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CHRIS ERTEL, KATHERINE FULTON, AND DIANA SCEARCE

Scenario Thinking

Futurism is the art of reperception. It means that life will change, must change, and has changed, and it suggests how and why. It shows that old perceptions have lost their validity, while new ones are possible.

—Bruce Sterling

Real-Life Story

Herman Miller, the office furniture maker, is one of the most influential U.S. design firms of the past half-century. In late 2000, members of the company’s Future Insight Group worked with Global Business Network, a consultancy specializing in long-term thinking, to develop a set of scenarios on the future of work and the workplace. The original goal was to identify emergent market opportunities. This initial scenario project went well, but with one small problem: By the time the team was ready to roll out the results and start exploring new innovations, the bottom had fallen out of the office furniture market. In one short year, the company—like others in the industry—saw a 40 percent drop in revenues, resulting in a shift in attention to survival mode.

By 2002, as the team was looking for additional ways to leverage the work, using the scenarios with customers emerged as an opportunity. As a “B2B” business, the majority of Herman Miller’s revenues come from big companies that need to outfit large workplace facilities. Before making purchases, these major clients like to meet first with key executives to discuss emerging trends affecting workplace design and productivity—resulting in a steady stream of visits to Herman Miller’s headquarters in Zeeland, Michigan. Even in the depths of recession, these customers expect Herman Miller to deliver on its long-standing reputation for fresh thought leadership.

In order to engage key customers in dialogue about their workplace strategies and emerging needs, Herman Miller customized a two-hour scenario process (dubbed the “kaleidoscope” experience). Beginning with a polished video presentation, the kaleidoscope experience serves three important purposes: It demonstrates the quality of Herman Miller’s thinking on the workplace of the future; it provides Herman Miller with a continuous stream of new, innovative ideas for future possible products and services, created by the company’s own customers; and it helps to deepen relationships with key customers by creating an accelerated and shared learning experience. To date, dozens of large corporate customers have been through the kaleidoscope process.

“We decided to do scenario work as a platform for thinking creatively about new product development,” said Maryln Walton, of Herman Miller’s Future Insight Group. “What we did not anticipate was that this work would also have benefits for our sales and marketing efforts, and would have a wider impact on how people in the company think about the future more generally.” The success of the kaleidoscope process underscored the value of helping organizations develop their own capacity for engaging others in scenario thinking. In many ways, Herman Miller’s creative use of scenario thinking is emblematic of the ways the scenario tool kit has exploded in use beyond its original application as a strategic planning application for the oil industry. Today, scenario thinking tools and approaches are routinely applied toward a broad range of uses in a variety of industries and with diverse groups, large and small.¹

The Basics

Scenarios are stories about how the future might unfold for our organizations, our issues, our communities, and even our world. Importantly, scenarios are not predictions. Rather, they are provocative and plausible stories about diverse ways in which relevant issues outside our immediate communities and organizations might evolve and interact, such as the future political environment, social attitudes, regulation, and the strength of the economy. Because scenarios are hypotheses, not predictions, they are created and used in sets of multiple stories—usually three or four—that capture a range of future possibilities: good and bad, expected and surprising. Finally, scenarios are designed to stretch our thinking about the opportunities and threats that the future might hold, and to weigh those opportunities and threats carefully when making both short- and long-term strategic decisions.

Ultimately, the point of scenario thinking is not to write stories of the future. Rather, it is to arrive at a deeper understanding of the world in which your organization or community operates, and to use that understanding to inform your strategy and improve your ability to make better decisions today and in the future. At its most basic, scenario thinking helps communities and organizations order and frame their thinking about the longer-term future, while providing them with the tools and the confidence to take action soon. At its finest, scenario thinking helps communities and organizations find strength of purpose and strategic direction in the face of daunting, chaotic, and even frightening circumstances.²

Scenarios can be applied in a wide variety of organizational and community settings. Scenarios have been used with groups of all shapes and sizes—to frame intimate strategic conversations among boards and executive committees, to build the capacity of hundreds of employees to adapt to an uncertain and changing environment, and even to catalyze broad-based dialogues about better futures across entire countries. The scenario process has been used extensively with corporations and nonprofits, government agencies, and diverse multistakeholder groups. Scenario thinking has catalyzed national, regional, and local community-based change, and it has been used to connect actors from around the world to engage in strategic conversations around issues of shared interest, ranging from the future of climate change to AIDS.

