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Using Scenario Planning to Reshape Strategy

Book Description

In recent years, organizations have been caught off guard by economic volatility, unexpected political events, natural disasters, and disruptive innovations. In response, the authors note, executives are showing a new interest in scenario planning. Rather than tying their company’s future to a strategy geared to one set of events, executives are coming to the view that smart management benefits from a richer understanding of the present possibilities afforded from multiple views about possible futures. Scenario planning came to prominence following World War II and gained recognition in the corporate world in the late 1960s and early 1970s. While several different approaches to scenario planning have emerged since then, this article focuses specifically on the Oxford scenario planning approach. Rather than taking a probabilistic stance (that is, making predictions in percentage terms or as best-case/worst-case scenarios) or a normative stance (that is, envisioning what a future should look like), the Oxford scenario methodology is based on plausibility. By recognizing the part of uncertainty that is unpredictable and by actively exploring the sources of the turbulence and uncertainty, the goal is to iteratively and interactively generate new knowledge and insights to help organizations reperceive their circumstances. During periods of turbulence, unpredictable uncertainty, novelty, and ambiguity (what the authors refer to as TUNA conditions), organizations frequently experience serious challenges that threaten existing value chains, communities, and even whole fields of endeavor. Such conditions can be unsettling and destabilizing on many different levels. A core feature in the Oxford scenario planning approach is making a distinction between the immediate business environment an organization inhabits (where business transactions take place) and the broader environment, or context, in which it operates. Different organizations go about scenario planning in different ways — there is no cookie-cutter methodology, the authors write. This article examines two cases. The first case involves Rolls-Royce plc, a leading supplier of power systems for aircraft and the marine and energy markets; the second case looks at the Royal Society of Chemistry, a London, U.K.-based international organization involved in advancing the field of chemical sciences. In addition to showing how these organizations used scenario planning, the authors discuss the challenges and opportunities of scenario planning more broadly.