of the future. inproject management , this is called the cone of uncertainty . quote needed ]

Numerous organizations have applied scenarios to a broad range of issues, from relatively simple, tactical decisions to the complex process of strategic planning and vision building. [2] [3] [4] The power of scenario planning for business has been established by Royal Dutch / Shell, which has used scenarios since the early 1970s as part of a process for generating and evaluating its strategic options. [5] [6 [6 [6 [6 [6 [6] Shell oil has been consistently improved in the oil and gas industry, and it has been in the oil and gas industry over the past several years. [2]But ironically, the approach may have had a greater impact than that of planning. Scenario planning is as much art as science, and prone to a variety of traps (both in process and content) as enumerated by Paul JH Schoemaker . [1]

History of use by academic and commercial organizations

Most authors attribute the introduction of scenario planning to Herman Kahn through his work for the US Military in the 1950s at the RAND Corporation where he developed a technique of describing the future in the future. He adopted the term “scenarios” to describe these stories. In 1961, he founded the Hudson Institute where he expanded his work to social forecasting and public policy. [7] [8] [9] [10] [11] One of his most controversial uses of scenarios was to suggest that a nuclear war could be won. [12]Kahn has been developing his methods at RAND, Gaston Berger was developing similar methods at the Center for Prospective Studies which he founded in France. His method, which he named ‘The Prospective’, was to develop normative scenarios of the future which was used as a guide in formulating public policy. During the mid-1960s various authors from the French and American institutions began to publish scenario planning concepts such as ‘The Prospective’ by Berger in 1964 [13] and ‘The Next Thirty-Three Years’ by Kahn and Wiener in 1967. [14 ]By the 1970s the Hudson Foundation, the Stanford Research Institute (now SRI International ), and the SEMA Metra Consulting Group in France. Several large companies also began to embrace planning scenarios including DHL Express , Royal Dutch Shell and General Electric . [9] [11] [15] [16]

Possibly as a result of these techniques, they are employed and they are employed in the management of the resources of a central planning staff. Even so, the theoretical importance of the use of alternative scenarios, to help address the uncertainty implied in long-range forecasts, was dramatically underlined by the widespread confusion which followed the Oil Shock of 1973. As a result, many of the larger organizations started to use the technique in one form or another. By 1983 Diffenbach reported that ‘alternate scenarios’ were the third most popular technique for long-range forecasting – used by 68% of the broad organizations he surveyed. [17]

Practical development of scenario forecasting, to guide the strategy of the country, which was started by Pierre Wack in 1971 at the Royal Dutch Shell group of companies – and it, too, was given impetus by the Oil Shock two years later. Shell has, since that time, led the commercial world in the use of scenarios – and in the development of more practical techniques to support these. Indeed, as – in common with most forms of long – range forecasting – the use of scenarios has been reduced to only a handful of private – sector organizations the technique at the forefront of forecasting. [18]

Anecdotal evidence offered in the context of the value of scenarios, even as aids to forecasting; and most of this company – Shell. In addition, with so few organizations, it is unlikely that any future developments will be achieved in the foreseeable future. For the same reasons, though, a lack of such proof applies to almost all long-range planning techniques. In the absence of proof, where it is possible to use a number of examples the horizons of managers’[19]

Criticism of Shell’s Use of Scenario Planning

In the 1970s, Many energy companies Were surprised by Both environmentalism and the OPEC cartel, and thereby lost trillions of dollars of revenue by set-investment. The dramatic financial effects of these changes at least one organization, Royal Dutch Shell, to implement scenario planning. The analysts of this company made this company their largest company in the world. [2] However other observers who? ] Of Shell’s use of scenario planning-have suggéré That FEW if any significant long-term business advantages accrued to Shell from the use of scenario methodology citation needed ]. Whilst the intellectual robustness of shell is long term, it has been used by senior shell executives citation needed ] . A shell insider has commented on “The scenarios were very much of a reality”, but neither of the “Group scenarios” was really taken into account. “. quote needed ]

The use of scenarios Was Audited by Arie de Geus ‘ s team in the early 1980s and They Found que la decision-making processes Following The scenarios Were the primary causes of the Lack of strategy implementation clarification needed ] ) Rather than the scenarios Themselves . Many practitioners today are spending time on the decision making process.

