Scenario Planning Primer

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Framework Primer
Scenario Planning Primer
Presentation created by
Protection
against
Groupthink
Expansion of
Thinking
Unveiling of
Inevitabilities
1
2
3

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Contents
Overview
Core Benefits of Scenarios
Pitfalls of Scenarios
Leading Practices of Scenario Planning
Templates
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A Scenario Planning Primer provides a comprehensive framework
in developing scenarios with greater possibilities
Presentation Overview
Scenario Planning is indeed a very valuable tool in today’s volatile times.
Scenarios are a powerful tool in the strategist’s armory. They are particularly useful in developing strategies to
navigate the kinds of extreme events we have recently seen in the world economy. Scenarios enable the
strategist to steer a course between the false certainty of a single forecast and the confused paralysis that often
strike in troubled times. When well executed, scenarios boast a range of advantages – but they can also set
traps for the unwary.
Scenario Planning is not rocket science. People do not routinely create robust sets of scenarios, create
contingency plans for each of them, watch to see which scenario is emerging, and live by it. Scenarios are in
fact harder than they look – harder to conceptualize, harder to build, and uncomfortably rick in shortcomings.
A good one takes time to build, and so a whole set take a correspondingly large investment of time and energy.
But having the guide in undertaking Scenario Planning can enable companies to better come up with more
dynamic scenarios. This framework serves as a primer to Scenario Planning, detailing the core benefits of
Scenario Planning, as well as pitfalls and leading practices.
There are 3 core benefits of Scenario Planning are:
Scenarios do not provide all the answers. With that said, scenarios can help executives ask better questions and
prepare for the unexpected.
This deck also includes slide templates for you to use in your own business presentations.
1 Expansion of Thinking
2 Unveiling of Inevitabilities
3 Protection against Groupthink

Scenario Planning is a strategic planning method that organizations use
to make flexible long-term plans
Scenario Planning is one component of the more complete management system –
integration with existing planning and budgeting system is essential.
Scenario Planning – Overview
Scenario Planning is also called Scenario Thinking or Scenario Analysis. It is changing mindsets about
the exogenous part of the world, prior to formulating specific strategies.
Scenario Planning allows
inclusion of factors that
are difficult to formalize –
novel insights about the
future, deep shifts in
values, unprecedented
regulations or inventions.
Scenario Planning
integrates with Systems
Thinking that leads to
plausible scenario
storylines where causal
relationships between
factors are demonstrated.
Scenario Planning in organizational
settings has its limitations.
It includes plausible, but
unexpected important situations
and problems that exist in some
small form in the present day.
It helps anticipate change,
prepare response, and create
more robust strategies.
It anticipates the impact of
different scenarios in identifying
weaknesses that can be
avoided or reduced.
Scenarios are combinations and
permutations of facts and related
social changes.
Subjectivity in scenario design.
May suffer from various
processes and content traps.
Weak integration into other
planning and forecasting
techniques.

Contents
Overview
Templates

Scenarios are powerful tools for understanding uncertainty and
developing strategy
When well executed, scenarios boost a range of advantages but they can also set traps
for the unwary.
Core Benefits of Scenarios – Overview
Scenarios are useful in developing strategies to navigate the kinds of extreme events seen in the world
economy. Scenarios enable strategists to steer a course between the false certainty of a single forecast
and the confused paralysis that often strike in troubled times.
Source: The Use and Abuse of Scenarios, McKinsey, 2009
Scenarios have 3 core benefits that make them a particularly powerful tool.
Protection
against
Groupthink
Expansion
of Thinking
Unveiling of
Inevitabilities
1
2
3
Ability to think more
broadly when a range
of possible outcomes
are developed.
Sufficiently broad
scenario-building can
yield another valuable
result.
The power structure
within the companies
inhibits the free flow
of debate.

Scenarios expand thinking capabilities
We must obligate ourselves to ask why the past might not be a helpful guide to find
surprisingly compelling answers.
Expansion of Thinking – Overview
CORE BENEFIT Expansion of Thinking
VALUE
Human quirky would lead us to expect that the
future will resemble the past and that change
will occur gradually.
Demonstrating how and why things become
better or worse will increase our readiness for
the range of possibilities the future may hold.
PROCESS
Develop a range of possible outcomes.
Back each outcome by sequence of events
that will lead to them.