The most common applications of scenario thinking typically fall into four broad categories: (1) alignment and visioning, (2) setting strategic direction, (3) catalyzing bold action and innovation, and (4) accelerating collaborative learning. Of course, these applications are not mutually exclusive. Most scenario thinking efforts are driven at the outset by a single application, such as decision making or organizational alignment, and result in multiple overlapping outcomes.

ALIGNMENT AND VISIONING

Scenarios can be used with multistakeholder coalitions and single organizations to create a shared vision and increase alignment around a desired future or strategic direction. This is a powerful application because scenario thinking often results in a deeper and shared understanding of the complexities of problem solving—the potential opportunities, barriers, allies, and pitfalls. When working with a diverse group, this shared understanding can help divergent voices find common ground and collaborative solutions for the future.

SETTING STRATEGIC DIRECTION

Scenarios can be used for various levels of strategy development: making a decision on a specific strategic issue; setting a high-level strategic agenda; creating the platform for an ongoing strategic conversation; and assessing risks and opportunities by exploring how complex factors could create very different environments that you might have to navigate. In addition, you can use scenario thinking to test your current strategy, theory of change, or vision in multiple possible futures beyond your control, rehearsing what you would need to do to succeed in different environments—positive, negative, and unexpected.

CATALYZING BOLD ACTION AND INNOVATION

Scenario thinking can be used to get your organization unstuck, catalyzing bold action and innovation. It does so by rehearsing diverse and provocative future possibilities—both desirable scenarios that you would like to help create and profit from and dark scenarios that generate a sense of urgency. Looking across a range of futures often enables organizations and communities to identify new opportunities and threats, and envision innovations that capture opportunities and mitigate threats.

ACCELERATING COLLABORATIVE LEARNING

Scenarios can serve as a powerful platform to collaboratively explore a topic of common interest that organizes what is known and surfaces what is unknown and uncontrollable. An important result of such collaborative learning is to challenge assumptions by introducing new perspectives and new knowledge, leading the group to discover as yet unimagined solutions.

Table of Uses

The following table illustrates the variety of settings in which scenario thinking can be used to facilitate a range of different outcomes.

Getting Started

Pierre Wack, a planner for Royal Dutch/Shell in the 1970s and the originator of scenario thinking as it is commonly used today, described it as a discipline for encouraging creative and entrepreneurial thinking and action “in contexts of change, complexity, and uncertainty.” Scenario thinking achieves this promise because of three fundamental principles: the long view, outside-in thinking, and multiple perspectives.

THE LONG VIEW

Scenario thinking requires looking beyond immediate demands and peering far enough into the future to see new possibilities, asking, “What if?” Such a long-term perspective may seem tangential to an organization’s more immediate pressures, but doing so enables you to take a more proactive and anticipatory approach to addressing deep-seated problems; see both challenges and opportunities more clearly; and consider the long-term effects and potential unintended consequences of actions that you might otherwise take.

OUTSIDE-IN THINKING

Most individuals and organizations are surprised by discontinuous events because they spend their time thinking about what they are most familiar with: their own industry or immediate context. They think from the inside—the things they can control—out to the world they would like to shape. Conversely, thinking from the outside in begins with pondering external changes that might, over time, profoundly affect your work—a seemingly irrelevant technological development that could prove advantageous for service delivery, for example, or a geopolitical shift that could introduce unforeseen social needs. Outside-in thinking can help organizations port ideas across industry silos to overcome the artificial boundaries resulting from narrowly focused industry mind-sets, and thus, anticipate and prepare for “surprising” eventualities.

PHASES OF SCENARIO THINKING

The scenario thinking process starts by exploring external developments, both in the broad contextual world and in your working environment. Only after you’ve created scenarios about the external environment do you consider implications for your individual organization or issue. The following diagram illustrates a framework for outside-in thinking. The inner ring refers to your organization or the specific issue at stake. The middle ring is your immediate working environment and the outer ring is the contextual environment, which encompasses broad driving forces such as social values, geopolitics, and technology (figure 1).

