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Scenarios and strategy

Published on May 30, 2013 Reviewed on April 30, 2018   39 min
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My name is Paul Schoemaker. I teach at the Wharton School. Also, I founded a company called Decision Strategies International, where we practice scenario planning with typically larger companies, looking out about 5 to 10 years into the future of a particular industry. This presentation will capture the basic steps in scenario planning, with practical examples to illustrate the methodology.
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Scenario planning, is a tool that got a lot of attention during the 1970s when the oil shocks, the first one being 1973, when OAPEC responded to the war between Israel, and Egypt, and Syria. And later in 1979, when Iraq and Iran had a war. Basically, these oil shocks, prompted by these geopolitical events, invalidated a lot of the forecast-based and financial-based planning that essentially extrapolated trends of the past. So, we see what, in this slide, is called level three planning. We see a much greater emphasis on conceptual analysis of how the future may be different from the past, less focus on numbers per se, and less focus on linear extrapolation. If this ability to think strategically is deeply embedded in an organization, it moves then to level four. I think the current frontier in strategic planning, where scenario planning itself can play a significant role, is the management of uncertainty. How to deal with shocks that are both large in magnitude and very difficult to predict, such as the financial crisis during 2008 and 2009. Royal Dutch Shell, used scenario planning