Peter Schwartz is a co-creator of scenario planning, a business tool designed to help leaders cope with the future without having to predict it. Schwartz writes, “In a scenario process, managers invent and then consider, in depth, several varied stories of equally plausible futures. The stories are carefully researched, full of relevant detail, oriented toward real-life decisions, and designed (one hopes) to bring forward surprises and unexpected leaps of understanding.”
Scenario planning was first used by the military in WWII, but the classic case demonstrating its value was undertaken by Pierre Wack, a planner in the London offices of Royal Dutch/Shell. In the early 1970s, Pierre and his colleagues in the Group Planning department were looking for events that might affect the price of oil—which had long been a steady, dependable commodity. That’s when they proposed a set of scenarios, each one a plausible story of the future, but radically different in their outcomes.
I’ll spare you the details except to say, between OPEC and the Yom Kippur War, the energy crisis that followed caught the oil industry off-guard--with the exception of Shell. From one of the weaker of the “Seven Sisters,” the seven largest global oil companies,
Shell became one of the two largest and, arguably, most profitable.
Schwartz tells us, “The purpose of scenarios is to help yourself change your view of reality—to match it up more closely with reality as it is, and reality as it is going to be. The end result, however, is not an accurate picture of tomorrow, but better decisions about the future.”
Superman Does Scenario Planning
Here's a quick example of how scenario planning works, designed for a superhero. Suppose you are Superman with a regular workday of urgent, very urgent, near-death, and saving-mankind activities. Over coffee one morning, you decide to look out, say, five years and wonder if you might be able to retire. As you ponder, there are two things that seem especially troubling and difficult to predict.
One is kryptonite. The one piece you know about is locked away, but The Daily Planet reports that an evil genius may have come up with a way to make kryptonite synthetically, though nobody really knows.
The other thing that troubles you is crime, which seems to be declining in Metropolis but increasing in Gotham City, where that wimpy Batman seems to be struggling. Again, nobody really knows which way the future trend will head in either city--only that there seems to be no end to weird bad-guys.
So, unable to predict the future around these two especially troubling issues, you decide to devise some scenarios. And, because you already know what's keeping you up at night, you decide to look at two sets of extremes:
- First, you imagine, five years from now, that the world still only has that one piece of kryptonite locked away safely (we’ll call that the “Low K” extreme), and, conversely, there will be a thriving black market for synthetic kryptonite and you’ll be in some deep trouble (“High K”).
- Next, you imagine five years from now that crime will be nearly eradicated (if Batman can get his act together—so “Low C”), or criminals will essentially be running Gotham City, and maybe Metropolis as well (“High C”).
Now, you're in a good position to look at four different scenarios:
- Low C/Low K: Easy City (and probably retirement)
- Low C/High K: Phoning in Sick (and a good opportunity to turn the entire crime-fighting thing over to Batman)
- High C/Low K: Bat Hell (because you'll need to depend on Batman, a lot)
- High C/High K: The Big Hurt
Remember, you’re not trying to predict the future--just tell plausible stories about what might happen.
Can you think of any strategic initiatives that might make sense under most or all of the scenarios? How about partnering with Batman? You may be able to take him with one arm, but kryptonite doesn't slow him down. Also, it sounds like he could use some help over in Gotham City, which might influence the High C scenarios. And even in the Easy Street scenario (Low K/Low C), it would be nice to have a buddy to go fishing with.
Remember, you’re still not predicting the future. But you are finding initiatives—like partnering--that make you stronger in every, or almost every scenario.
Sometimes in scenario planning there are some eye-opening findings. For example, why not marry Lois Lane and start a family, like you've been putting off for 70 years? Maybe your son or daughter can't become the Kid of Steel, but perhaps the Kid of High Strength Poly-carbonate, unfazed by kryptonite? Having a third superhero on the block might reduce the likelihood of a High C outcome, as well.
See how it works? Four scenarios. Not a single one likely to occur exactly. But all useful in generating strategic options and new ideas--not to mention surprising the heck out of Lois Lane.
Schwartz adds a few additional considerations. Beware of settling on three scenarios, because the one “in the middle” is often treated as the “most likely.” This undermines the advantages of multi-scenario planning. And avoid assigning probabilities. Also, remember to use names that telegraph the scenario logic. Make them vivid and memorable.
Finally, Schwartz closes by saying, “You can tell you have good scenarios when they are plausible and surprising; when they have the power to break old stereotypes; and when the makers assume ownership of them and put them to work. Scenario making is intensely participatory, or it fails.”