Figure 1. Outside-In Thinking

MULTIPLE PERSPECTIVES

The introduction of multiple perspectives—diverse voices that will shed new light on your strategic challenge—helps you better understand your own assumptions about the future, as well as the assumptions of others. When one is working with passionate convictions, it is easy to become deaf to voices you may not agree with. However, consciously bringing these voices to the table exposes you to new ideas that will inform your own perspective and could prove extremely helpful in your effort to see the big picture of an issue or idea. The scenario thinking process creates a powerful platform for multiple (and often divergent) perspectives to come together. The result is an expansion of an organization’s peripheral vision—you see new threats and opportunities that you otherwise may have missed.

Over the years, a basic process has emerged that serves as a foundation for most scenario thinking exercises. The process has five phases: orient, explore, synthesize, act, and monitor (figure 2). Just as scenario thinking can be used toward many different ends, the basic process can be modified in countless ways to better meet your desired outcomes. In some cases, a few of the phases are abridged and extra time is allocated to other phases. In other cases, a more radical departure from the basic process may be appropriate.

Figure 2. Phases of Scenario Thinking

PHASE ONE: ORIENT

The goal of phase one is to clarify the issue at stake. The process begins with learning more about your challenges, and the underlying assumptions that you and others in your organization/community—decision makers, in particular—hold about the nature of those challenges and how they will play out in the future. The most effective and efficient way to surface these assumptions is to conduct structured interviews with key decision makers and other important stakeholders. Once you have learned more about the nature of your challenges, issues, and underlying assumptions, you are ready to frame the focal issue or question that will orient the remaining phases of the scenario thinking process.

PHASE TWO: EXPLORE

In this second phase, you explore the many driving forces that could shape your focal issue, including forces within your immediate working environment like regulatory shifts and changes in your customer base, as well as broader developments—social, technological, economic, environmental, and political. The point of brainstorming a list of driving forces is to look beyond the pressures that dominate your work and mind on a daily basis and seek out those forces in the outside world that could have an unexpected impact.

PHASE THREE: SYNTHESIZE

In phase three, you synthesize and combine the driving forces that you have identified to create scenarios. Start by prioritizing your driving forces according to two criteria: (1) the degree of importance to the focal issue or question, and (2) the degree of uncertainty surrounding those forces. The goal of prioritization is to identify the two or three driving forces that are most important to the focal issue and most uncertain. These driving forces are your “critical uncertainties,” and they will be the foundation of your scenario set.

There are a number of different approaches to developing a scenario set. The most common is to picture your critical uncertainties on two axes that frame the poles of what seems possible in your time frame. For instance, a group working in health care might cross an uncertainty about the financial and regulatory environment with an uncertainty about the pace and distribution of technological development to create a scenario matrix. Try to envision the four scenarios created by this matrix. What if the financial and regulatory environments are favorable toward a freer market in health care, and technology develops and spreads at a fast and even pace? This could be a world with a highly automated and efficient infrastructure for managing and administering health care with broad array of choice and a relatively weak safety net. As you try to envision each of the four possible scenarios, ask yourself: Do the combined critical uncertainties produce believable and useful stories of the future? The scenarios should represent a range of alternative futures, not simply a best, worst, and most likely world (figure 3).

Figure 3. Example of Scenario Matrix

PHASE FOUR: ACT

In phase four, you use your scenarios to inform and inspire action.

The test of a good set of scenarios is not whether, in the end, they turn out to portray the future accurately, but whether they enable an organization to learn, adapt, and take effective action. After you’ve developed your scenarios, imagine—deeply imagine—living and working in each one. Ask yourself: What if this scenario is the future? What actions would I take today to prepare? You can then analyze the implications that surfaced in all scenarios. Are any of the implications valid in all scenarios? Are there significantly different implications in each scenario? Do these differences highlight any strategic choices that you will have to address? The patterns and insights that emerge from the scenario implications will help you set strategic priorities and catalyze action.

PHASE FIVE: MONITOR

In this last phase, you create mechanisms that will help your organization track shifts in the environment and adjust its strategy accordingly. This can be achieved by creating an ongoing dialogue process to identify and track leading indicators—signs of emerging change—that will tell you if a particular scenario is beginning to unfold, causing some implications to rise in importance and some uncertainties to evolve into certainties.

