Scenario Planning

This is a primer on Scenario Planning.

Table of Contents

• What is Scenario Planning?
• Origins and Evolution
• Core Concepts
• The Standard Process
• Methodological Variations
• Integration with Other Methods
• Practical Applications
• Key Practitioners
• Contemporary Frameworks and Innovations
• Critical Perspectives
• Related Concepts

What is Scenario Planning?

Scenario Planning is a strategic foresight methodology that develops multiple plausible narratives about how the future might unfold, not to predict what will happen, but to prepare organizations and individuals for uncertainty.

The core insight is deceptively simple: since the future is fundamentally unknowable, the most useful preparation is not a single forecast but a set of coherent stories about different ways the world could change. These stories do not aim for accuracy. They aim for usefulness. A good scenario expands what decision-makers can imagine and, consequently, what they can prepare for.

This distinguishes scenario planning from forecasting. Forecasting asks “What will happen?” and produces probabilities. Scenario planning asks “What could happen?” and produces narratives. The difference matters enormously in practice. A forecast creates confidence in one future; scenarios create comfort with many.

The methodology rests on three pillars:

Anti-predictive stance: Scenarios explicitly reject the notion that the future can be predicted. Internal consistency and plausibility matter more than probability. A scenario that seems unlikely but remains logically coherent often proves more valuable than a probable forecast that blinds organizations to alternatives.

Narrative form: Unlike trend analysis or quantitative modeling, scenarios take the form of stories. Research has demonstrated that humans process narratives differently than data: stories stick where statistics slide away. Pierre Wack, who developed the method at Shell, called this the “gentle art of reperceiving” because scenarios work by changing how people see, not just what they know.¹

Strategic application: Scenarios exist to inform decisions, not as intellectual exercises. The methodology includes testing strategies against multiple futures, a process sometimes called windtunneling. Robust strategies work across several scenarios; brittle strategies fail when the world deviates from expectations.

Origins and Evolution

Military Roots (1950s)

Scenario planning emerged from Cold War military strategy, specifically at the RAND Corporation. Herman Kahn, a physicist turned strategist, pioneered the use of systematic “what if” thinking to explore nuclear war outcomes. His 1960 book On Thermonuclear War shocked readers with its clinical exploration of scenarios most people refused to contemplate.² Kahn’s willingness to “think the unthinkable” established a core principle: the uncomfortable scenarios matter most precisely because they challenge assumptions.

Kahn’s approach drew on earlier military tradition, particularly the Prussian Kriegsspiel (war games) that simulated conflicts to train officers and test strategies. The innovation was systematic application to strategic planning rather than tactical training.

Shell’s Corporate Revolution (1970s)

The transformation from military tool to corporate methodology happened at Royal Dutch Shell, and one name dominates the story: Pierre Wack.

Wack joined Shell’s newly formed Group Planning department in 1968, tasked with exploring long-term uncertainties in the oil industry. Traditional forecasting had repeatedly failed to anticipate major disruptions. Wack recognized the problem was not inadequate models but the mental models of executives themselves. No amount of data would change behavior if decision-makers could not imagine different worlds.

In 1971, Wack’s team presented scenarios to Shell’s management committee that explored what might happen if oil-producing nations dramatically restricted supply. These were not predictions. They were stories about worlds where the rules of the oil business had fundamentally changed. The executives who engaged with these scenarios developed what Wack called “prepared minds”: they could recognize the 1973 oil crisis when it arrived and respond faster than competitors still trapped in old assumptions.³

Shell’s performance during the oil shocks became the canonical success story for scenario planning. The company reportedly moved from seventh to second place among oil majors, a shift attributed partly to strategic agility developed through scenario thinking. Scholars dispute whether scenario planning actually caused this success, but Shell’s commitment to the methodology has now exceeded fifty years.⁴

The Wack Philosophy

Pierre Wack’s contributions went beyond technique to philosophy. His two Harvard Business Review articles from 1985, “Scenarios: Uncharted Waters Ahead” and “Scenarios: Shooting the Rapids,” remain essential reading. The core insight deserves emphasis: scenarios exist to change mental models, not to predict events.⁵

Wack distinguished between “first-generation” scenarios that simply presented alternative projections and “second-generation” scenarios that actually transformed how executives perceived their environment. The latter required understanding the “microcosm” of the decision-maker: what assumptions they held, what they could and could not imagine. Effective scenarios had to connect with this microcosm while expanding it.

