Framework

Scenario planning

The question it answers

Before committing to a long-term investment in a volatile industry, which plausible futures should the leadership team test its strategy against to see if it holds?

Origin
Wack, 1985
Diagram type
Cycle
Level of analysis
Industry
Topics
Strategy & leadershipData & analytics
Chess knight on a glass compass, icon for strategy and leadership

Diagram

Scenario planning

  1. Define the focal questionWhich decision is being tested?
  2. List driving forcesPolitical, economic, technological forces that bear on the question.
  3. Rank by impact and uncertaintyPick two forces that are both important and uncertain.
  4. Build a few scenariosEach scenario is a coherent story, not a forecast.
  5. Stress-test the strategyWhich decisions work in every scenario, which in only one?
  6. Monitor signpostsChoose early indicators of which scenario is arriving.

Pitfalls

Pitfall

Turning scenarios into best/worst/middle. They should differ in structure, not only degree.

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

  1. Schoemaker, P.J.H. (1995) ‘Scenario planning: a tool for strategic thinking’, Sloan Management Review, 36(2), pp. 25–40.No DOIshop.sloanreview.mit.eduSource page
  2. Wack, P. (1985) ‘Scenarios: uncharted waters ahead’, Harvard Business Review, 63(5), pp. 72–89.No DOIhbr.orgSource page
  3. Wack, P. (1985) ‘Scenarios: uncharted waters ahead’, Harvard Business Review, 63(5), pp. 73–89.No DOIhbr.orgSource page