Roles, Responsibilities, and Relationships

The following descriptions of roles and responsibilities capture how many scenario thinking processes are structured.

SPONSOR

The sponsor is someone with support of decision makers and credibility across all levels of the organization or community. The sponsor is deeply involved through all steps of the formal process and beyond, building broad-based ownership for the output and keeping the strategic conversation alive in the organization or community.

INTERNAL PARTICIPANTS

Internal participants include representatives of key stakeholders in the organization or community. Many of them are interviewed during the initial “orient” phase. They collaborate in a workshop setting to develop the scenarios and identify implications during the explore, synthesize, and act phases. Some internal participants are often recruited (or volunteer) to engage in the follow-on monitoring phase and to lead the implementation of actions that emerge from the process.

EXTERNAL PARTICIPANTS

External participants are creative thinkers who contribute new and sometimes controversial perspectives to the scenario thinking process. They can be integrated into your scenario process in a variety of ways: through interviews in the orient phase, by participating in the scenario development, and/or by providing feedback on your scenarios once developed. The best outside participants are highly creative, skilled at pattern recognition, and comfortable with challenging their own perspectives.

FACILITATOR

The facilitator works in close collaboration with the sponsor and core team to shape and manage the overall process. In addition, it is the responsibility of the scenario facilitator to push the group to think longer term, surface blind spots, and consider a broader range of uncertainties in the external environment. In most cases, the scenario facilitator will also conduct some interviews, analyze the interview input in order to suggest potential focal issues, customize the design of the scenario development and implication workshops, and lead follow-on strategy conversations.

LOGISTICS COORDINATOR

The logistics coordinator is involved in all phases of the formal process. Responsibilities include coordinating interviews during the orient phase; securing meeting space for convening internal and external participants in the explore, synthesize, and act phases; and supporting the sponsor’s efforts to secure and coordinate participation of internal and external participants.

CORE TEAM

The core team shepherds the scenario process from beginning to end, and executes scenario development work outside of the facilitated large group process, like conducting interviews, researching driving forces, and drafting scenario narratives. The core team should be limited to four or five members, including the sponsor, scenario facilitator, the logistics coordinator, and one or two others with strong research, writing, and strategy skills.

Conditions for Success

In order to truly internalize and act upon the insights and implications that come out of a scenario process, your organization or community must be very motivated to learn, and ultimately willing to change. Your scenario thinking effort will enable learning and change if the following are true:

• You are open to hearing multiple perspectives and challenging commonly held assumptions. By introducing multiple perspectives on the future, the scenario-thinking process can challenge commonly held assumptions and help align your organization’s (or community’s) perspectives on the future with the changing environment.

• You are positioned to change in a meaningful way. The organization/community needs to have some impetus for change, internally or externally driven, in order to make the scenario learning meaningful and, ultimately, to act on these insights. The impetus for change often comes from a strategic issue that does not have a clearly defined solution and that is important enough to catalyze action—like the need to address new forms of competition. The call to change can be driven by either crisis or opportunity, or by both. According to scenario thinker and writer Betty Sue Flowers, “People should have a sense of urgency even if things seem to be pretty good. My sense of urgency doesn’t come from impending crisis; it comes from a need to be prepared for anything, including opportunity.”

• You have a well-positioned leader for the process. In order to make the learning—and subsequent action—stick, there needs to be a credible, facilitative leader who can build support and sustain excitement for the process. That leader must advocate for a way of strategic thinking that, if executed well, can produce considerable change. It’s equally important that there be clear ownership of the output—a person or group who will take responsibility for acting on ideas generated during the process.

• You are willing to commit the necessary resources—time and money. Like any strategy development effort, scenario thinking demands time and money. Because insights from scenario thinking are developed through extensive reflection and dialogue, senior decision makers must be ready to commit significant time and attention to the effort. That said, the amount of resources required need not be huge, simply commensurate with the scope of your ambition.

• You have a clear, and realistic vision of success. As with any strategic intervention, it is critical you enter into the scenario process with a reasonably clear and credible set of objectives and desired outcomes. Once you have identified your primary objectives, you can customize the scenario thinking process to maximize impact around these stated objectives.

DECISION TREE

The decision tree depicted below (figure 4) can be used to determine whether scenario thinking is an appropriate tool for addressing your challenge or problem. As always, when skillfully facilitated and in special circumstances, there are exceptions to the logic outlined here.