Scenarios uncover inevitable or near-inevitable futures
The realization that something must happen, even if it is not clear when, leads to the
inclusion of at least one scenario to stop growing sooner rather than later.
Unveiling of Inevitabilities – Overview
VALUE
The drivers result in outcomes that are the
inevitable consequence of events that have
already happened or trends that are already
well developed.
Unexpected outcomes are the most powerful
source of new insight uncovered in the
scenario development process.
PROCESS
Identify some particular powerful drivers of
change as the analysis underlying each
scenario proceeds.
Search for predetermined outcomes –
particularly unexpected ones.
CORE BENEFIT Unveiling of Inevitabilities

Unveiling of Inevitabilities have 4 kinds of predetermined outcomes
While some errors can be avoided by recalling fundamental economic and demographic
factors or scheduled events, problems of time will continue to exist.
Unveiling of Inevitabilities – Predetermined Outcomes
There are 4 kinds of predetermined outcomes.
Demographic
Trends
1
Demography is destiny.
Changes in population size and structure
are among the few highly predictable
aspects of the future.
When trends grow near, its effects can be
powerful.
Economic Action
and Reaction
2
The Law of Economics cannot be changed.
Every economic action has a predetermined
reaction.
Reactions are often ignored in business
strategy.
If uncovered through scenario planning,
they can generate powerful insights.
Reversal of
Unsustainable
Trends
3
Optimistic projections are often
accompanied by bold claims of a new
paradigm.
Strategies must be very cautious about
alleged new paradigms.
Scheduled Events4
Scenarios must take into account scheduled
events just beyond corporate planning
horizons.

Scenarios protect against groupthink
Often, the power structure within companies inhibits the free flow of debate.
Protection against Groupthink – Overview
CORE BENEFIT Protection against Groupthink
VALUE
Scenarios allow companies to break out of the
trap.
Provides a political safe haven for contrarian
thinking.
PROCESS
Typically agree with whatever the most senior
person in the room says.
Employees wait for most senior executives to
state an opinion before venturing their own –
which magically mirrors that of the senior
person.

Contents
Overview
Templates

Scenarios also have their downside
At least 2 variables should be used to construct scenarios – and the variables must not be
dependent or be in just one spectrum.
Pitfalls of Scenarios – Overview
Inexperienced people and companies are prone to fall into a number of traps.
Lack of Clear Leadership Vision2
Narrow Set of Outcomes3
Discarding of Extreme Scenarios4
Discarding of Scenarios Too Quickly5
Analysis Paralysis
Situations of High Uncertainty6
The future is multivariate. There
are elements strategists will miss.
Scenarios that fall on a single
spectrum should therefore be
avoided.
1

Many CEOs have given hostages to fortune – scenarios would have
helped them avoid doing so
A wide range of scenarios can help prevent leaders from making statements that can be
proven wrong if one of the more extreme scenarios unfolds.
Pitfalls of Scenarios – Details (1 of 2)
Analysis Paralysis1
Lack of Clear
Leadership Vision
2
Narrow Set
of Outcomes
3
Creating a range of scenarios that is
appropriately broad can paralyze a
company’s leadership.
Organization become confused and
lacking in direction.
Scenarios are an abdication of
leadership.
A sense of complacency of having all
bets covered is induced.
Creating scenarios that do not cover a
full range of possibilities can leave
organizations exposed when scenarios
provide most comfort.
PITFALL
Pick the scenario whose outcome seems
most likely and base a plan upon that
scenario.
Use scenarios without abdicating their
leadership responsibilities.
Do not communicate with the
organization via scenarios.
Test the breadth of a scenario by
identifying extreme events – low
probability, high impact outcomes – from
the past 30 or 40 years.
See whether the scenario set contains
anything comparable.
APPROACH

Scenarios ought to be treated dynamically to prevent pitfalls
The most interesting and insightful scenarios are the ones that seem the most unlikely.
Pitfalls of Scenarios – Details (2 of 2)
Discarding of
Extreme Scenarios
4
Discarding
of Scenarios
Too Quickly
5
Situations of High
Uncertainty
6
Extreme scenarios are regarded as
waste – they won’t happen or if they do,
all bets are off.
Leaders leave themselves exposed to
dramatic changes on the downside.
Companies not holding on to scenarios
based on required shelf life.
Strategists will not want to use scenarios
when uncertainty is so great.
PITFALL
Include stretch scenarios while
acknowledging their low probability.
Treat scenarios as a living thing.
Companies don’t get scenarios right –
they keep it useful.
Never think that you have all reasonable
scenarios when there are different
possibilities present.
APPROACH

