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    Scenario Planning: An Alternative Way of Dealing With Uncertainty

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    Lorraine Hall
    Scenario planning is an alternative approach to dealing with uncertainty that involves constructing multiple plausible scenarios about the future rather than making predictions or probability assessments. Scenarios are narratives that encompass a range of futures bounded by critical uncertainties. The scenario planning process identifies trends, uncertainties, and how they may impact issues of concern. It develops extreme scenarios and tests strategies for robustness across scenarios. Scenario planning is useful when uncertainty is high, industries are changing, and strong differences of opinion exist. Typical outcomes include developing new opportunities, rethinking plans, and monitoring weak signals of change.

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    Scenario Planning: An Alternative Way of Dealing With Uncertainty

    Uploaded by

    Lorraine Hall
    9 views11 pages
    Scenario planning is an alternative approach to dealing with uncertainty that involves constructing multiple plausible scenarios about the future rather than making predictions or probability assessments. Scenarios are narratives that encompass a range of futures bounded by critical uncertainties. The scenario planning process identifies trends, uncertainties, and how they may impact issues of concern. It develops extreme scenarios and tests strategies for robustness across scenarios. Scenario planning is useful when uncertainty is high, industries are changing, and strong differences of opinion exist. Typical outcomes include developing new opportunities, rethinking plans, and monitoring weak signals of change.

    Original Description:

    Dealing with Uncertainty

    Original Title

    Scenario Planning

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    Scenario planning is an alternative approach to dealing with uncertainty that involves constructing multiple plausible scenarios about the future rather than making predictions or probability assessments. Scenarios are narratives that encompass a range of futures bounded by critical uncertainties. The scenario planning process identifies trends, uncertainties, and how they may impact issues of concern. It develops extreme scenarios and tests strategies for robustness across scenarios. Scenario planning is useful when uncertainty is high, industries are changing, and strong differences of opinion exist. Typical outcomes include developing new opportunities, rethinking plans, and monitoring weak signals of change.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    9 views11 pages

    Scenario Planning: An Alternative Way of Dealing With Uncertainty

    Uploaded by

    Lorraine Hall
    Scenario planning is an alternative approach to dealing with uncertainty that involves constructing multiple plausible scenarios about the future rather than making predictions or probability assessments. Scenarios are narratives that encompass a range of futures bounded by critical uncertainties. The scenario planning process identifies trends, uncertainties, and how they may impact issues of concern. It develops extreme scenarios and tests strategies for robustness across scenarios. Scenario planning is useful when uncertainty is high, industries are changing, and strong differences of opinion exist. Typical outcomes include developing new opportunities, rethinking plans, and monitoring weak signals of change.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 11

    Scenario Planning:

    An Alternative Way
    of Dealing
    with Uncertainty
    1

    Assumptions of scenario planning


    1. Managers are not able to make valid
    assessments of probabilities of unique
    future events
    2. Best guesses of the future may be
    wrong
    3. Minority opinions should be allowed
    airtime
    2

    What are scenarios?


    A scenario is not a forecast of the future
    multiple scenarios are pen pictures
    encompassing a range of plausible futures
    Each scenario has an infinitesimal
    probability of occurrence, but the range
    of the set of scenarios is constructed to
    BOUND uncertainties seen to be inherent in
    the future
    Unlike probability judgments, scenarios
    highlight the reasoning underlying judgments
    about the future
    3

    More on scenarios
    A major focus is how the future can evolve from
    now to the horizon year
    Relationship between critical uncertainties,
    predetermined trends and behavior of actors is
    thought through
    Decisions are then tested for robustness in
    the wind tunnel of the set of scenarios
    4

    Scenario construction: The extreme world


    method
    1.
    2.
    3.
    4.
    5.
    6.
    7.
    8.

    Identify the issue of concern and horizon year


    Identify current trends that have an impact on the issue
    of concern
    Identify critical uncertainties
    Identify whether trends and uncertainties have a
    negative or positive impact on issue of concern
    Create extreme worlds
    Add predetermined trends to both scenarios
    Check for internal consistency
    Add in actions of individuals and organizations
    5

    Examples of predetermined trends


    Demographic:
    Technology:
    Political:
    Cultural:
    Economic:

    population growth, birth rates


    growth rates, production capacity
    power shifts, budget deficits
    changing values, spending
    patterns
    disposable incomes, investment
    levels
    6

    An illustrative idea for a business school

    Testing the robustness of strategies against scenarios

    An output of the driving forces method

    When should a company use scenario planning?


    1. When uncertainty is high
    2. Too many costly surprises have occurred in the
    past
    3. Insufficient new opportunities are perceived or
    generated
    4. The industry has experienced significant change,
    or is about to
    5. Strong differences of opinion exist, each of
    which has its merits
    10

    Typical outcomes of scenario planning


    This is what we have to do
    (developing new business opportunities)
    We better think again
    (understanding outcomes of plans better)
    We better watch those dots on the horizon
    (perceiving weak signals of new developments)
    We are in the right track
    (moving forward with more confidence)
    11

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