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A Scenario Planning Process

Scenario planning is a creative process much like writing a novel with a plot beginning with current reality.  The object is to create a variety of plausible futures and analyze how the enterprise would fare under each of them.  It is generally used to assess the risk associated with a key decision being considered.  

This scenario planning process is a condensed version of the one described in great detail by Peter Schwartz in The Art of the Long View.    


Step 1.  State the focal issue or decision facing the enterprise.

Scenario planning works best when it proceeds from the "inside out" rather than the "outside in".  The best way is to begin with the important decisions that must be made and then progress outward to the environment.  This will keep the process focused and prevent it from degenerating into purposeless speculation about infinite futures.

Step 2.  List the key factors that influence this decision.

Identify the things that will determine the success or failure of the decision under consideration.  This includes the assumptions that provide the logic for this decision.

  • What do you need to know to make this decision or resolve this issue?

  • What will you consider success or failure?

  • What conditions or events will determine success or failure?

  • What critical assumptions define the logic for these responses? 

Step 3.  List the driving forces that influence these key factors.

Identify the driving forces in the macro-environment that drive the key factors you listed.  These driving forces can originate in the following areas.

  • Society and its structure including demographic, economic and political factors, and public opinion.

  • Markets and customer behavior.

  • Technology and innovation.

  • Your industry competitive structure.

  • Your organizational capabilities and core competencies.

Separate those forces that are highly predictable or predetermined (i.e. demographics) from those which are uncertain (i.e. public opinion).  Plausible plot development requires knowing what is inevitable and what is uncertain and open to choice.

Extensive knowledge or research is may be required to identify these driving forces.  Systems thinking is needed to understand the structural dynamics creating them.  

Step 4.  Rank the key factors and driving forces by importance and by uncertainty.  

The purpose of this step is to identify the key factors and forces that are the most important and most uncertain.  This ranking is based on two criteria.

  1. The degree of importance for the success of the decision or issue under consideration.

  2. The degree of uncertainty surrounding these factors and forces.

The objective of this ranking is to identify the two or three factors or trends that are most important and most uncertain.

The predictable and predetermined factors are the same in all scenarios and will not be a differentiating feature. 

This ranking will identify the factors and forces that will comprise the characters and settings for the set of scenarios that will be developed. 

Step 5.  Compose plots for alternate futures that could impact the decision.

This is the most creative and most important part of this process.  The object is to develop a range of plausible scenarios whose differences all have a bearing on the decision under consideration.

The characters in these plots are either driving forces or institutions.  The scenarios describe how these driving forces or institutions might behave under different plots or combinations of plots.

Commonly occurring plots that should be considered for every set of scenarios.

Winners and losers- a zero sum plotline where the strong survive and the weak get weaker.

Challenge and response- an adventure story of overcoming obstacles and being transformed in the process.

Evolution- slow change in growth or decline in response to environmental influences.

Systems thinking is essential for plausible plot development because it looks for structural relationships that create behavior.

Step 6.  Evaluate the decision in each of the postulated scenarios.

Each scenario is simulated as if it were actually occurring. Examine how the decision looks in each scenario.  If it is good in all scenarios it is a low risk decision but if it looks good in some but not in others it presents a higher risk.

This simulation exercise requires a suspension of belief to recognize that any of these scenarios could happen.  This is necessary to enable an unbiased evaluation of the decision in each of these possible futures.

Step 7.  Select indicators and signposts for each scenario.

These indicators and signposts will provide advanced insight into which of these scenarios is actually unfolding.  This knowledge can provide a significant competitive advantage from knowing what the future holds.

This step is an important product of the scenario planning process because it forces the recognition that the future is not fixed and that many different scenarios are possible.  It creates heightened sensitivity to the events shaping the institution's future and how to deal with them.

Three Sigma provides facilitation and coaching in this scenario planning process.  Contact TheCoach@ThreeSigma.com. 

Copyright 2002 Three Sigma, Inc.