This explains why scenarios take narrative form. Stories do what data cannot: they create emotional and imaginative engagement. A spreadsheet showing oil price volatility leaves mental models intact. A story about OPEC ministers meeting in Vienna while Western executives scramble to understand the new rules gets inside the head.

Institutionalization and Spread (1980s-1990s)

Shell’s example spawned imitation. Peter Schwartz, who led Shell’s scenario team in the 1980s, founded the Global Business Network (GBN) in 1987 to bring scenario planning to other organizations. His 1991 book The Art of the Long View popularized the method for corporate strategists.⁶ GBN worked with major corporations and governments, establishing scenario planning as a recognized management practice.

The 1990s saw scenario methodology mature and diversify. Different schools emerged: the intuitive logics approach from Shell and GBN; the French La Prospective tradition emphasizing stakeholder analysis; probabilistic methods that assigned likelihoods to scenario elements. What began as one company’s response to uncertainty became a recognized field with textbooks, consultancies, and academic programs.

Contemporary Evolution (2000s-Present)

The methodology continues evolving. Contemporary practice has moved in several directions:

Dynamic scenario scanning: Traditional scenario planning produced static documents, updated every few years. Contemporary practice increasingly treats scenarios as living frameworks. “Scenario scanning” monitors indicators that suggest which scenario elements are becoming more likely, allowing continuous strategic adjustment rather than periodic revision.

Integration with other futures methods: Scenario planning now frequently combines with Causal Layered Analysis (CLA) to deepen narrative, Worldbuilding techniques from design fiction to make scenarios more immersive, and participatory methods that involve broader stakeholders in scenario development.

AI-enhanced horizon scanning: The explosion of available data creates both opportunity and challenge. Natural language processing enables systematic monitoring of weak signals across vast text corpora, from patent filings to academic papers to social media. The challenge is transforming this signal detection into meaningful scenario narratives rather than drowning in noise.

Core Concepts

Critical Uncertainties vs. Predetermined Elements

The foundation of scenario construction lies in distinguishing what is genuinely uncertain from what is already determined, even if not yet visible.

Predetermined elements include trends with such momentum that they will shape all plausible futures: demographic shifts, infrastructure already under construction, physical laws. These must appear in every scenario. An aging population in Japan, for instance, is predetermined. The social response to that aging is uncertain.

Critical uncertainties are high-impact factors where the outcome genuinely remains unknown. These become the building blocks of scenario differentiation. If climate policy and geopolitical alignment both represent critical uncertainties for an energy company, combining their extreme values creates distinct futures worth exploring.

The skill lies in the sorting. Mistaking an uncertainty for a predetermined element produces scenarios that all miss the same surprise. Treating a predetermined element as uncertain wastes analytical energy on futures that will not happen.

Driving Forces and Structural Breaks

Pierre Wack emphasized that effective scenarios require understanding driving forces: the fundamental dynamics that shape systems. Cataloging external factors through PESTLE analysis (Political, Economic, Social, Technological, Legal, Environmental) provides raw material. Scenarios require the additional step of understanding which forces actually drive change.

Structural breaks represent moments when systems fundamentally reorganize. The shift from fossil fuels to renewables, the emergence of platform economics, the transformation of media from broadcast to networked: these are not incremental changes but reconfigurations of how things work. Scenarios that anticipate structural breaks prove more valuable than those extrapolating existing patterns.

Mental Model Transformation

This remains the methodology’s central design criterion: strategic value comes from expanded perception, not accurate prediction. A scenario that proves “right” but never influenced anyone accomplished nothing. A scenario that proves “wrong” but expanded thinking and improved decisions succeeded.

This explains why scenarios need stakeholder engagement rather than delivery as reports. The transformation happens in the conversation, not the document. Executives who participate in scenario development carry expanded mental models back to their decisions. Executives who receive scenario reports as PDFs often file them unread.

Plausibility Over Probability

Scenarios prioritize internal consistency over likelihood estimates. A plausible scenario hangs together logically: causes lead to effects, actors behave in ways that make sense given their interests, the world at the end of the scenario follows believably from the world at the beginning.

