Why Scenarios?

Scenarios are stories about how the future might unfold for our organizations, our communities and our world. Scenarios are not predictions. Rather, they are provocative and plausible accounts of how relevant external forces — such as the future political environment, scientific and technological developments, social dynamics, and economic conditions — might interact and evolve, providing our organizations with different challenges and opportunities.

The purpose of scenario thinking is not to identify the most likely future, but to create a map of uncertainty — to acknowledge and examine the visible and hidden forces that are driving us toward the unknown future. Scenarios are created and used in sets of multiple stories that capture a range of possibilities, good and bad, expected and surprising. They are designed to stretch our thinking about emerging changes and the opportunities and threats that the future might hold. They allow us to weigh our choices more carefully when making short-term and long-term strategic decisions.

Scenario thinking is both a process and a posture. It is the process through which scenarios are developed and then used to inform decision-making. After that process itself is internalized, scenario thinking becomes, for many, a posture towards the world — a way of thinking about and managing change, a way of exploring the future so that they might meet it better prepared. At its most basic, scenarios help people and organizations order and frame their thinking about the long-term while providing them with the tools and confidence to take action soon. At its most powerful, scenarios help people and organizations find strength of purpose and strategic direction in the face of daunting, chaotic and even frightening circumstances.

A Brief History

As a methodology, scenario thinking has been used by the military since the 1940s, but only in the last 40 years, in the face of increasing uncertainty and complexity, have corporations and other large global organizations begun to apply sophisticated scenario processes. Scenario planners at Royal Dutch/Shell became famous for challenging traditional approaches to long-range planning, and embedding scenarios into the strategy work of the company.

Royal Dutch/Shell had long relied on forecasting to guide strategic decisions. But by the early 1970s, Shell had come to realize that traditional forecasting created a narrow, blinkered view of the future and invested in scenario planning. As a result, Shell did not make a prediction about the future price of oil; instead it systematically developed a set of plausible scenarios about what could happen to oil prices in different contexts. When Shell saw the indicators for one of its scenarios — one that featured a rapid rise in prices — were coming to pass, it changed its strategy accordingly. Other oil companies thought Shell was crazy, and that a rise in prices was impossible. But it wasn't. Shell was the first oil company to profit from the 1973 oil shock because it was the first to see it coming.

Another famous example occurred in South Africa in 1991, when the creation of the Mont Fleur scenarios catalyzed a nationwide discussion about the possibilities for post-Apartheid South Africa. These scenarios were developed as the political negotiations between the ANC and the apartheid-era National Party were taking place. The scenarios were presented as alternative outcomes of difficult decisions that the key stakeholders in South Africa would have to make (e.g. reconciliation versus revenge, the role of private property, minority rights for whites). The dialogue that stemmed from these scenarios enabled the stakeholders to think through the implications of their decisions and consequently adjust their strategies.

In recent years, scenario thinking has become one of the most popular strategy and long-term thinking tools, used by many of the world's top companies, influential government agencies, and community organizations and foundations to make sense of and succeed in a turbulent, uncertain world.

Fundamental Principles

Three principles underpin any successful scenario thinking approach:

Take the Long-View. The day-to-day work of most organizations is driven by near-term concerns, from quarterly profits to 1-3 year planning horizons. However, in reality, most strategic choices — from new product concepts to shifts in policy to new leadership — are choices that will play out a long way into the future. Taking the long view offers a more proactive and anticipatory approach to address deep-seated problems; see both challenges and opportunities more clearly; and consider the long-term effects and potential unintended consequences of actions that you might take.

Think from the "Outside-in". Most organizations are surprised by discontinuous events because they spend their time thinking about what they are most familiar with: their own organization. They think from the inside — the things they can control — out to the world in which they operate. Conversely, thinking from the outside-in begins with pondering external social, technological, environmental, economic and political shifts changes that might, over time, profoundly affect your community and organization, creating profound new risks and opportunities in the process.

