Scenario Planning

Purpose

Scenario planning, also called scenario thinking or scenario analysis, is a strategic planning tool that organisations can use to assist decision making and in developing flexible long-term plans.

Description

Scenario planning or thinking has an established and successful heritage, with deep roots in the development of decision-making. Carefully managed scenario building process can help organisations improve their decision-making processes, overcome problems of lock-in on business-as-usual thinking and become effective observors of change.

A useful typology of scenarios presents contrasts between:

• the predictive (asking what will happen, short term),
• the explorative (asking what can happen, what is possible, longer term), and
• the normative (how can a vision or target be reached?).

It is important to be clear that scenarios are not predictions, nor desired visions. They are simply alternative stories of how the future might unfold: explorations that gather information about divergent trends and potential developments into new narratives about how these parts of the future might work together.

Jointly crafting scenarios, as images of the future, allow exploration of both how elements of the future may be the same as today and where they may significantly change in areas of technological, social, economic, environmental and other developments. 

It may not be more accurate about guessing the future in detail, but conversations will still help us make better decisions about the future, not least by alerting us in advance of more – and less – desirable directions. Scenarios help us to take account of different perspectives on issues and opportunities. One person or institution alone does not cause changes in society. 

Models, Quantitative and Qualitative scenarios and stories create multiple views of the future helps us to understand how different individual and joint decisions, actions, and events can lead to alternative futures. We are not trying to determine what is going to happen; we are trying to understand what might happen in the longer term.

Unlike forecasting, scenario planning embraces uncertainty. Where forecasts often assume that the world of tomorrow is a trend-projection of the world of today, scenarios can allow for sudden shifts in the environment.  Scenario planning is based on four assumptions:

1. The future is unlike the past, and is significantly shaped by human choice and action. 
2. The future cannot be foreseen, but exploring the future can inform present decisions.
3. There are many possible futures; scenarios therefore map within a ‘possibility space’.
4. Scenario development involves both rational analysis and creative thinking.

Good scenarios help us understand how key drivers, such as governance systems and resource availability, might interact and affect the future weight and momentum of change.  They sit between quantitative analysis that models trends and speculative, anecdotal approaches of telling stories about the imagined future.

Scenario planning differs from contingency planning, sensitivity analysis and computer simulations.

Contingency planning is a "What if" tool, that only takes into account one uncertainty. However, scenario planning considers combinations of uncertainties in each scenario. Planners also try to select especially plausible but uncomfortable combinations of social developments.

Sensitivity analysis analyzes changes in one variable only, which is useful for simple changes, while scenario planning tries to expose policy makers to significant interactions of major variables.

While scenario planning can benefit from computer simulations, scenario planning is less formalized, and can be used to make plans for qualitative patterns that show up in a wide variety of simulated events.

State of Development	Unknown

Scope

Outcome Areas	Economic, Environmental, Social, Cultural
Management Domains	General
Steady State or Dynamic	Unknown

Input & Output Data

Accessibility

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User Information

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Technical Considerations

Keywords	scenario planning, futures thinking,
Linkages to other Models	Climate Change Scenarios http://www.niwa.co.nz/our-science/climate/information-and-resources/clivar/scenarios
Key References	A Sustainable Energy Future for New Zealand by 2050: A Business View. NZ Business Council for Sustainable Development Scenarios using a computable general equilibrium model of the New Zealand economy Ministry of Business, Innovation and Employment, New Zealand. Published: October 2009 – Economic Impacts of Immigration Working Paper Series

Associated Case Studies