[20]

General limitations

Though scenario planning has gained much adherence in industry, its subjective and heuristic nature leaves many academics uncomfortable. How do we know if we have the right scenarios? And how do we go from scenarios to decisions? These questions are made in the context of comparative planning and performance. A collection of chapters by noted scenario planners [21] failed to contain a single reference to an academic source, but it may be because of academic research or planning. In general, there are few academically validated analyzes of scenario planning (for a notable exception, see Paul JH Schoemaker [22]).). The technique is based on its practice and its appeal. Furthermore, significant misconceptions remain. Above all, scenario planning is a tool for collective learning, reframing perceptions and preserving uncertainty when the latter is pervasive. Too many decision makers want to bet on a future scenario. Another trap is to take the scenarios too literally but they were static beacons that map out a fixed future. In actuality, their aim is to be bound in a future way.

One criticism of the two-by-two technical Commonly used est que le resulting and matrixresults in four arbitrary scenario themes. If other key uncertainties had been selected, it might be argued, very different scenarios could emerge. How true this is depends on the matrix is ​​viewed as a starting point to be superseded by the ensuing blueprint or is considered as great architecture that nests everything else. In either case, however, the issue should not be the “right” scenarios but rather they are delineating the range of possible future appropriately. Any tool that tries to simplify a complex picture will introduce distortions, whether it is a geographical map or a set of scenarios. Seldom will be more easily decomposed into simple states. But it might. Consider, for example, the behavior of water (the H 2 moleculeWhich one, depending on temperature and pressure, naturally exists in one of three states: gas, liquid or ice. The art of scenarios is to look for such natural states or points of bifurcation in the behavior of a complex system.

Apart from some inherent subjectivity in scenario design, the technical can of various processes and content traps. [23]These traps mostly relate to how the process is conducted in organizations (such as team composition, role of facilitators, etc.) as well as the substantive focus of the scenarios (long vs. short term, global vs. regional, incremental vs. paradigm shifting, etc.). One might think of these as challenges of implementation, but since the process is integral to the scenario experience, they can also be seen as weaknesses of the methodology itself. Limited safeguards exist against political derailing, agenda control, myopia and limited imagination. Objective, to varying extents, The benchmark to use is not perfection, especially when faced with high uncertainty and complexity, or even strict adherence to such normative precepts as procedural invariance and logical consistency, but whether the technique performs better than its rivals. And to answer this question fairly, performance must be carefully specified. It should be clear that there are some measures of cost-benefit analysis that consider the tradeoff between effort and accuracy. In addition, legitimation criteria may be important to consider the ability to improve and improve the approach. It should be clear that there are some measures of cost-benefit analysis that consider the tradeoff between effort and accuracy. In addition, legitimation criteria may be important to consider the ability to improve and improve the approach. It should be clear that there are some measures of cost-benefit analysis that consider the tradeoff between effort and accuracy. In addition, legitimation criteria may be important to consider the ability to improve and improve the approach.

A third limitation of scenario planning is in fact a weak position in planning and forecasting techniques. Most companies have plenty of trouble dealing with just one future, let alone multiple ones. Typically, budgeting and planning are predicted on the basis of variance analysis, contingency planning, rolling budgets, and periodic renegotiations. The weaknesses of these traditional approaches were very obvious after the tragic attack of September 11, 2001when many companies became paralyzed and quite a few. Their strategies were not future-proof and they lacked organized mechanisms to adjust to external turmoil. In cases of crisis, leadership becomes important. Once the scenarios are ready, the real works are starting to make flexible strategies and appropriate monitoring systems. [24]Managers need a simple goal to understand. Scenario planning is just one component of a complete management system. The point is that scenario thinking needs to be integrated with the existing planning and budgeting system, as this may be. The reality is that most organizations do not handle the problem of high uncertainty and complexity.

