The creators of the Back to the Future trilogy were on to something.
At the risk of dating myself, the first installment of the three-part movie series debuted the year I graduated from high school and was the highest-grossing movie of 1985. It had cool special effects, catchy songs (Forget Michael J. Fox … I developed a crush on Huey Lewis because of his music and performance) and nonstop action.
You know the story. Marty McFly accidentally travels back in time from 1985 to 1955 where he meets his future parents and becomes his mother’s romantic interest. Doc Brown has invented the time-traveling DeLorean, and he helps Marty repair history and return him to 1985.
While in 1955, Marty unknowingly changes his future life by altering events, and he saves Doc Brown’s life by alerting him to something that will happen in 1985.
Marty and Doc were using scenarios and they didn’t even know it.
What are Scenarios?
Simply put, scenarios are the “what ifs?” of life and business. They are a way to investigate, but not predict, alternate futures for planning purposes. What if I move out of state or what if you expand your services? What if I get an advanced degree or what if the price of a gallon of gas triples? What if Marty McFly’s mom and dad don’t get married?
Scenarios combine known facts about the future, along with key driving forces or trends in society, economics, technology, regulations, and politics, and they can help answer the question, “What do I need to do now to be prepared for that future?”
From a business perspective, imagining scenarios with varying positive and negative story lines is the crux of the scenario strategic planning model.
A Brief History of Scenario Planning
Scenarios first emerged following World War II as a method for military planning. The U.S. Air Force tried to imagine what its opponents might do and prepare alternative strategies.1
Brigadier General Billy Mitchell proposed that airplanes might sink battleships by dropping bombs on them. (It’s worth noting that then U.S. Secretary of War Newton Baker remarked, “That idea is so damned nonsensical and impossible that I’m willing to stand on the bridge of a battleship while that nitwit tries to hit it from the air.”) 2
In the 1960s, Herman Kahn, who had been part of the Air Force effort, refined scenarios as a tool for business prognostication. Scenarios reached a new dimension in the early 1970s, with the work of Pierre Wack, who was a planner in the London offices of Royal Dutch/Shell, the international oil enterprise, in a newly formed department called Group Planning. 1
Wack and his colleague, Ted Newland, started looking at events that might affect the price of oil. They wrote two scenarios about the future – one where the price of oil stayed stable and one in which there was an oil price crisis. Eventually, the pair fully played out what would happen to the company in both scenarios, which helped managers imagine the decisions they might have to make for Royal Dutch/Shell to be prepared in either version. And they were ready for the energy crisis that happened in 1973. As a result of scenario planning, Shell moved from one of the weaker global oil companies to one of the two largest.
When Should you Use Scenario Planning and Why is it Important?
Building a strategic plan for your business without certainty about your future is like building a house on quicksand. Unfortunately, there is no crystal ball in the business-planning toolbox. We know that decisions should be based on data and sound analysis and not intuition; however, data represents the past and can inform the future, but data can’t predict the future.
By using scenario planning as a part of your strategic planning model, it can be useful in identifying gaps, issues or goals, and ultimately making better decisions about the future.
The team at Callis recently facilitated a strategic planning workshop for a client that included scenario planning. The exercise resulted in new strategic focus areas and multiple objectives for the next five years, with many based on potential futures that may impact the industry.
1. The Art of the Long View: Planning for the Future in an Uncertain World, Peter Schwartz, 1991
2. Scenario Planning: A Tool for Strategic Thinking, Paul J.H. Schoemaker, Jan. 15, 1995