This stance irritates quantitative thinkers who want probability weights. The scenario planning response is pragmatic: assigning probabilities creates false precision and encourages betting on the most likely future rather than preparing for many futures. The point is not to predict which scenario will occur but to develop strategic capacity that performs well across all of them.

The Standard Process

Phase 1: Focal Question

Every scenario project begins with a focal question that grounds the work in strategic decisions. “What happens to our industry over the next fifteen years?” is too vague. “How should we position our product portfolio given potential disruptions to global supply chains?” provides focus.

The focal question determines time horizon (usually five to thirty years), geographic scope, and relevant factors. This question shapes everything that follows. Brilliant scenarios addressing the wrong question waste everyone’s time.

Phase 2: Environmental Scanning

Systematic scanning identifies the factors that might shape the futures of interest. Most practitioners use some variant of PESTLE or STEEPLE (adding Ethics and Ecological dimensions):

• Political: Regulatory changes, geopolitical shifts, governance trends
• Economic: Growth patterns, trade dynamics, financial system changes
• Social: Demographic shifts, value changes, lifestyle evolution
• Technological: Emerging capabilities, adoption patterns, disruption potential
• Environmental: Climate impacts, resource constraints, ecological feedback
• Legal: Liability shifts, compliance requirements, intellectual property evolution

Scanning produces a landscape of potentially relevant factors. The next phases sort and combine them.

Phase 3: Identifying Critical Uncertainties

From the scanned factors, the team identifies the critical uncertainties: those with high potential impact where outcomes genuinely remain unknown. Various sorting techniques exist. The simplest plots factors on impact versus uncertainty axes: high impact and high uncertainty means critical uncertainty.

The goal is typically two to four critical uncertainties that will structure the scenarios. More creates unmanageable complexity; fewer produces insufficient differentiation.

Phase 4: Scenario Construction

The classic approach crosses two critical uncertainties on orthogonal axes, creating a 2x2 matrix with four quadrants. Each quadrant represents a distinct combination of uncertainty resolutions that becomes one scenario.

For example, a corporation exploring future energy markets might cross:

• Axis 1: Rapid energy transition vs. continued fossil dominance
• Axis 2: Cooperative global governance vs. fragmented national competition

This produces four worlds: cooperative transition, fragmented transition, cooperative fossil, fragmented fossil. Each requires development into a coherent narrative.

The 2x2 matrix has critics who find it oversimplified, but its popularity reflects practical virtues. Four scenarios is a manageable number for organizational discussion. The matrix forces clear differentiation between scenarios. The visual representation aids communication.

Alternative approaches exist. Morphological analysis systematically combines multiple factors across many dimensions. Probabilistic methods assign likelihoods to scenario elements. Intuitive logics allows more organic scenario emergence through facilitated discussion. The right method depends on context and objectives.

Phase 5: Narrative Development

This phase transforms analysis into story. Lists of factors and matrix positions become stories about futures. Effective scenario narratives include:

• A memorable name: “Sustainable Growth” tells you less than “Green Giants” or “Fragmented Planet”
• A clear storyline: How did this world emerge from today? What sequence of events, decisions, and developments led here?
• Immersive detail: What does daily life look like? How do organizations operate? What headlines appear in newspapers?
• Internal consistency: Do the elements hang together logically? Would this world actually function?
• Implications: What does this future mean for the focal question? What threats and opportunities appear?

The narrative development stage often involves iteration between scenario teams and organizational stakeholders. Scenarios that do not resonate with decision-makers fail regardless of their analytical quality.

Phase 6: Strategy Testing

Scenarios exist to inform strategy, and this phase makes that connection explicit. Existing strategies are “windtunneled” against all scenarios: How does our current approach perform if Scenario A unfolds? What about Scenario B?

Robust strategies perform adequately across multiple scenarios. They may not optimize for any single future but avoid catastrophic failure in all futures. Brittle strategies succeed brilliantly in one scenario but collapse if the world develops differently.

This testing often reveals assumptions embedded in current strategy: “We’re betting that energy transition happens slowly” or “Our approach requires geopolitical stability in Asia.” Making these bets explicit allows conscious risk assessment rather than unconscious vulnerability.