Use by managers

The basic concepts of the process are relatively simple. In terms of the overall approach to forecasting, they are divided into three main groups of activities: [19]

  1. Environmental analysis
  2. Scenario planning
  3. Corporate strategy

The first of these groups quite simply understood the normal environmental analysis . This is almost exactly the same as it should be done in the first stage of any serious long-range planning. However, the quality of this analysis is particularly important in the context of scenario planning.

The central part represents the specific techniques – which is one of the most important aspects of long – range planning.

The final group is all about the subsequent processes which produces the corporate strategy and plans. Again, the requirements are different in the long run.

Process

The part of the overall process which is most importantly of the long-range planning is the central section, the actual production of the scenarios. Even this, though, is relatively simple, at its most basic level. Most commonly used by Shell, [25] it follows six steps: [26]

  1. Decide drivers for change / assumptions
  2. Bring drivers together into a viable framework
  3. Produce 7-9 initial mini-scenarios
  4. Reduce to 2-3 scenarios
  5. Draft the scenarios
  6. Identify the issues arising

Step 1 – decide assumptions / drivers for change

The first stage is to consider the results of the most important factors that will determine the nature of the future environment within which the organization operates. These factors are sometimes called ‘variables’ (because they are more likely to be investigated, although the terminology may be confused. Users tend to prefer the term ‘drivers’ (for change), since this terminology is not laden with quasi-scientific connotations and reinforces the participant’s commitment to future action. Whatever the nomenclature, the main requirement is that these will be informed assumptions.

This is a process of analysis, needed to recognize what these ‘forces’ might be. However, it is likely that some of this work will have taken place during the preceding environmental analysis. By the time the formal scenario has been completed, the participants may have already decided – probably in their sub-conscious rather than formally – what the main forces are.

In the ideal approach, the first stage should be carefully decided. Only then, as a second stage, should the various drivers be specifically defined. Participants, though, seem to have problems in separating these stages.

Perhaps the most difficult aspect though, is freeing the participants from the preconceptions they take into the process. In particular, most participants will want to look at the medium term, or to take a longer term. However, a time horizon of anything more than ten years often leads to participants in extrapolate from present trends. When, however, they are asked to consider timescales in excess of ten years, they are likely to accept the logic of the scenario planning process, and no longer require extrapolation. There is a similar problem with expanding participants horizons to include the whole external environment.

Brainstorming

In any case, the brainstorming which should then take place, to ensure that the list is complete, may be more variable – and, in particular, the combination of factors may suggest yet others.

A very simple technique which is particularly useful at this – brainstorming – stage, and in general for handling scenario planning. An especially easy approach, it only requires a 3M Post-It Notes .

The six to ten people are ideally involved in such face-to-face debates should be in a conference environment that is isolated from outside interruptions. Post-It notes will stick. At the start of the meeting itself, any topics which have already been identified during the environmental analysis are written (preferably with a thick magic marker, so they can be read from a distance) on separate Post-It Notes. These Post-It Notes are then, at least in theory, randomly placed on the wall. In practice, even at this early stage the participants will want to cluster

A similar technique – using 5 “by 3” index cards – has also been described (as the ‘Snowball Technique’), by Backoff and Nutt, for grouping and evaluating ideas in general. [27]

As in any form of brainstorming, the initial ideas almost invariably stimulate others. Indeed, everyone should be encouraged to add their own Post-It Notes to those on the wall. However it differs from the ‘rigorous’ form described in ‘creative thinking’ texts, it is much slower paced and the ideas are discussed immediately. In practice, as many ideas can be removed. Even so, it follows the same rules of normal brainstorming and lasts the same length of time – say, an hour or so only.

It is important that all participants feel they ‘own’ the wall – and are encouraged to move the notes around themselves. The result is a very powerful form of creative decision-making for groups, which is applicable to a wide range of situations (but is particularly powerful in the context of scenario planning). It also offers a very good introduction for those who are coming to the scenario for the first time. Since the workings are largely self-evident, participants very quickly come to understand exactly what is involved.