In summary: Your situation is ideal for scenario thinking if:

• You are dealing with a strategic issue and the solution is unclear.

• You are working in a highly uncertain environment.

• There is leadership support for the scenario thinking process.

Figure 4. Decision Tree

• Your organization is open to change and dialogue.

• You can attract the resources necessary for a successful initiative.

Theoretical Basis

The idea of scenarios—telling stories of the future—is as old as humankind. Scenarios as a tool for strategy have their origins in military and corporate planning. After World War II, the U.S. military tried to imagine multiple scenarios for what its opponents might do. In the 1960s, Herman Kahn, who played an important role in the military effort, introduced scenarios to a corporate audience. In the 1970s, Pierre Wack, a strategist at Royal Dutch/Shell brought the use of scenarios to a new level. At Shell, Wack realized that he had to get inside the minds of decision makers in order to affect strategic decisions—and scenarios could enable him to do so. Wack and his team used scenarios to paint vivid and diverse pictures of the future so that decision makers could rehearse the implications for the company. As a result, Shell was able to anticipate the Arab oil embargo, and then again anticipate and prepare for the dramatic drop in oil prices in the 1980s. Since then, scenario thinking has become a popular tool for the development of corporate strategy in numerous industries.

The codification and spread of scenario thinking was accelerated in the late 1980s, with the founding of Global Business Network, a network of corporations, scenario practitioners, and provocative long-term thinkers across multiple disciplines. In the early 1990s, there were successful experiments using scenarios as a tool for civic dialogue around large intractable issues, such as the future of South Africa at the end of apartheid. Around the same time there were also public-sector efforts to use scenarios as an economic development tool, most notably by the Dutch and Scottish governments. With the growth of the nonprofit capacity movement in the 1990s, scenario thinking began to extend more rapidly into the U.S. nonprofit sector and into civil society around the world. In recent years, scenarios have been increasingly used to help corporations anticipate and embrace rapid technological and geopolitical change, catalyze product innovations, and manage risk. From its early use in the late 1960s to today, scenarios have evolved from cutting-edge practice to a mainstream part of the corporate strategy tool kit.

Sustaining the Results

The scenario thinking process is often defined as a discrete series of workshops that facilitate group collaboration. During the workshops and immediately after, participants are opened up to the range of challenges and opportunities that the future may bring. They can come out of the process with great momentum and enthusiasm to embrace newly defined opportunities. They may also emerge feeling overwhelmed by the amount of change and adaptation that is required of their organizations, their communities, and themselves. If the scenario thinking process ends with the last workshop, once the organizational implications are identified, it is natural for participants to go back to old behaviors and file away the recommendations surfaced.

In order to ensure follow-through and retain the benefits, it is important to approach scenario thinking as both a process and a posture. It is a process through which scenarios are developed and then used to inform strategy. After the process itself is internalized, scenario thinking becomes, for many practitioners, a posture toward the world—a way of thinking about and managing change, a way of exploring the future so that they might then greet it better prepared. Internalizing the scenario process requires: (1) a system for incorporating the fundamental principles of scenario thinking (taking the long view, outside-in thinking, and embracing multiple perspectives), and (2) dedicated leaders who can marshal resources and support for such a system, and build ownership for the process outcomes, shepherding them from recommendations to strategic priorities to action.

Burning Questions

The most frequent—and most difficult—questions that tend to arise relate to precision and evidence. How can one be sure that the right scenarios have been developed? What indicators illustrate the effectiveness of the scenario thinking process? Such questions are seeking clear answers; yet, at its best, scenario thinking surfaces better questions, which lead to a better understanding of the system in which an organization or community is operating. Scenario thinking is an ongoing learning process. As such, there are better scenario sets, but no “wrong” scenario sets; furthermore, the process typically yields many new insights, but few measurable indicators of effectiveness. As Arie de Geus, one of the pioneers of scenario thinking, once explained: “Scenarios are stories. They are works of art, rather than scientific analyses. The reliability of [their content] is less important than the types of conversations and decisions they spark.”

