Scenario method for strategic planning

Type: Research

Description:

Scenario building has become an integral part of the innovation and policy-making process (Duin, 2006). In future research, scenario building is a method to stimulate different perspectives or images of the future of a certain area to gain more insight into possible future developments (Heijden, 1996). Based on the insights from such visionary views, concerted and focused actions can be derived to positively impact future developments.

The definition of scenarios in futures research is that the scenarios are archetypal images of the future that nevertheless often interpret current realities. Scenarios are internally consistent, mutually different and plausible stories about a path from now into the future. Scenarios can include contrasting perspectives on the future and can support better policy development.

Scenario building strongly differs from forecasting. While forecasting predicts the near future based on the extrapolation of past and current developments, scenario building cuts off the past and requires us to look solely into the future. Of course, scenarios have some historical roots. Every expert reflects on his or her past and current knowledge of actual developments and from thereof extrapolates his or her view on potential futures. Figure 1 (Bicking et al., 2007, based on Bouwman & Duin, 2003) shows that certain developments will continue for some time into the future (the single dashed line). In this period reliable forecasts can be made. However, after a certain length of time it becomes impossible to extend the line (or development) because there is too much uncertainty. Forecasting with high accuracy is then almost impossible. From this point onwards, scenarios (the diverging dotted lines) can be used to explore the future. The moment at which there is too much uncertainty to extrapolate may differ for different variables. For example, forecasts concerning the birth rate are usually relatively accurate for a time horizon of 15 years, whereas correct predictions of the number of mobile telephones are aimed at only two years into the future.

A frequently used method for building and using scenarios is the variant first reported by the Rand Institute and later copied by well-known organizations such as Shell and Global Business Network. This variant is usually characterized by its structure, using four scenarios, defined by four quadrants resulting from two axes, which reflect the most uncertain and high-impact trends or variables relevant to the (business) issues at hand (Burmeister et al., 2002; Coates et al., 2001).

The use of scenarios within both commercial and non-commercial organizations received a significant boost in the 1970s when Shell was able to anticipate the oil-crisis in good times for the oil-industry by using scenarios (Schwartz, 1991). Together with the Rand Corporation they turned simple 'what if' exercises performed by national armies into a fully-fledged futures research method (Burmeister et al., 2002; Coates et al., 2001; May, 1996). There are many different methods of scenario development. Creativity and the involvement of subjective opinions by (possibly biased) humans are important ingredients of all scenario-methods (Duin, 2006). The scenario method seems to be an interesting tool for many policy debates in local and regional agenda setting discussions. It can be carried out in physical workshops and as well via virtual discussions.

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References

Bicking, M., Wimmer, M. A., Janssen, M., & Dawes, S. (2007 to appear). Scenario building for E-Government in 2020: Consolidating the results from regional workshops. Accepted for HICSS 2007.

Bouwman, H. & P.A. van der Duin (2003). Technological forecasting and scenarios matter: research into the use of information and communication technology in the home environment in 2010. Foresight, Vol.5, Number 4, 2003, pp. 8-20.

Burmeister, K., Neef, A., Albert, B., & Glockner, H. (2002). Zukunftsforschung und Unternehmen. Praxis, Methoden, Perspektiven. Essen: Z_punkt GmbH? Büro für Zukunftsgestaltung.

Coates, V., M. Farooque, R. Klavans, K. Lapid, H.A. Linstone, C. Pistorius & A.L. Porter. On the future of technological forecasting. Technological Forecasting & Social Change, Vol.67, Issue 1, 2001, pp.1-17

Duin, P. van der. Qualitative futures research for innovation. Doctoral dissertation, Delft University of Technology, The Netherlands, 2006

Heijden, K. Van der. Scenarios: the art of strategic conversation. Chichester: Wiley, 1996

Schwartz, P.. The art of the long view. Chichester: John Wiley & Sons, 1991

Aim:

scenario building is a method to stimulate different perspectives or images of the future of a certain area to gain more insight into possible future developments