Embrace Multiple Perspectives. The introduction of multiple perspectives — different voices that will shed new light on your strategic challenge — helps you better understand and challenge your own assumptions while painting a bigger picture of an issue or idea. This is achieved in two ways: by engaging a diverse internal team — demographics, functions, seniority, experience — in the process as well as incorporating provocative external perspectives. The result is an expansion of an organization's peripheral vision — you see new threats and opportunities that you otherwise may have missed.

Following these principles makes it more likely that the scenario work will be successful in challenging current assumptions and conventional wisdom. This, in turn, opens doors to new insights.

The Scenario Thinking Process

Although scenario planning is a highly imaginative and interactive exercise, the process is a systematic and iterative one.

1. Orient

The goal of this phase is to clarify the issue at stake, and to use that issue as an orienting device throughout the remaining phases. The process begins with learning more about the challenges that an organization or community faces, and the underlying assumptions that you and others in the organization — decision-makers in particular — hold about the nature of those challenges and how they will play out in future. The most effective way to surface these is through a series of structured interviews, allowing decision-makers to identify the issues that they feel will shape the future. The interviews enable you to clearly frame the 'focal question' — the issue that you would like the scenarios to shed light on.

2. Explore

The second phase is to explore the many "driving forces" that could shape your focal question. Driving forces are the forces of change outside the organization or community that will shape future dynamics in predictable and unpredictable ways. They might include new technologies, political shifts, economic conditions or social dynamics. This list should allow you to look beyond the pressures that dominate organizational thinking on a daily basis, and seek out those broader forces that could have an unexpected impact. Driving forces can be either "predetermined elements" — forces that are highly likely to develop in a direction that is known and unchangeable; or "uncertainties" — forces that are important, but unpredictable in terms of how they may play out.

3. Synthesize

The next phase involves combining the identified driving forces to create a scenario framework. Usually, frameworks are constructed from two of the most important, or "critical" uncertainties. Choosing a scenario framework is an iterative, trial-and-error process. It requires testing various combinations of critical uncertainties until you arrive at a framework that will serve as a strong platform on which to explore the future possible outcomes of the focal question. Once a framework is in place, the next step is to develop the scenarios into narratives — stories that begin in the present, and end in the future. These scenario stories can be powerful communication tools — a well-written brief story can quickly capture a lot of complexity and leave a lasting message.

4. Act

In this phase, scenarios are used to inform and inspire action. The test of a good set of scenarios is not whether in the end it turns out to portray the future accurately, but whether it enables an organization to learn, adapt and take effective action. After creating the scenarios, the next step is to deeply imagine living and working in each one. Individuals and organizations should ask themselves: What if this scenario is the future? What actions would I take today to prepare? Are there actions I could take to catalyze a desirable future, or to mitigate a negative one? The answers to your questions are scenario implications. The patterns and insights that emerge from the implications — across all possible scenarios — can form the building blocks of an organization's strategic agenda — the set of priorities that will help you make progress on your long-term goals.

5. Monitor

The last phase involves creating mechanisms that will help your organization track shifts in the environment and adjust strategy accordingly. Having created a powerful, useful set of scenarios, organizations often devise a monitoring system to identify and track a few 'leading indicators' which tell you if a particular scenario is beginning to unfold. Leading indicators are signs of potentially significant change. If leading indicators are selected carefully and imaginatively, they will serve as powerful signals that you need to adapt current strategy to the changing environment. They allow an organization to become more agile in the face of uncertainty.

Summary

Creating scenarios is a different, proven approach to planning for the future. When it is done in an engaging fashion, it harnesses participants' collective experience and knowledge as well as their powers of judgment and intuition. The exercise may sound simple — and in some cases it is. But the results are often surprising and profound. In the process of adding detail and color to each future, new issues and strategic concerns rise to the surface and old issues get reframed. Ultimately, the point of scenario thinking is not to write stories of the future. Rather, it is to arrive at a deeper understanding of the world in which your organization operates, and to continue to use that understanding to address your most critical challenges — from strategy, risk assessment, and innovation to visioning and executive intelligence. In every context, scenario thinking improves your ability to make better decisions today and in the future.