Scenario-Based Decision Making - Technique
© Dr. Terry J. van der Werff, CMC

Scenario sketching is a creative technique for decision making and should be in every manager's toolkit.

In an era of unrelenting change, many corporate leaders turn to scenarios to help them to understand the forces propelling them into the future and to prepare their companies to flourish in that future.

Scenario planning examines important “What if...?” questions that involve large uncertainties in the external influences on the organization.  Unlike strategic planning which postulates a single future, scenario planning looks at several alternative versions of the future, any one of which may or may not come about.

Scenario planning steps.  Scenario development is as much art as science.  While easy to describe, it is a bit messier to execute!  The process I use is similar to that described in Peter Schwartz's delightful 1991 book The Art of the Long View (Doubleday Currency, New York) or in Paul Schoemaker's influential article "Scenario Planning: A Tool for Strategic Thinking" (Sloan Management Review, 25-40, Winter 1995).

        1. Specify the major issue or decision you are facing.
        2. Isolate the key drivers (external forces) affecting your company.
        3. Select three drivers that are both important and the most uncertain.
        4. Write three scenarios (short stories) of the future, each highlighting a different key driver.
        5. Give each scenario a pithy, memorable name.
        6. Determine the implications of each scenario for the issue being considered.
        7. Consider possible strategies to respond to each implication.
        8. Select indicators which suggest that a particular scenario is unfolding.
        9. Act in a timely and appropriate manner as a particular future unfolds.

These steps are described in my own article "What If?" (Washington CEO, February 1995).

Planning or decision making?  So far, so good.  The magic question, of course, is "Do real companies and real scenario teams, in fact, use this process for planning purposes?"  My experience is that for the vast majority the answer is a resounding "No!" for three simple and compelling reasons:

	CEO's are uncomfortable in making a (perceived) fuzzy process their company's primary planning method.
	80% or more of the creativity comes during the first few hours that scenario teams brainstorm their story elements, implications, and responses.
	CEO's are facing a critical issue and implicitly look to scenarios for help in making a decision now!

My own light bulb lit up when participants in my CEO seminars on scenario planning reported as much value in a few hours of sketching scenarios to make decisions as my consulting clients who had invested weeks or months developing scenarios, supposedly for planning, but in reality for decisions.

So, what to do? I now advocate using scenarios as an aid to decision making, not as a planning method, and lead groups through the above steps with that in mind.  During a half day seminar for CEO's, I expose them first to several trends that will likely affect them in the future and second to scenario sketching (it is inappropriate to call this scenario "development" or "planning" due to the limited time available) so they can use these and other trends to their benefit.  For day long management or board retreats I do the same.  The major difference is that the product in the latter is a bit more "tangible" because everyone is from a single organization or company and because there is more time available.

In the CEO seminars I give a ten minute overview of the above nine steps in sketching scenarios, followed by consideration of each step in turn, with examples from my own practice.  The total time devoted to scenarios may only be 60-90 minutes, so the group stays together and each CEO works individually on each step, though the discussion is surprisingly rich due to the prior level of trust built up amongst the CEO club members.

In retreats I follow the same format with three exceptions:

	After the three drivers are selected, participants chose a scenario team to be on.  The remaining steps are done within each scenario team who are at separate tables in the same room.
	As each step is completed, each scenario team reports its thoughts and results to the entire group, who, with little prodding, roundly but good naturedly critique the ideas presented.

After all steps have been completed, we review the strategies proposed by each scenario team (for different scenarios, remember), and the entire group reaches consensus on the one or two best strategies to pursue, regardless if it directly related to the issue being faced.  The CEO usually issues "marching orders" for further work on the chosen strategy(ies).   

Next week we will look at two case studies using scenarios for decision making.

Could you benefit from using scenarios for decision making in your company?
Contact us.  We would be delighted to assist you.

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