scenario planning Peter McKiernan DEFINITION Scenario planning (SP) is a process within strategic management that combines the creation of several stories of plausible futures with the practical strategic responses that are required to deal with them. The creation of stories maps the future terrain through a systematic analysis of the key drivers of contextual change. By focusing on the uncertain outcomes of those drivers, SP becomes a major component of organizational learning. CONCEPTUAL OVERVIEW The original formal systems for exploring possible future states have their origins in the military, where anticipation of enemy action and reaction was crucial for survival. A series of “what if?” questions helped ready forces for attack or defense. For the Normandy landings … what if the beach sand does not take the weight of the tanks? For the Maginot line … what if the opposition comes through the forested Ardennes or across the plains of Belgium? Answers to such “what if?” questions require foresight to build the possible future states that might unfold and planning to prepare the resource base for any consequent strategic action. Contemporary commercial scenario history has followed two journeys. The frst emerged in post-war Europe where, ravaged by destruction, leaders were faced with rebuilding society and recreating cultures and economies from the grassroots. In France, Gaston Berger founded the “Centre d’Etudes Prospectives” (CEP), where he developed a scenario approach to long-range planning entitled “La Prospec- tive.” Berger believed that the future was not predetermined, but rather something that could be shaped to the benefts of wider society by emphasizing positive future scenarios. By the 1960s, this approach had embraced education, the environment, urbanization, and regional planning. Pierre Masse (the Commissioner for the French National Plan) incorporated it into the fourth French National Plan (1960–1965). Subsequent iterations of the CEP methodology focused on infuencing key political groups and specifying ways in which these futures could improve the lives of ordinary people (de Jouvenal, 1967) and the development of fresh tools and techniques, including pioneering computer simulation, after the arrival of defense analyst Michel Godet in the 1970s. The second journey fows from the US mili- tary during World War II when, coupled with the usual “what if?” questions above, leaders were faced with a mismatch between military planning based on past wisdom and the rapid throughput of ingenious new technology that would shape the future domain of warfare. After the war, the RAND Corporation was established to bridge traditional military planning and technological R&D. In the 1950s, its “systems theory” approach was extended from defense studies into social issues such as urban decay and poverty. Herman Kahn, one of RAND’s infuential thinkers, set up the Hudson Institute in 1961 where his foresightful studies speculated on the “World of 2000.” Kahn’s conjectures were based mainly on the analysis of the long- term trends, for example, population growth and their impact at key stages in societal devel- opment. He coined the term “scenarios” for the resultant futures – a term used in Hollywood for the complete script and shooting directions of a motion picture. Ironically, in thinking the unthinkable about thermonuclear warfare, the Dr Strangelove character in Kubrick’s 1963 flm of the same name, was based on Kahn. Kahn saw scenarios as: “A hypothetical sequence of events for the purpose of focusing attention on causal processes and decision points.” Kahn (1965). Hudson’s research attracted a variety of multinational companies, including the Shell Corporation that is credited widely with the frst commercial applications of Kahn-based SP. But the highly formalized “Unifed Planning Machinery” (UPM) had dominated Shell’s prospecting of the future since 1961. As the oil price became subject to increasing uncertainty, the forecasting-based UPM began to struggle. Pierre Wack (from Shell Français) and Ted Newland led its small team in the early 1970s that introduced Kahn’s scenario stories into the planning process and argued that this was Wiley Encyclopedia of Management, edited by Professor Sir Cary L Cooper. Copyright © 2014 John Wiley & Sons, Ltd.