Important and uncertain

This step is, however, also one of the most important factors in the field. The 80:20 Rule here, at the end of the process, management’s attention must be focused on the most important issues. It is important to provide a range of information that is most important to the organization.

In addition, as scenarios are a technique for presenting alternative futures, the factors to be included must be genuinely ‘variable’. They should be subject to significant alternative outcomes. Factors whose outcome is predictable, but important, should be spelled out in the introduction to the scenarios (since they can not be ignored). The Important Matrix Uncertainties, as reported by Kees van der Heijden of Shell, is a useful check at this stage. [3]

At this point it is also worth pointing out that they are able to accommodate any other type of forecasting. They may use figures, diagrams or words in any combination. No other form of forecasting offers this flexibility.

Step 2 – bring drivers together into a viable framework

The next step is to link these drivers together to provide a meaningful framework. This may be obvious, where some of the factors are clearly related to one way or another. For instance, a simple lead to market changes, but may be constrained by legislative factors. On the other hand, some of the ‘links’ (or at least the ‘groupings’) may need to be artificial at this stage. Can be found, or the factors may be rejected from the scenarios. In the most theoretical approaches to the subject, probabilities are attached to the event strings. This is difficult to achieve, however, and adds little – except complexity – to the outcomes.

This is probably the most (conceptually) difficult step. It is where managers ” intuition ” – their ability to make sense of complex patterns of ” soft ” data that more rigorous analysis would be unable to handle – plays an important role. There are, however, a range of techniques which can help; and again the Post-It-Notes approach is especially useful:

Thus, the participants try to arrange the drivers, which have emerged from the first stage, into groups which seem to make sense to them. Initially there may be many small groups. The intention should, therefore, be to gradually merge these (often having to reform them from new combinations of drivers to make these larger groups work). The aim of this stage is eventually to make 6-8 larger groupings; ‘Mini-scenarios’. Here the Post-It Notes can be moved from one place to another. While this process is taking place – more Post-It Notes are added to the wall. In the opposite direction, the unimportant ones are removed (possibly to be grouped, again as an audit trail ‘on another wall). More important, the ‘certain’

As the clusters – the ‘mini-scenarios’ – emerge, les associated notes may be stuck to each other rather than individually to the wall; which makes it easier to move the clusters around (and is a considerable help during the final, demanding stage to reduce the scenarios to two or three).

The great benefit of using Post-It is changing to your minds. If they want to rearrange the groups – or simply to go back (iterate) to an earlier stage – then they are going to work in their new position.

Step 3 – produce initial mini-scenarios

The outcome of the previous step is usually between seven and nine logical groupings of drivers. This is usually easy to achieve. The ‘natural’ reason for this may be one of those participants who can visualize.

Having the factors in these groups, the next action is to work, what is the connection between them. What does each group of factors represent?

Step 4 – reduce to two or three scenarios

The main action, at this next stage, is to reduce the seven to nine mini-scenarios / groupings detected at the previous stage. The challenge in practice seems to come down to finding just two or three ‘containers’ in which all the topics can be sensibly fitted. This usually requires a considerable amount of debate – but it does not require much heat. Indeed, the essential process of developing these framework frameworks often, by itself, makes fundamental insights into what are the really important (perhaps life and death) issues affecting the organization. During this final debate – and even before it is summarized in the final reports – the participants come to understand, by their own involvement in the debate, what the most important drivers for change may be, and (perhaps even more important) what their peers think they are. Based on this intimate understanding, they are well prepared to cope with such changes – reacting almost instinctively – when they actually do happen; even without recourse to the formal reports which are eventually produced!

There is no conceptual reason for reducing to just two or three scenarios, only a practical one. It has been found that the managers who can be asked for the final scenarios can only cope effectively with a maximum of three versions! Shell started, more than a few months ago, by building a half-dozen or more scenarios As a result, the planners reduced the number to three, which managers could easily This is the number now recommended most frequently in most of the literature.

