Rather than trying to predict the future, organizations need to strengthen their abilities to cope with uncertainty. A new approach to scenario planning can help companies reframe their long-term strategies by developing several plausible scenarios.

In recent years, organizations have been caught off guard by economic volatility, unexpected political events, natural disasters, and disruptive innovations. In response, we are seeing increased interest in scenario planning. Rather than tying their company’s future to a strategy geared to a single set of events, many senior executives are coming to the view that smart management benefits from a richer understanding of the present possibilities afforded from multiple views about possible futures.

Scenario planning came to prominence following World War II and gained recognition in the corporate world in the late 1960s and 1970s, around the time when Royal Dutch/Shell used it to help address the turbulence1 caused by the 1973 oil crisis. While several different approaches to scenario planning have emerged since then, this article focuses specifically on what we call the Oxford scenario planning approach.2 This approach is intended to be collaborative in order to get individuals and groups at all levels and functional backgrounds within an organization to examine an array of factors that contribute to the future and, in the process, to reframe their collective understanding of the present. (See “About the Research.”)

References

1. F.E. Emery and E.L. Trist, “The Causal Texture of Organizational Environments,” Human Relations 18, no. 1 (February 1965): 21-32; and R. Ramírez, J. Selsky, and K. van der Heijden, eds., “Business Planning for Turbulent Times: New Methods for Applying Scenarios” (London: Earthscan, 2008).

2. R. Ramírez and A. Wilkinson, “Strategic Reframing: The Oxford Scenario Planning Approach” (Oxford, U.K.: Oxford University Press, 2016).

3. “Best-case” and “worst-case” scenarios are not seen as true scenarios for the purposes of the Oxford scenario planning approach; instead, they are disguised forecasts.

4. F. Knight, “Risk, Uncertainty, and Profit” (Boston: Hart, Schaffner, and Marx Prize Essays 31; Houghton Mifflin Co., 1921).

5. R. Ramírez and C. Selin, “Plausibility and Probability in Scenario Planning,” Foresight 16, no. 1 (2014): 54-74; E. Eidinow and R. Ramírez, “The Aesthetics of Story-Telling as a Technology of the Plausible,” Futures 84, part A (November 2016): 43-49; and R. Ramírez and J. Ravetz, “Feral Futures: Zen and Aesthetics,” Futures 43, no. 4 (May 2011): 478-487.

6. R. Ramírez and J. Selsky, “Strategic Planning in Turbulent Environments: A Social Ecology Approach to Scenarios,” Long Range Planning 49, no. 1 (February 2016): 90-102; and R. Ramírez and U. Mannervik, “Strategy for a Networked World” (London: Imperial College Press, 2016).

7. This distinction was first introduced by Emery and Trist in “The Causal Texture of Organizational Environments” and was more fully developed in K. van der Heijden, “Scenarios: The Art of Strategic Conversation” (New York: John Wiley & Sons, 1996).

8. See “Shipping Scenarios 2030,” www.shippingscenarios.wartsila.com.

9. See S. Elahi and R. Ramírez, “Appendix E: European Patent Office Case Study,” in Ramírez and Wilkinson, “Strategic Reframing: The Oxford Scenario Planning Approach.”

10. Probability involves possible deviance from trajectories established from past facts and their distribution. In turbulent conditions, these facts and their distributions are either irrelevant or nonexistent.

11. Ramírez and Wilkinson, “Strategic Reframing: The Oxford Scenario Planning Approach,” 42-43.

12. Rolls-Royce Holdings plc Annual Report 2016, www.rolls-royce.com.

13. The “power by the hour” concept was introduced in the 1960s for the Viper engine developed by Armstrong Siddeley (which later became Bristol Siddeley and then Rolls-Royce). It was conceived as a tool to provide maintenance cost assurance. The company contracted with customers for the total in-service cost of the product, not only providing airline customers with predictable operating costs but also aligning Rolls-Royce’s commercial incentives with those of the customer.

14. The year 2040 was chosen because it was beyond Rolls-Royce’s long-range technology scanning horizon of 20 years and beyond the planned introduction dates for any products under consideration.

15. S. Matlin, G. Mehta, and H. Hopf, “Chemistry Embraced by All,” Science 347, issue 6227 (March 13, 2015): 1179.

16. G. Whitesides, “Reinventing Chemistry,” Angewandte Chemie International Edition 54, issue 11 (March 9, 2015): 3196-3209.

17. Researchers at Johns Hopkins University recently developed a “map” to predict the safety of untested chemicals, using data collected by the European Chemicals Agency.

18. “Future of the Chemical Sciences,” www.rsc.org.

i. R. Ramírez, “What Might Decision-Making Be in a Complex World?” invited lecture coauthored with J. Ravetz, T. Lang, and A. Wilkinson, International Risk Assessment and Horizon Scanning Symposium 2010, March 2010, Singapore.