Analysis Without Paralysis: 10 Tools to Make Better Strategic Decisions

Chapter 9. Scenario Analysis

Description and Purpose

A scenario is a detailed description of what the future may look like. It is based on a set of assumptions that are critical to an economy’s, industry’s, or technology’s evolution. Scenario analysis is a structured way of developing multiple scenarios that address two common decision-making errors—underprediction and overprediction of change. The objective of scenario analysis is to build a shared baseline for strategic thinking and provide strategic early warning.

Companies facing challenges will especially benefit from scenario planning and analysis when the following conditions are present:

• Uncertainty is high relative to managers’ ability to predict or adjust to the future.

• Many ...