Phase 7: Monitoring and Updating

Contemporary practice emphasizes that scenarios are not endpoints but ongoing tools. Monitoring systems track indicators associated with each scenario: What signals suggest Scenario A is becoming more likely? What would early indicators of Scenario C look like?

This “scenario scanning” transforms static planning exercises into continuous strategic orientation. The OODA Loop framework (Observe-Orient-Decide-Act) from military strategy provides a useful parallel: scenarios function as orientation tools that shape how organizations observe their environment and decide on action.

Methodological Variations

Intuitive Logics (Shell/GBN Approach)

The original Shell methodology, refined by Peter Schwartz at GBN, emphasizes qualitative judgment and narrative craft over quantitative analysis. Experienced facilitators guide stakeholder groups through structured exploration of uncertainties, driving forces, and scenario implications.

Strengths include flexibility, stakeholder engagement, and memorable narratives. Weaknesses include dependence on facilitator skill and difficulty replicating results.

La Prospective (French School)

The French tradition, associated with Gaston Berger and Michel Godet, emphasizes more systematic analysis of actor relationships and structural forces.⁷ Tools like MICMAC (cross-impact matrix analysis) and MACTOR (actor strategy analysis) bring analytical rigor to scenario construction.

The approach produces more structured output but can sacrifice narrative engagement for methodological precision.

Probabilistic Approaches

Some practitioners incorporate probability estimates, assigning likelihoods to scenario elements or entire scenarios. This satisfies demands for quantification but conflicts with the philosophical stance that scenarios should not be probability-weighted.

Hybrid approaches use probabilities for specific elements (technology adoption rates, for instance) while maintaining scenario equiprobability for strategic testing.

Participatory Scenarios

Traditional scenario planning was often expert-driven: consultants and planners developed scenarios for organizational leadership. [[ Participatory Futures ]] approaches extend scenario development to broader stakeholder groups, including affected communities.

The Mont Fleur Scenarios in South Africa (1991-1992) exemplify this approach. Faced with imminent political transition, a diverse group including ANC and government representatives developed scenarios for South Africa’s future. The process itself created shared understanding across ideological divides, contributing to the relatively peaceful transition that followed.⁸

Experiential Scenarios

Worldbuilding techniques from speculative design and science fiction create more immersive scenario experiences. Rather than reading about a future, participants encounter artifacts from that future: newspapers, products, policy documents. Design fiction and experiential futures methods aim to make scenarios feel real enough to shift perception.

Integration with Other Methods

Scenario planning rarely operates in isolation. Strategic foresight projects typically combine multiple methods, with scenarios providing narrative framework.

PESTLE/STEEPLE Analysis

Environmental scanning frameworks provide input for scenario development. The relationship is sequential: PESTLE identifies factors; scenario construction sorts them into predetermined elements and critical uncertainties; narrative development transforms combinations into stories.

Three Horizons Framework

The Three Horizons model (Horizon 1: current system; Horizon 2: transition; Horizon 3: emerging future) complements scenario planning by structuring temporal relationships. Scenarios often describe Horizon 3 futures while Three Horizons maps the transition path from present to scenario world.

Causal Layered Analysis (CLA)

CLA brings depth to scenario narratives by exploring four layers: litany (surface phenomena), systems (structural causes), worldview (ideological frames), and myth/metaphor (deep narratives). Scenarios developed with CLA reach beyond trend extrapolation to challenge fundamental assumptions about how the world works.

Backcasting

While scenarios describe possible futures, backcasting works backward from a desired future to identify required actions. Combining the methods creates both exploration of possibilities (scenarios) and path development toward preferences (backcasting).

Windtunneling

Strategy testing against scenarios has developed its own methodological sophistication, including systematic assessment of strategic options, identification of contingent actions, and development of early warning indicators.

Practical Applications

Corporate Strategy

The original application domain remains central. Organizations facing long investment horizons and significant uncertainty use scenarios to stress-test strategies and develop adaptive capacity. Energy companies (following Shell’s example), pharmaceutical firms (facing regulatory and scientific uncertainty), and infrastructure developers commonly employ scenario planning.

Public Policy

Government agencies increasingly use scenarios for policy development. Finland’s Committee for the Future has used foresight methods since 1993, making scenario thinking part of parliamentary process.⁹ Singapore’s Centre for Strategic Futures provides scenario-based analysis to government ministries.¹⁰ The approach helps overcome the short-term horizons that electoral cycles create.