Complementary scenarios

As used by Shell, two scenarios should be complementary; The reason being that this helps to avoid ‘choosing’ just one, ‘preferred’, scenario – and lapsing more than one single – track forecasting (negating the benefits of using ‘alternative’ scenarios to allow for alternative, uncertain futures). This is, however, a potentially difficult concept to grasp, where managers are used to looking for opposites; a good and a bad scenario, say, or an optimistic one versus a pessimistic one – and indeed this is the approach advocated by Foster. In the Shell approach, the two scenarios are required, and between them to cover all the ‘event strings’ / drivers. Ideally they should not be obvious opposites, which might once again bias their acceptance by users, so the choice of ‘neutral’ titles is important. For example, Shell’s two scenarios at the beginning of the 1990s were titled ‘Sustainable World’ and ‘Global Mercantilism’ [xv]. In practice, we found that this requirement, much to our surprise, 85%, of those in the survey; which easily produced ‘balanced’ scenarios. The remaining 15% of the population is expected to fall under the expected trap of ‘good versus bad’. We have found that our own relatively complex (OBS) scenarios can also be made complementary to each other; without any great effort needed from the teams involved; and resulting from one of the following: so the choice of ‘neutral’ titles is important. For example, Shell’s two scenarios at the beginning of the 1990s were titled ‘Sustainable World’ and ‘Global Mercantilism’ [xv]. In practice, we found that this requirement, much to our surprise, 85%, of those in the survey; which easily produced ‘balanced’ scenarios. The remaining 15% of the population is expected to fall under the expected trap of ‘good versus bad’. We have found that our own relatively complex (OBS) scenarios can also be made complementary to each other; without any great effort needed from the teams involved; and resulting from one of the following: so the choice of ‘neutral’ titles is important. For example, Shell’s two scenarios at the beginning of the 1990s were titled ‘Sustainable World’ and ‘Global Mercantilism’ [xv]. In practice, we found that this requirement, much to our surprise, 85%, of those in the survey; which easily produced ‘balanced’ scenarios. The remaining 15% of the population is expected to fall under the expected trap of ‘good versus bad’. We have found that our own relatively complex (OBS) scenarios can also be made complementary to each other; without any great effort needed from the teams involved; and resulting from one of the following: Two scenarios at the beginning of the 1990s were titled ‘Sustainable World’ and ‘Global Mercantilism’ [xv]. In practice, we found that this requirement, much to our surprise, 85%, of those in the survey; which easily produced ‘balanced’ scenarios. The remaining 15% of the population is expected to fall under the expected trap of ‘good versus bad’. We have found that our own relatively complex (OBS) scenarios can also be made complementary to each other; without any great effort needed from the teams involved; and resulting from one of the following: Two scenarios at the beginning of the 1990s were titled ‘Sustainable World’ and ‘Global Mercantilism’ [xv]. In practice, we found that this requirement, much to our surprise, 85%, of those in the survey; which easily produced ‘balanced’ scenarios. The remaining 15% of the population is expected to fall under the expected trap of ‘good versus bad’. We have found that our own relatively complex (OBS) scenarios can also be made complementary to each other; without any great effort needed from the teams involved; and resulting from one of the following: 85% of those in the survey; which easily produced ‘balanced’ scenarios. The remaining 15% of the population is expected to fall under the expected trap of ‘good versus bad’. We have found that our own relatively complex (OBS) scenarios can also be made complementary to each other; without any great effort needed from the teams involved; and resulting from one of the following: 85% of those in the survey; which easily produced ‘balanced’ scenarios. The remaining 15% of the population is expected to fall under the expected trap of ‘good versus bad’. We have found that our own relatively complex (OBS) scenarios can also be made complementary to each other; without any great effort needed from the teams involved; and resulting from one of the following:

Testing

Having grouped the factors in these two scenarios, the next step is to test them, again, for viability. Do they make sense to the participants? This may be in terms of logical analysis, but it may also be in terms of intuitive ‘gut-feel’. Once more, intuition may be a useful – if academically less respectable – vehicle for the complex and ill-defined issues. If the scenarios do not intuitively ‘hang together’, why not? The usual problem is that one of the assumptions of the participants is unrealistic in terms of how the participants see their world. If it is the case then you need to return to the first step – the whole scenario planning process is above all iterative one (returning to its beginnings).

