CLASS LESSON PLAN
Class #16 – Introduction to Scenarios
Overview:
Scenarios, sometimes described as “memories of the future”, can be a very useful tool in foresight. They
can allow leaders to foresee and plan for multiple plausible outcomes, and build resilience into their
planning and strategies. Not all are fans of the process, suggesting that they are too disconnected from
real-world management and can be an abdication of leadership, as illustrated by Harry Truman’s famous
line, “Give me a one-handed economist…”. Others advocate more in favor of the value of scenarios
arguing that they push leaders out of the status-quo mindset and uncover “disturbing” outcomes that
would not otherwise been envisioned.
The framework forecasting process outlined by Peter Bishop defines two main forecasting stages:
Baseline forecasting and alternative futures forecasting (scenarios). Developing scenarios bridges the gap
between expected/baseline forecasts and the impacts created by disruptive change.
Well-developed, evidence-based scenarios can help to define and describe the potential outcomes that
may result from uncertain change. They offer the practitioner a process to integrate uncertainty and
disruptive change into the planning process. Scenarios also provide a perspective from which to explore
implications of change in ways that can reveal unexpected opportunities or threats.
There are several useful examples of companies and other organizations that effectively use scenarios to
help their leadership understand and prepare for potential change. This class will explore examples to
provide context as a backdrop for student scenario development for their foresight projects. Specifically,
students will explore the use of scenarios by Royal Dutch Shell, a recognized leader in development and
strategic use of scenarios.
As preparation, students will explore a Harvard Business Review reading entitled “The Use and Abuse of
Scenarios”. Complexity and uncertainty are at the center of the discussion regarding how to plan for an
uncertain future, so we will begin the scenarios class with an overview of a recent IBM CEO survey on
complexity to set the stage for the discussion.
Learning Objectives:
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Gain an awareness of scenarios and how they can be useful for helping leaders anticipate
uncertain change and its consequences
Explore real world examples of how organizations cope with and capitalize on complexity
Understand some of the shortcomings of the method and how to effectively utilize scenarios
in business
Gain an understanding of multiple scenario development techniques as a set-up for the next
class where these techniques will be more thoroughly explored
© 2013 University of Notre Dame. All rights reserved. This document may not be duplicated, distributed
or excerpted without the University’s advance written consent.
Key Terms and Concepts:
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Scenario Development
Uncertainty
“Baseline” (expected) scenario
Alternative Future Scenarios
“Turkey Problem”
“Saber-Toothed Tiger Problem”
“Disturbing” Scenarios
Memories of the Future
“Wind Tunnel Testing”
Signposts
Artifacts From The Future
Class Preparation:
Readings:
 The Use and Abuse of Scenarios by Charles Roxburgh (McKinsey Quarterly, 11/2009)
 Scan Shell’s usage of scenarios (www.shell.com/scenarios)
 Optional – Scan the recent IBM CEO survey on “Capitalizing on Complexity”
http://public.dhe.ibm.com/common/ssi/ecm/en/gbe03297usen/GBE03297USEN.PDF
Critical Thinking Questions:
 The McKinsey reading suggests that creators of scenarios should be good story tellers. What is
the reason and do you agree that this is important to business decision making?
 The McKinsey reading suggests that if scenario development has been conducted well, the results
will be disturbing. Why?
 What are some of the benefits of using scenarios in business?
 What is meant by the phrase “Crunch the Quadrants”? How can this process help in identifying
the most important uncertainties for a foresight project?
 The reading discusses whether using scenarios is an abdication of leadership. How can leaders
use scenarios in a way that avoids this pitfall?
 Why does the reading suggest that at least four scenarios should be created?
 What is meant by the saber-toothed tiger problem and how is this relevant to scenario
development?
Assignment Due: None.
© 2013 University of Notre Dame. All rights reserved. This document may not be duplicated, distributed
or excerpted without the University’s advance written consent.