Similarly, Pierre Wack pictured scenario thinking as part of an iterative learning process (figure 5):

Figure 5. Scenario Thinking: An Iterative Learning Process

Some Final Comments

Scenario thinking is often confused with strategic planning. Strategic planning is a discipline for helping your organization achieve its desired impact; the strategic planning process identifies the priorities and corresponding actions that will help your organization fulfill its mission and succeed. Scenario thinking facilitates and strengthens the strategic planning process by keeping it alive and responsive to the changing environment.

By using scenario thinking to inform your strategic planning, you can turn a discrete activity into an organizational behavior. Unlike many strategy development efforts that are designed around the creation of a strategic plan, scenario thinking is an ongoing, collaborative process. It results in deep organizational learning and, ultimately, in the ability to change in response to both challenge and opportunity.

While a strategic plan can be a great tool to keep an organization on track and the process for developing the plan can spark fruitful conversations, the plan itself can quickly become obsolete. This is because a strategic plan is more fixed than fluid, and the corresponding planning process is more linear than dynamic. While the production of a fixed plan may result in organizational decisions, those decisions are often difficult to convert to actions—especially if the behavioral changes necessary to implement these decisions are not also addressed. Scenario thinking, in contrast, creates a platform for an ongoing strategic conversation—it is more a process than an endpoint, and identifying and confronting behavioral barriers to change are inherent to that process.

About the Authors

Chris Ertel ([email protected]) is cohead of Global Business Network’s (GBN) consulting practice. Since joining GBN in 1997, Chris has led or worked on about 50 long-term strategy projects related to education, regional development, and the consumer goods and financial services industries, among others.

Katherine Fulton ([email protected]) is a senior practitioner at Global Business Network, a partner of Monitor Group, and president of Monitor Institute, the primary vehicle through which Monitor applies its assets to complex social problem solving. She coauthored with Diana Scearce GBN’s 2004 publication, What If? The Art of Scenario Thinking for Nonprofits.

Diana Scearce ([email protected]) has led scenario processes and training courses for organizations across sectors since 1998. Diana developed a passion for scenario thinking during her tenure at Global Business Network. She is currently a consultant with the Monitor Institute.

Where to Go for More Information

REFERENCES

Scearce, Diana, and Katherine Fulton. What If? The Art of Scenario Thinking for Nonprofits. San Francisco: Global Business Network, 2004.

Schwartz, P. Art of the Long View. New York: Doubleday, 1991.

Shell International’s Global Business Environment. Scenarios: An Explorer’s Guide. London: Shell International, 2003.

Van Der Heijden, Kees. Scenarios: The Art of Strategic Conversation. Chichester, UK: John Wiley & Sons, 1996.

Wack, Pierre. “Scenarios: Shooting the Rapids.” Harvard Business Review 63, no. 6 (1985): 139–150.

———. “Scenarios: Uncharted Waters Ahead.” Harvard Business Review 63, no. 5 (1985): 72–79.

INFLUENTIAL SOURCES

Kahane, Adam. Solving Tough Problems: An Open Way of Talking, Listening, and Creating New Realities. San Francisco: Berrett-Koehler, 2004.

Kelly, Eamonn. Powerful Times: Rising to the Challenge of Our Uncertain World. Upper Saddleback River, NJ: Wharton School Publishing, 2006.

Meadows, Donella. “Chicken Little, Cassandra, and the Real Wolf: So Many Ways to Think about the Future.” Whole Earth Review, Spring 1999.

Ogilvy, James. Creating Better Futures: Scenario Planning as a Tool for a Better Tomorrow. New York: Oxford University Press, 2002. An exploration of the ethical dimension of scenario planning—our ability as humans to imagine and realize better futures.

Senge, Peter, Art Kleiner, Charlotte Roberts, Richard B. Ross, and Bryan Smith. The Fifth Discipline Fieldbook: Strategies and Tools for Building a Learning Organization. New York: Doubleday, 1994.

ORGANIZATION

Global Business Network—www.gbn.com

1. The material in the remainder of this chapter draws heavily on a guide to the scenario thinking process written by Scearce and Fulton, What If? The Art of Scenario Thinking for Nonprofits (2004).

2. Note on terminology: This methodology is called interchangeably scenario planning and scenario thinking. We prefer to use the term “scenario thinking” because the action of “thinking,” as opposed to “planning,” conveys an ongoing discipline as well as a time-bound process.