Step 5 – write the scenarios

The scenarios are then ‘written up’ in the most suitable form. The flexibility of this step often confuses participants, for they are used to forecasting processes that have a fixed format. The rule, though, is that you should produce the scenarios in the most convenient way for the managers who are going to base their strategy on them. Obviously, the managers who are going to implement this strategy should also be taken into account. They will also be exposed to the scenarios, and will need to believe in these. This is essentially a ‘marketing’ decision, since it will be very necessary to ‘sell’ the final results to the users. On the other hand, a not inconsiderable consideration may be the most comfortable.

Most scenarios will, perhaps, be written in word form (almost as a series of alternative essays about the future); especially where they will almost inevitably be able to meet the needs of their audience, and their audience, will likely use this in their day to day communications. Some, though, use an expanded series of lists and some of their reports by adding some fictional ‘character’ to the material – perhaps taking literally the idea that they are stories about the future – though they are still clearly intended to be factual. These are some of the most important things in the world of shell do (and in the process gain by the acid test of more measurable ‘predictions’).

Step 6 – identify issues arising

The final stage of the process is the most important outcomes; the ‘branching points’ relating to the ‘issues’ which will have the greatest impact on the future of the organization. The following strategy will be used to address the issue of minimizing risk by being ‘robust’ (that is, it will be possible to cope with the alternative outcomes of these ‘life and death’ issues ) rather than aiming for performance (profit) maximization by gambling on one outcome.

Use of scenarios

It is important to note that scenarios can be used in a number of ways:

a) Containers for the drivers / event strings

They are a logical device, an artificial framework, for presenting the individual factors / topics (or coherent groups of these) so that these are easily available for managers. without reference to the rest of the scenario. It should be stressed that no factors should be dropped, or even given lower priority, as a result of producing the scenarios. In this context, which scenario contains which topic (driver), or issue about the future, is irrelevant.

b) Tests for consistency

At every stage it is necessary to ensure that the contents are viable and make any necessary changes to ensure that they are; here the main test is to see if the scenarios seem to be internally consistent It is important to stress once again that it is ideally an iterative process. It usually does not just happen in one meeting – though, it does not take place – but rather takes place as participants gradually refine their ideas.

c) Positive perspectives

Perhaps the main benefit deriving from scenarios, however, comes from the alternative ‘flavors’ of the future their different perspectives offer. It is a common experience, when the scenarios finally emerge, for the participants in the future, they are able to framework (or rather set of alternative frameworks) for dealing with that.

Scenario planning compared to other techniques

Scenario planning differs from contingency planning , sensitivity analysis and computer simulations . [24]

Contingency planning is a “What if” tool, which only takes into account one uncertainty. However, scenario planning considers combinations of uncertainties in each scenario. Planners also try to select especially plausible purpose uncomfortable combinations of social developments.

Sensitivity analysis analyzes changes in one variable only, which is useful for simple changes.

Simulations, scenario planning is less formalized, and can be used to make plans for qualitative patterns that show up in a wide variety of simulated events.

During the past 5 years, computer supported Morphological Analysis has been employed by the Swedish Defense Research Agency in Stockholm . [28] This method makes it possible to create a multi-variable morphological field which can be treated as an inference model – thus integrating scenario planning techniques with contingency analysis and sensitivity analysis .

Combination of Delphi and scenarios

Scenario Planning Concerning Planning Based on the Plausible and Consistent Pictures. Delphi , in turn, attempts to develop systematically expert consensus opinion concerning future developments and events. It is a judgmental forecasting procedure in the form of an anonymous, written, multi-stage survey process, where feedback is provided after each round.

Numerous researchers have stressed that both approaches are best suited to be combined. Kinkel et al. (2006) [29] Delphi-scenarios and scenarios-Delphis. The authors found that, due to their process similarity, the two methodologies can be easily combined. Generally speaking, the output of the different phases of the Delphi method can be used as input for the scenario method and vice versa. A combination makes the realization of the benefits of both tools possible. In practice, usually one of the two tools is considered the dominant methodology and the other one is integrated at some stage. In fact, the authors found that in the case of the combination of methodologies adds significant value to future projects.