INSTRUCTOR GUIDELINES
Discussion Launchers:
Question of the day: Is using scenarios an abdication of leadership? Use the Harry Truman “one-handed
economist” quote to spur discussion. Get a discussion started, and then plan to revisit the question later in
the session taking the twist “How can leaders use scenarios without abdicating leadership?”
Discussion Questions with Answers:
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The McKinsey reading suggests that creators of scenarios should be good story tellers. What is
the reason and do you agree that this is important to business decision making?
A: Scenarios create “memories of the future”. Successful leaders have advanced to where they
are because they have developed the ability to make good decisions. These decisions are usually
based on an ability to read the situation well and to leverage prior experience as a filter for
framing decisions. Presenting these leaders with scenarios that are described more as
experiences than as worksheets and charts enables the leaders to immerse themselves in the
scenario and take advantage of the best of their decision making skills.
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The McKinsey reading suggests that if scenario development has been conducted well, the results
will be disturbing. Why?
A: Even experienced scenario developers and the companies that have experience using
scenarios are prone to become “trapped by the past”, which is to say limit the extent to which
they push the boundaries of their scenarios. For example, being too optimistic heading into an
economic downturn and too pessimistic heading into a recovery. It is useful to test scenarios by
gauging against extreme events from the past (low probability, high impact events). If the
scenarios are too close to the status quo, they will likely not yield the insights that more
disturbing scenario may reveal.
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What are some of the powers that scenarios can bring to business?
A: Scenarios, when used effectively, can offer a range of benefits for business. Examples of these
benefits include:
1. Scenarios expand your thinking. They get your team to break loose of the constraints of
conventional wisdom (business as usual paradigm) and can help avoid the problem of
groupthink.
2. Scenarios can uncover “inevitable” futures that may not appear as such in traditional
planning and analysis processes. Four types of inevitable futures are identified:
 Demography is destiny. Most demographic trends and outcomes are highly
likely over the long term.
 The Laws of Economics. Supply and Demand will have predictable impacts on
future behavior.
 Trees Don’t Grow in the Sky. We keep hearing reports of the end of business
cycles and speculative bubbles. This is likely not so.
© 2013 University of Notre Dame. All rights reserved. This document may not be duplicated, distributed
or excerpted without the University’s advance written consent.
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Scheduled events may fall beyond typical planning horizons. Elections, a surge
of mortgage rate resets, a concentration of corporate bond maturities. These can
foretell of long term change that is highly likely.
3. Scenarios create “memories of the future”. Successful leaders have advanced to where
they are because they have developed the ability to make good decisions. These
decisions are usually based on an ability to read the situation well and to leverage prior
experience as a filter for framing decisions. Presenting these leaders with scenarios that
are described more as experiences than as worksheets and charts enables the leaders to
immerse themselves in the scenario and take advantage of the best of their decision
making skills.
4. Scenarios enable companies to “Wind Tunnel Test” their strategies. Once scenarios are
defined, potential future strategies can be overlaid on each scenario to look for potential
critical issue or potentially missed future opportunities. This review can enable
businesses to re-craft and retest their scenarios to optimize across the full range of
scenarios – creating resilience.
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What is meant by the phrase “Crunch the Quadrants”? How can this process help in identifying
the most important uncertainties for a foresight project?
A: Crunching the quadrants can be very useful in the early stages of scenario development. The
challenge early on is to determine which uncertainties are really most important in driving future
outcomes. Usually the process yields 3 to 5 critical uncertainties that need to be prioritized. One
way to resolve this is to build multiple uncertainty matrices and look to find those that may be
highly correlated (so that they can be combined) or those that prove not to be as relevant. This
process can be useful for simplifying the complexity of the topic and in generating insights into
how uncertainties can be embraced to describe plausible future scenarios.
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The reading discusses whether using scenarios is an abdication of leadership. How can leaders
use scenarios in a way that avoids this pitfall?