Contents
Overview
Templates

The 7 Leading Practices are rules of thumb in Scenario Planning
Scenario Planning can be a very valuable tool when done in the best way possible.
Leading Practices of Scenario Planning – Overview
Scenarios do not provide all the answers. But there are rules of thumb companies can follow in Scenario
Planning. These can help executives ask better questions and prepare for the unexpected.
Analyze with a 2x2 matrix
Set a base case scenario
Give scenarios catchy, short names
Learn by doing
Develop at minimum 4 scenarios
Pay attention to environmental changes
Embrace contrarian opinions
2
3
4
5
7
1
6

Scenario Planning becomes effective when narrowed down to fewer
possibilities
Those who must weigh scenarios and reach decisions based on them expect and deserve
to get a specific point of view about the future.
Leading Practices of Scenario Planning – Details (1 of 2)
Specialist business models fails when the business environment changes. This is the saber-toothed
tiger problem. Scenario Planning must remain dynamic and robust.
Develop at minimum
4 scenarios
1
Develop a scenario set should always contain at least 4 alternatives.
Four scenarios forces people which way they truly lean.
Analyze with
a 2x2 matrix
2
Create multiple 2x2 using all possible combinations of 4 or 5 critical
uncertainties.
Combine and identify uncertainties that are highly correlated.
Set a base case
scenario
3
Identify a scenario that is highest in probability. This is the base case.

Scenario Planning must be dynamic and robust
If the environment changes in a scenario but the competitors remain the same, the scenario
is not imaginative enough.
Leading Practices of Scenario Planning – Details (2 of 2)
Give scenarios
catchy, short names
4
Attach clever names to scenarios to keep it a living part of the
organization.
Use only 2 to 4 snappy words.
Learn by doing5
Learn by experience.
Look at old scenarios and ask what has been missed.
Embrace contrarian
opinions
6
Build scenarios on a new insight – wither predetermined that others
have missed or an unobvious but critical uncertainty.
Pay attention to
environmental changes
7
Base scenarios on creative thinking about how predicted changes in
the business environment will alter the competitive landscape.

Contents
Overview
Templates

Insert headline
Insert bumper.
Core Benefits of Scenarios – TEMPLATE
Protection
against
Groupthink
Expansion
of Thinking
Unveiling of
Inevitabilities
1
2
3 • Insert filler text, filler text,
filler text, filler text, filler
text, filler text.
• Insert filler text, filler text,
text, filler text.
text, filler text.The content on this page has been partially hidden.

Insert headline
Insert bumper.
Core Benefits of Scenarios – TEMPLATE ALTERNATE
Expansion
of Thinking
Unveiling of
Inevitabilities
Protection against
Groupthink
Ability to think more
broadly when a
range of possible
outcomes are
developed.
Sufficiently broad
scenario-building
can yield another
valuable result.
The power
structure within
the companies
inhibits the free
flow of debate.

Insert headline
Insert bumper.
Core Benefits of Scenarios – TEMPLATE ALTERNATE
Expansion
of Thinking
1
Ability to think more broadly when a range of possible
outcomes are developed.
Unveiling
of Inevitabilities
2
Sufficiently broad scenario-building can yield another
valuable result.
Protection against
Groupthink
3
The power structure within the companies inhibits the
free flow of debate.

Lack of Clear Leadership Vision
Narrow Set of Outcomes
Discarding of Extreme Scenarios
Discarding of Scenarios Too Quickly
Analysis Paralysis
Situations of High Uncertainty
Insert headline
Insert bumper.
Pitfalls of Scenarios – TEMPLATE
2
3
4
5
6
1
text, filler text.
text, filler text.
text, filler text.

Insert headline
Insert bumper.
Scenario Planning Best Practices – TEMPLATE
Analyze with a 2x2 matrix
Set a base case scenario
Give scenarios catchy, short names
Learn by doing
Develop at minimum 4 scenarios
Pay attention to environmental changes
Embrace contrarian opinions
2
3
4
5
7
1
6
text, filler text.
text, filler text.
text, filler text.The content on this page has been partially hidden.

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Flevy (www.flevy.com) is the marketplace
for premium documents. These
documents can range from Business
Frameworks to Financial Models to
PowerPoint Templates.
Flevy was founded under the principle that
companies waste a lot of time and money
recreating the same foundational business
documents. Our vision is for Flevy to
become a comprehensive knowledge base
of business documents. All organizations,
from startups to large enterprises, can use
Flevy— whether it's to jumpstart projects, to
find reference or comparison materials, or
just to learn.
Contact Us
Please contact us with any questions you may have
about our company.
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Scenario Planning Primer