Rikkonen, 2005; [30] von der Gracht, 2007; [31] Transportation & Logistics 2030 – How will supply chains evolve in the process? year energy and low-carbon constrained world ; Transportation & Logistics 2030 – Transport infrastructure – Engine or hand brakes for global supply chains? ; Future of Logistics – Global Scenarios 2025 ). Authors refer to this type as Delphi-scenario (writing), expert-based scenarios, or Delphi panel derived scenarios. Von der Gracht (2010) [32]is a scientifically valid example of this method. Since scenario planning is “information hungry”, Delphi research can deliver valuable input for the process. There are various types of information output of Delphi that can be used as input for scenario planning. Researchers can, for example, identify relevant events or developments, based on expert opinion, assign probabilities to them. Moreover, expert comments and arguments provide deeper insights into the relationships of factors that can, in turn, be integrated into scenarios afterwards. Also, Delphi helps to identify extreme opinions and opinions among the experts. Such controversial topics are particularly suited for extreme scenarios or wildcards.

In his doctoral thesis, Rikkonen (2005) [30] reviewed the use of Delphi techniques in scenario planning and concretely, in construction of scenarios. The author comes to the conclusion that the Delphi technique has been instrumental in providing different alternative futures and the argumentation of scenarios. It is therefore recommended to use Delphi in order to make the scenarios. Further benefits lies in the simplification of the scenario writing process and the deep understanding of the interrelations between the forecast items and social factors.

See also

  • Counter-revolutionary
  • Decentralized planning (economics)
  • Disruptive innovation
  • Hoshin Kanri # Hoshin schedule
  • Futures studies
  • Robust decision-making
  • Scenario (computing)

Similar terminology

  • Feedback loop
  • System dynamics (also known as Stock and flow )
  • System thinking

Analogous concepts

  • Delphi method
  • Game theory
  • Rational choice theory
  • Twelve leverage points

Examples

  • ICD-10 Bomarc ( Semi-Automatic Ground Environment )
  • Covert United States foreign exchange foreign exchange
  • Dynamic Analysis and Replanning Tool
  • floodplain
  • Nijinomatsubara
  • Pentagon Papers