A: The reading makes the distinction between leaders using scenarios for decision-making and
using them to communicate with their organizations. Scenarios should be use for the former, but
not for the latter. Leaders cannot stand up in front of an organization and say, “Things will be
good, bad, or terrible, but I am not sure which.” Rather leaders should determine an end goal
and create a plan that will get the company to that end goal regardless of the scenario that
becomes reality. It is this end goal that leaders should communicate to their employees.
Leaders should frame a vision that stems from their understanding of plausible scenarios, and
create strategies that will be robust under different scenarios. The scenarios inform the decisionmaking on the strategies, and the vision and robust strategies should be communicated to lead
the organization. The Winston Churchill example is illustrative: “Victory at all costs, victory in
spite of all terror, victory however long and hard the road may be.” Churchill’s remarks
acknowledged a wide range of conditions might exist (uncertainty) and also resisted being overly
optimistic.
© 2013 University of Notre Dame. All rights reserved. This document may not be duplicated, distributed
or excerpted without the University’s advance written consent.
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Why does the reading suggest that at least four scenarios should be created?
A: Basically, this is a function of human nature. Two scenarios will usually too few and will
yield best case/worst case outcomes. If you create three scenarios, human nature will favor the
one in the middle. So four (possibly a few more) has emerged as the best practice for scenario
development.
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What is meant by the saber-toothed tiger problem and how is this relevant to scenario
development?
A: The saber-toothed tiger was a highly specialized species that rose to the top of the food chain,
feeding on large mammals. Its risk became apparent as a result of a fairly minor shift in its
operating environment. When the large mammals became extinct, the sabre-tooth tiger’s survival
strategy proved to be too narrowly focused, and it could not adapt to survive.
In business, it can be risky to become too specialized and reliant on a specific set of operating
conditions. A disruption or paradigm shift can emerge that can render historically-successful
strategies obsolete. Scenarios enable managers to envision that potential disruptions and
integrate this uncertainty into their strategic planning processes. Scenarios can highlight
strategies that are overly specialized and thus exposed to obsolescence while there is still time to
adapt.
Class Timeline:
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5 Minutes – Quote of the Day and Intro
10 Minutes – Introduction of Uncertainty, Wildcards and Black Swans
15 Minutes – Discussion of IBM CEO Survey on Complexity
5 Minutes – Uncertainty Reduction Theory
10 Minutes – The Power of Scenarios
20 Minutes - Challenges and Shortcomings of Scenarios (Shell Video – 9 min)
5 Minutes – Brief Intro to Methods
5 Minutes – Wrap Up and Preview of Upcoming Class
Classroom Activities/Short Assignments:
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For IBM CEO Survey, after you go over the details of the survey – pose the following scenario to
the students: It is Monday morning and the regularly scheduled quarterly planning meeting is
about to begin when the CEO walks in. She never attends this meeting, so you are a little
surprised. She pulls out the IBM CEO survey and indicates that she was one of the participants.
One key finding is that over half of the companies consider themselves ill-equipped to handle the
increasing levels of complexity. The CEO wants forward looking recommendations.
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Have the students divide into triads to discuss what they might recommend, and then report out
after a few minutes.
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Answers should be written on the chalk board and organized roughly into the three categories that
IBM suggests (see next slide as a summary from IBM report):
© 2013 University of Notre Dame. All rights reserved. This document may not be duplicated, distributed
or excerpted without the University’s advance written consent.
1. Tighten customer relationships to better identify emerging market transitions – find new
ways to scan for weak signals
2. Experiment and innovate to explore solutions on multiple fronts – which means having
clarity on plausible future scenarios
3. Creating an operating framework that enables resilience/dexterity – look for frameworks
that can work across multiple scenarios
Multimedia Supplements:
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Shell “Blueprint and Scramble” scenarios video
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http://www.shell.com/home/content/aboutshell/our_strategy/shell_global_scenarios/scena
rios_videos/video/
Notes and Perspectives:
© 2013 University of Notre Dame. All rights reserved. This document may not be duplicated, distributed
or excerpted without the University’s advance written consent.