Regional and Urban Planning

Cities and regions face long development horizons with significant uncertainty about demographic, economic, and technological change. Scenario planning helps explore alternative development paths and identify robust policy choices. The Isfahan 2040 project in Iran applied scenario methods to urban planning challenges, developing a 25-year urban vision through structured future exploration.¹¹

Conflict Resolution and Peace Building

Transformative scenario projects bring adversaries together to imagine shared futures. The Mont Fleur process in South Africa, followed by similar projects in Colombia, Guatemala, and elsewhere, demonstrated that scenario dialogue could create common ground where political negotiation had stalled.

Crisis Preparedness

FEMA (the US Federal Emergency Management Agency) has used scenario planning since 2010 to prepare for unknown challenges, developing futures-informed approaches to emergency resilience. The approach helps organizations prepare for surprises rather than merely responding to historical patterns.

Key Practitioners

Herman Kahn (1922-1983)

RAND Corporation strategist who pioneered systematic scenario thinking for military applications. His willingness to explore uncomfortable possibilities established the principle that the most important scenarios are often those we least want to consider.

Pierre Wack (1922-1997)

The intellectual architect of corporate scenario planning. His work at Shell from 1968 to 1982 transformed a military technique into a strategic management tool. His emphasis on mental model transformation rather than prediction remains the methodology’s philosophical foundation.

Peter Schwartz (b. 1946)

Former Shell scenario planner who founded the Global Business Network and wrote The Art of the Long View (1991), the most widely read introduction to scenario planning. More than anyone else, Schwartz popularized the methodology outside Shell.

Kees van der Heijden

Shell scenario team member who later became Professor of Strategic Management at Strathclyde Business School. His book Scenarios: The Art of Strategic Conversation (1996, revised 2005) provides the most rigorous academic treatment of the methodology, emphasizing its role in organizational learning.¹²

Adam Kahane

Developed transformative scenario applications for social change, including the Mont Fleur Scenarios in South Africa. His books Solving Tough Problems (2004) and Transformative Scenario Planning (2012) extend scenario methodology into conflict resolution and civic dialogue.

Angela Wilkinson

Director of the Oxford Scenarios Programme and Secretary General of the World Energy Council. Has advanced scenario methodology within OECD contexts and developed contemporary approaches integrating systems thinking with scenario practice.

Contemporary Frameworks and Innovations

The classical Shell/GBN approach remains influential, but practitioners and scholars have developed notable methodological innovations since 2000. These frameworks address perceived limitations of traditional scenario planning while preserving its core insights about uncertainty and mental model transformation.

Oxford Scenario Planning Approach (OSPA)

Rafael Ramirez and Angela Wilkinson developed the Oxford Scenario Planning Approach at Oxford’s Saïd Business School, formalized in their 2016 book Strategic Reframing.¹³ OSPA emphasizes scenarios as tools for reframing rather than forecasting, designed specifically for TUNA conditions: Turbulence, Uncertainty, Novelty, and Ambiguity.

The key distinction from classical approaches lies in epistemology. Where Shell-style scenarios help organizations prepare for multiple futures, OSPA focuses on helping leaders recognize their role in creating futures. The methodology prioritizes “working with the future” over “knowing about the future,” emphasizing iterative learning cycles that enhance judgment quality rather than producing definitive scenario sets.

OSPA has been adopted by science-centric organizations (Royal Society of Chemistry, European Patent Office, International Atomic Energy Agency), NGOs, and government bodies. The approach treats scenario planning as fundamentally a social process requiring careful workshop design rather than standardized templates.

Scenario Planning Plus (SP+)

Singapore’s Centre for Strategic Futures developed Scenario Planning Plus (SP+) in 2009 to address limitations they observed in traditional scenario planning, particularly its difficulty anticipating unprecedented events and weak signals.¹⁴

SP+ operates through six iterative phases: defining focus (using complexity frameworks like Cynefin), environmental scanning, sense-making, developing possible futures, designing strategies, and monitoring. What distinguishes SP+ is its integration of complexity theory and weak signal detection into the scenario process, combined with systematic horizon scanning.