References

  1. ^ Jump up to:b Schoemaker, Paul JH “Scenario Planning: A Tool for Strategic Thinking,” Sloan Management Review . Winter: 1995, pp. 25-40.
  2. ^ Jump up to:c Schwartz, Peter. The Art of the Long View . Doubleday, 1991.
  3. ^ Jump up to:b van der Heijden, Kees. Scenarios: The Art of Strategic Conversation . Wiley & Sons, 1996.
  4. Jump up^ Ringland, Gil. Scenario Planning: Managing for the Future. Wiley & Sons, 1998.
  5. Jump up^ Wack, Pierre. “Scenarios: Uncharted Waters Ahead”,Harvard Business Review. September-October, 1985.
  6. Jump up^ Schoemaker, Paul JH and Cornelius AJM van der Heijden, “Integrating Scenarios into Strategic Planning at Royal Dutch / Shell,”Planning Review. Flight. 20 (3): 1992, pp. 41-46.
  7. Jump up^ Schwartz, Peter. . The Art of the Long View: Planning for the Future Uncertain World New York: Currency Doubleday, 1991.
  8. Jump up^ “Herman Kahn.” The Columbia Encyclopedia, Sixth Edition. 2008. Retrieved November 30, 2009 from Encyclopedia.com:http://www.encyclopedia.com/doc/1E1-Kahn-Her.html
  9. ^ Jump up to:b Chermack, Thomas J., Susan A. Lynham, and Wendy EA Ruona. “A Review of Scenario Planning Literature.” Futures Research Quarterly 7 2 (2001): 7-32.
  10. Jump up^ Lindgren, Mats, and Hans Bandhold. Scenario Planning: The Link between Future and Strategy. New York: Palgrave McMillan, 2003.
  11. ^ Jump up to:b Bradfield, Ron, et al. “The Origins and Evolution of Scenario Techniques in Long Range Business Planning.” Futures 37 8 (2005): 795-812.
  12. Jump up^ Kahn, Herman. Thinking About the Unthinkable. New York: Horizon Press, 1965.
  13. Jump up^ Berger, G. “Phenomenologies of Time and Prospects.” University Press of France, 1964.
  14. Jump up^ Kahn, Herman, and Anthony J. Wiener. “The Next Thirty-Three Years: A Framework for Speculation.” Daedalus 96 3 (1967): 705-32.
  15. Jump up^ Godet, Michel, and Fabrice Roubelat. “Creating the Future: The Use and Misuse of Scenarios.” Long Range Planning 29 2 (1996): 164-71.
  16. Jump up^ Godet, Michel, Fabrice Roubelat, and Guest Editors. “Scenario Planning: An Open Future.” Technological Forecasting and Social Change 65 (2000): 1-2.
  17. Jump up^ Diffenbach, John. “Corporate Environmental Analysis in Large US Corporations,”Long Range Planning. 16 (3), 1983.
  18. Jump up^ Wack, Peter. “Scenarios: Uncharted Waters Ahead,” Harvard Business Review. September-October, 1985.
  19. ^ Jump up to:b Mercer, David. “Simpler Scenarios,” Management Decision . Flight. 33 Issue 4: 1995, pp 32-40.
  20. Jump up^ Cornelius, Peter, Van de Putte, Alexander, and Romani, Mattia. “Three Decades of Scenario Planning in Shell,”California Management Review. Flight. 48 Issue 1: Fall 2005, pp 92-109.
  21. Jump up^ Fahey, Liam and Randall, Robert M.Learning from the Future. Wiley & Sons, 1998.
  22. Jump up^ Schoemaker, Paul JH “Multiple Scenario Development: Its Conceptual and Behavioral Foundation,”Strategic Management Journal. Flight. 14: 1993, pp 193-213.
  23. Jump up^ Schoemaker, Paul JH “Twenty Common Pitfalls in Scenario Planning”, inLearning from the Future. Wiley & Sons, 1998, pp 422-431.
  24. ^ Jump up to:b Schoemaker, Paul JH Profiting from Uncertainty . Free Press, 2002.
  25. Jump up^ Shell (2008). “Scenarios: An Explorer’s Guide” (PDF) . www.shell.com/scenarios . Shell Global . Retrieved 15 July 2014 .
  26. Jump up^ Meinert, Sacha (2014). Field manual – Scenario building (PDF) . Brussels: Case. ISBN  978-2-87452-314-4 . Retrieved 15 July 2014 .
  27. Jump up^ Backoff, RW and PC Nutt. “Strategic Planning: Threats and Opportunities for Planners.” Planners Press, 1988.
  28. Jump up^ T. Eriksson & T. Ritchey, “Scenario Development using Computer Aided Morphological Analysis,” (PDF) . Adapted from a Paper Presented at the Winchester International OR Conference, England, 2002.
  29. Jump up^ Kinkel, S., Armbruster, H., & Schirrmeister, E. (2006). Szenario-Delphi or Delphi-Szenario? Erfahrungen aus zwei Vorausschaustudien mit der Kombination dieser Methoden. In J. Gausemeier (Ed.), Vorausschau und Technologieplanung: 2. Symposium for Vorausschau und Technologieplanung (pp. 109-137). Paderborn: Heinz-Nixdorf-Institute.
  30. ^ Jump up to:a Rikkonen B , P. (2005). Use of alternative scenarios in the future of agriculture in Finland. Turku School of Economics and Business Administration, Helsinki.
  31. Jump up^ von der Gracht, H. (2007). Scenario Planning for Logistics Service Providers. Planning Practices and Scenarios for 2025. EBS Business School, Supply Chain Management Institute, Germany
  32. Jump up^ von der Gracht, HA / Darkow I.-L .:Scenarios for the Logistics Service Industry: A Delphi-based analysis for 2025. In: International Journal of Production Economics, Vol. 127, No. 1, 2010, 46-59.