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We all know that we have to live with uncertainty. Many people try to predict the future. For most people, knowing where developments are headed and where they are headed is very important. It is clear that paying attention to the future and thinking about it is very useful and entertaining. This only makes sense if we assume that, even in a world of uncertainty, elements of the future world are predictable to varying degrees. A systematic approach to distinguishing predictable elements from uncertainties is a prerequisite for a characteristic future thinking.
Thinking requires a specific language with which to formulate it. We need a tool to express the future in terms of predictable elements and uncertainties. These tools are scenarios. Logically, if the future is full of uncertainties, then there are plausible futures that are equally likely to occur. Scenarios express these futures in the form of stories and offer alternative narratives about the relevant future situation. Together, scenarios show the uncertainty in the future. A set of scenarios also strengthens and deepens our understanding of what is predetermined; that is, the issues in which the scenarios overlap. The predetermined elements and uncertainties of the future can be explained by a set of scenarios and based on that; we can take a position and plan for the future.
Scenario-Based Planning Objectives
A set of scenarios can be an effective tool for conceptualizing the future immersed in a vast amount of data and information. By focusing on the future-related implications of everything we observe, scenarios provide a contextual framework within which experiences can be organized. The tool used for this is internally consistent stories in which events move forward in time and along a logical, causal progression into the future.
At the opposite end of scenario thinking is prediction. In prediction, a probable future is always considered and forms the basis of people’s judgments for planning. The basic assumption in this view is that some people can predict future situations and predict what will happen sooner than others. But such a view removes the unexpected changes that are moving towards the organization from the focus of people’s attention. Prediction creates a mental model in people where the unexpected has no place and is outside of their focused framework. This is where scenarios come in handy, bringing a wide range of futures into focus and explaining many seemingly unrelated factors in coherent, coherent stories (free from contradictions and based on cause and effect logic).
Scenario planning takes a step outside of everyday thinking and puts a wider range of possible future events in the focus of attention. It forces people to stretch their imaginations into the future and create alternative interpretations of the business environment that differ from the traditional, old-fashioned way of looking at situations as they arise.
The foundation of this approach is an understanding of the systemic forces that drive the organization’s environment. Scenario planning raises questions about this system that require serious and in-depth research. Using the enhanced understanding that results from new research, scenarios are built and generate deeper and newer questions that in turn require further research. Through such an iterative process, decision-makers’ understanding deepens and the entire organization gains a broader view of the changing environment.
Scenarios are a tool for organizational understanding. Everything an organization sees in the outside world is determined by the stories it uses to understand this world. Broader understanding requires more concrete and developed stories. People in an organization need to continually rehearse mental pathways to the future and develop areas of their vision. In this way, scenarios help a company or organization escape from a one-dimensional, one-pointed mindset about the future.
When are scenarios most useful?
Scenarios are most useful when the external operating environment for an organization is complex and uncertain, and key decisions are at stake with long-term consequences. Typically, complex environments involve undetermined factors, structural changes are among the uncertainties, and the system has complex and intricate feedback loops. Systems thinking, which attempts to identify how systems behave and their tendency toward unpredictable feedback, is an important part of scenario thinking. However, for situations where variables are identifiable and deterministic and decisions with short-term consequences are at stake, scenarios are not very useful.
Why Scenarios?
As mentioned, scenarios are an approach to focused thinking about key future uncertainties that organizational decision makers face in making strategic decisions. Developing scenarios involves gathering information about the past and present, identifying patterns, and using them to structure logical and coherent stories about the future. An organization can then think about strategic options within them through scenarios. The value of scenarios can be examined in two parts: the value of the scenario product and the value of the scenario writing process.
Scenarios as a product:
- Provide coherent mental models of the future.
- Explicit key assumptions.
- Force managers to think about alternative futures.
- Provide a context for developing and testing strategic options or policies.
- Increase understanding and comprehension of the external environment.
- Provide a means of communication within the organization.
- Highlight uncertainties and risks involved in decision-making.
Scenarios as a process:
- Encourage strategic and systemic thinking.
- Provide a place for sharing different perspectives from all parts of the organization.
- Encourage the emergence of unusual perspectives and new ideas.
- Stimulate intra-organizational communication.
- Encourage learning and adaptation to change.
Scenarios are, in fact, understanding different futures in the present. The basic idea is that the seeds and buds of the future exist today, provided that we can interpret them correctly and in a timely manner. Using this simple idea in developing scenarios, our main challenge is to identify the seeds of change, interpret their significance, and anticipate their future implications.
The main approach to scenario building involves seven main steps:
- Revealing and clarifying the main focus of the scenarios (the main question)
- Examining past changes to identify trends and driving forces in progress
- Identifying future changes and the drivers of known changes
- Identifying key uncertainties that could push the course of events towards radically different futures
- Creating a logical framework based on the identified uncertainties
- Enriching the main features and developing stories for each scenario
- Identifying the implications of each scenario for the organization
The developed scenarios actually provide a context for testing the risks and opportunities inherent in different strategic choices or policy options. They become a tool for assessing the future consequences of decisions made today.
What are the characteristics of a good scenario?
Since scenarios are not predictions, how can we tell if they are good or bad? The criteria for this distinction are largely subjective, but depend on the characteristics and goals of the scenarios.
Good scenarios have the following characteristics:
- They are credible.
- They are relevant to past and present events.
- They are challenging.
- They are relevant to the organization’s decisions and uncertainties.
- They are free of contradictions and are internally consistent.
Most importantly, a good scenario is one that, after challenging thinking about the future, leads the organization’s managers to ask the “right questions.”