Singapore runs national scenario planning cycles every three to five years, taking approximately two years to complete. Complementary processes like Emerging Strategic Issues (ESI) identification operate on shorter timeframes, enabling faster government response to developments that fall outside existing scenario frameworks.

AI-Enhanced Scenario Planning

The integration of artificial intelligence into scenario planning accelerated significantly after 2020, driven partly by increased computational capabilities and partly by the uncertainty shock of the COVID-19 pandemic.¹⁵

AI enhances scenario planning in several ways:

• Horizon scanning automation: Natural language processing monitors vast text corpora (news, patents, academic papers, social media) for weak signals and emerging trends
• Dynamic scenario updating: Machine learning enables continuous revision of scenarios as new data arrives, moving from periodic scenario exercises to ongoing scenario monitoring
• Complexity handling: AI can process hundreds of variables and their interdependencies, addressing the traditional constraint that human-driven scenario processes must simplify to remain manageable
• Scenario generation acceleration: What previously required weeks of workshop time can be compressed, though the quality of AI-generated narratives remains debated

The primary applications have emerged in financial planning and supply chain management, where scenario-based stress testing benefits from rapid iteration. Whether AI-enhanced approaches can match human-driven scenarios for strategic insight and mental model transformation remains an open question. The technology excels at processing complexity but may struggle with the imaginative leaps that make scenarios transformative.

Transformative Scenario Planning

Adam Kahane’s Transformative Scenario Planning extends scenario methodology beyond organizational strategy into social change and conflict resolution. Where traditional scenarios help organizations adapt to external change, transformative scenarios aim to help diverse stakeholders collectively create change.

The Mont Fleur process in South Africa demonstrated this potential, and Kahane has since facilitated similar processes in Colombia, Guatemala, and other contexts where adversarial groups needed to imagine shared futures. The methodology emphasizes the scenario process itself as a mechanism for building relationships and shared understanding across divides.

This approach requires different facilitation skills and longer time horizons than corporate scenario planning, but addresses situations where the “organization” conducting scenarios is actually a fragmented system of actors with conflicting interests.

Critical Perspectives

The Prediction Problem

Scenario planning explicitly rejects prediction, but organizations often want predictions. The methodology can be misused when scenarios are treated as forecasts with different probabilities, collapsing back into the single-future thinking that scenarios are meant to overcome. The temptation to declare “Scenario B is most likely” undermines the entire approach.

Cognitive Limitations

Research on cognitive bias suggests that humans struggle to hold multiple futures in mind simultaneously. We tend to anchor on one scenario (often the first presented or the one that matches prior beliefs) and discount alternatives.¹⁶ Effective scenario use requires ongoing effort to maintain multi-future thinking, which organizational cultures rarely sustain.

The Plausibility Trap

Scenarios must be plausible to engage decision-makers, but the most transformative changes often seem implausible before they happen. The fall of the Soviet Union, the 2008 financial crisis, the COVID-19 pandemic: each seemed far-fetched until it arrived. Scenarios can reinforce conventional thinking by excluding “implausible” possibilities that later prove decisive.

Expert Bias

Traditional scenario processes rely heavily on expert judgment, which inherits the biases of those experts. Futures that experts cannot imagine remain unexplored. [[ Participatory Futures ]] approaches address this by including diverse voices, but achieving genuine diversity in scenario development remains challenging.

Implementation Gap

Scenarios that do not connect to decisions accomplish nothing. Many organizations invest in scenario development but fail to use the results, treating scenarios as intellectual exercises rather than strategic tools. The methodology’s emphasis on mental model transformation can obscure the need for concrete strategic application.

Black Swans and Wild Cards

Scenarios typically explore variations within a comprehensible future space. True surprises, the “black swans” that lie outside scenario boundaries, remain unaddressed.¹⁷ Some practitioners incorporate “wild cards” (low-probability, high-impact events) to stretch scenario spaces, but the fundamental limitation remains: scenarios explore the imaginable, while the most disruptive changes are often unimaginable until they happen.

Measurement Difficulties

How do you know if scenarios worked? The standard claim that Shell outperformed competitors after 1973 is difficult to verify causally. Measuring whether scenarios changed mental models, and whether those changes improved decisions, remains methodologically challenging. This makes it difficult to distinguish effective scenario practice from strategic foresight theater.