Scenario Analysis

Introduction to Scenario Planning - Future Fright Flows, Massachusetts Institute of Technology

Scenario Analysis or Scenario Planning is a tool for project, programme and portfolio uncertainty management. Since its origin in war games and refinement by Shell the mid twentieth century, scenario planning has developed from a fairly quantitative methodology with close ties to game theory, to a more qualitative tool. (Roxburgh, 2009) In the same period, scenario planning has possibly also become increasingly important, in an era where innovation and disruption has had everyone looking for the next way to flip over the table in the ever-changing markets. (Amer, 2012) It is in the same instance that scenario planning becomes most valuable, enabling organisations to prepare for whatever the future might bring, thus not merely offering a better chance of surviving potential dramatic changes by mitigating risks, but in some cases also take advantage of said changes. Managing projects, programmes, or portfolios, scenario planning aids preparing the best strategy, making contingency plans or even just reflect on how the environment will look in the future.

Application

None of the above is rocket science. Why, then, don’t people 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 rich in shortcomings. A good one takes time to build, and so a whole set takes a correspondingly larger investment of time and energy. Scenarios will not provide all of the answers, but they help executives ask better questions and prepare for the unexpected. And that makes them a very valuable tool indeed.

-Roxburgh, 2009

References

• Hindle, T., (2008), “Scenario Planning”, The Economist, [ONLINE] available at: http://www.economist.com/node/12000755
• Roxburgh, C., (2009), “The use and abuse of scenarios” [ONLINE] available at: http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-use-and-abuse-of-scenarios
• Caplice, C. (2011), “Introduction to Scenario planning”, Future Freight Flows (FFF) Project at MIT [ONLINE] available at: https://www.youtube.com/watch?v=yVgxZnRT54E
• Boasson, Y., (2004), “An Evaluation of Scenario Planning for Supply Chain design”, Massachusetts Institute of Technology [ONLINE] available at: http://ctl.mit.edu/sites/ctl.mit.edu/files/library/public/theses_2004_Boasson__execsumm.pdf
• Seal, W., Garrison, R. H., & Noreen, E. W. (2012). Management Accounting(4th ed.). Maidenhead: McGraw-Hill Higher Education.
• Ford, D., & Saren, M. (2012). Managing & Marketing Technology . Hampshire, United Kingdom: Cengage Learning.
• Tonnquist, B. (2009). Project management: a complete guide. København: Hans Reitzels Forlag.
• Muhammad Amer, Tugrul U. Daim, Antonie Jetter, A review of scenario planning, Futures, Volume 46, 2013, Pages 23-40