The Use and Value of Scenario Planning

Abstract

Strategies are often approached with the assumption that uncertainty can be partially understood and minimized to some extent by exploring plausible future events. Scenario planning addresses this question by using scenarios to describe more than one evolution and future state of the business environment. Throughout the years, strategists and academics have worked hard to resolve the methodological chaos (Martelli, 2001) created by the increasing number of scenario development methods. Aiming to contribute towards this goal, the history of scenario planning is covered in this paper, as well as its use and value in a range of industry sectors including energy (oil and gas), defense and space. With the insight and understanding gathered by both our research and interviews with strategists in different organizations, we propose a framework that suggests how to select different methods depending on different domain characteristics. We also use our findings to suggest how scenario planning, despite having its roots in strategic decision-making, can be a valuable input to risk management and systems design.