Using Scenarios - The Key to Effective Planning in an Uncertain World
by Craig Hibberd
More and more we find ourselves planning for the future in a highly uncertain world, with a large number of diverse interests to be satisfied. The pace of change, increasing flow of information, and complexity of decisions brings about an almost certain planning gridlock. Asking for more information and studies compounds the problems rather than making decisions easier. "Scenario planning" is well suited for this kind of planning environment.
Many times people argue over the future rather than focusig making a good decision. By developing a few logical, realistic scenarios about the future, we have a way test test alternatives we are considering. These future scenarios include various costs, inflation, and political climates.
Royal Dutch/Shell developed scenario planning during the oil crises of the early ‘70’s. Shell planners saw the beginnings of fundamental changes occurring in the industry, and were able to position Shell to take advantage of a very chaotic and uncertain situation. Scenario planning challenged corporate assumptions and allowed Shell to move from the smallest of the seven major oil companies to the number two position in the industry. 1
Peter Schwartz, who worked for Royal Dutch/Shell as the head of Group Planning, explained scenarios this way:
"You can tell you have good scenarios when they are both 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." 2
Scenario planning cuts across political, social, and economic boundaries. Peter Schwartz not only worked for Royal Dutch/Shell, he is also a Rocky Mountain Institute (RMI) board member. Peter is a co-founder of Global Business Network (GBN).
Peter’s GBN associate, Lawrence Wilkinson wrote the following about scenario planning for Wired Magazine:
The Electric Power Research Institute (EPRI) offers scenario planning for its utility customers. This use of scenario planning has been specifically adapted for electric utilities who are moving from a regulated to a competitive environment.4
"Futures Workshops" based on scenario planning have been held for three electric utilities, one in Texas, and two in New Mexico. Scenarios were used to develop various plausible futures, strategies that make sense across all futures were developed, and actions plans were put in place.
Traditional "contingency" planning (best, worst, and most likely case) falls short when working with diverse interests in a highly uncertain planning environment. "Decision tree" planning, which accounts for many variables, is also inadequate because the large number of variables creates too many combinations and permutations. With a large number of variables, decision trees quickly blossom into hundreds of mini-scenarios.
At first glance, future "scenario planning" might look like science fiction - maybe a lot of fun, but not much practical value. Actually, scenario planning done well, is about action and moving forward in uncertainty.
1 "The Fifth Discipline - The Art and Practice of the Learning Organization" Peter M. Senge, Doubleday, 1990p 178.
2 "The Art of the Long View" Peter Schwartz, Currency Doubleday, 1996
3 "How to Build Scenarios - Planning for ‘Long Fuse, Big Bang’ Problems in an Era of Uncertainty" p77, by Lawrence Wilkinson, Special Edition, Wired Magazine, November, 1995
4 "Windows on the Future - Using Scenarios to Envision the Impact of Future Uncertainties on Utility Markets" Electric Power Research Institute, September 1993, Report # TR-102567
