Scenario planning or scenario thinking is a strategic planning tool used to make flexible long-term plans. It is a method for learning about the future by understanding the nature and impact of the most uncertain and important driving forces affecting our world.
Many of the regular methods for strategy development assume that the world in three to ten years’ time will not significantly differ from that of today and that an organisation will have a large impact on its environment: they assume we can mould the future. Scenario planning however assumes that the future can differ greatly from what we know today.
The method is based on creating a series of ‘different futures’ generated from a combination of known factors, such as demographics, with plausible alternative political, economic, social, technical, legal and environmental (PESTLE) trends which are key driving forces. The goal is to craft diverging worlds by extrapolating these heavily-influencing driving forces. The technique can also include anticipatory thinking elements that are difficult to formalise, such as subjective interpretations of facts, shifts in values, new regulations or inventions.
It is a group process which encourages knowledge exchange and development of mutual deeper understanding of central issues important to the future of your organisation. Although the method is most widely used as a strategic management tool, it can also be used for enabling other types of group discussion about a common future.
The thought processes involved in getting to the scenarios have the dual purpose of increasing knowledge of the environment in which you operate and widening the participant’s perception of possible future events – encouraging them to ‘think the unthinkable’. For each of these worlds, appropriate action plans can be considered. Asking the key question, ‘what do we need to do (now) to be ready for all scenarios?’, can then inform the formulation of strategies to cope with these differing pictures of the future (or at least to address the maximum number of possibilities).
Predicting is difficult!
Future-gazing and making accurate predictions is notoriously fraught with difficulty. Scenario planning, by using trend analysis as its base, keeping a focus and reigning in the prediction period to somewhere around the 10-year mark, helps build tests of plausibility into the process.
- 1901 – The world market for cars is 1 million
- 1943 – There is a world market for maybe 5 computers – Chairman, IBM
- 1968 – There is no market for Japanese cars in the USA
- 1977 – There is no reason why everyone should have a computer – CEO, DEC
- 1978 – All offices paperless by 1990