Scenario Planning

Conceptual Overview

The first formal systems for exploring possible future states found their origins in the battle zone, where anticipation of enemy action and reaction was crucial for survival, to anticipate surprise, and to gain success. What if we reach the outskirts of the city and our water supply is poisoned? Answers to such questions require foresight to build the possible future states that might unfold and planning to prepare the resource base for any consequent strategic action.

Contemporary scenario history starts with the U.S. military during World War II. After the war, the RAND Corporation was established to fill the perceived need for closer linkages between military planning and technological R&D. In the 1950s, its systems theory approach was extended from defense studies into social issues like urban decay and poverty. One of its influential thinkers, Herman Kahn, set up the Hudson Institute in 1961, where he speculated on the “World of 2000.” Kahn's conjectures were based primarily on the analysis of long-term trends—for example, population growth and its impact at key stages in societal development. He coined the term scenarios, used in Hollywood for the complete scripts and shooting directions of motion pictures, for the resultant futures. Ironically, the Dr. Strangelove character in Stanley Kubrick's 1964 film of the same name was based on Kahn, who thought the unthinkable about thermonuclear warfare.

The Hudson Institute's research attracted a variety of multinational companies, including the Shell Corporation, which is credited widely with the first commercial applications of Kahn-based scenario planning. Pierre Wack and Ted Newland led a small team in the early 1970s that examined the price of oil at a time when dominant thinking at Shell held that supplies were secure and resources plentiful, largely because the oil majors were in control. At this time, the main technique for future prospecting was probabilistic forecasting, which was reasonably accurate over the [Page 1392]short run but broke down seriously thereafter. Wack questioned Shell's thinking, asking what the outcome might look like if control were ceded to the producing nations. His team developed a crisis scenario premised on the producers taking power and restricting supply. This unthinkable outcome transpired and triggered the oil crises of 1973 and 1978. The scenario approach gained credence by stretching company thinking beyond the confines of the forecasting paradigm to the imagination of what deep futures could be like. Planners, faced with increasing complexity in their external contexts, had to embrace uncertainty rather than predictability, and SP provided the tools.

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