SCENARIOS : How companies create stories of the future?

What are scenarios?

Scenarios are stories of possible futures. It is an Italian word that means the sketch of the scenes in a play. Its origins are Latin; the word scena means “a scene.” Michael Porter, the Harvard Business School professor, defines scenarios as “an internally consistent view of what the future might turn out to be.”

Scenarios are prospective stories, which are not trying to predict the future; instead, they explore how uncertainties might interact in ways that are usually surprising. Scenarios create stronger connections to the future. The famous scenario planning exercise by Shell in 1974, was triggered by the uncertainty in the global energy sector given the 1973 war domino effect. The struggle with the future of this sector continues – we see cyclical changes and major shifts in oil prices from 1974 till 2024.

Scenarios re coherent, credible, and plausible stories that describe different paths to alternative futures – this is relevant to individuals, businesses, and nations. Scenarios are not forecasts. Scenario builders are not hooked on forecasts where the specifics of numbers and probability are important. Scenario planning can be understood as a discipline that triggers a set of steps to finally reach the selected strategy.

Good scenarios can give us ideas on what can happen in the future, but we should not always expect a scenario to confirm the right strategy for that future. In 2022, Toyota insisted that the growth scenario for Electric Vehicles is highly exaggerated. The majority were skeptical. Towards the end of 2024, it seems Toyota’smost probable scenario of the future, is happening now.

Let’s reflect on an important question. Why multiple futures?

Uncertainty.

The more uncertainties we face, the higher the number of possible futures. Imagine how many outcomes there are if you throw a dice where the six sides carry the number 3. One certain outcome: the number 3. Now, imagine throwing three standard dices together. There are 216 outcomes. The formula predicts with 100% accuracy the number of possible outcomes; there are not 197 or maybe 231. Th dice experiment is not a context where we benefit from creating scenarios. The table below clarifies in what way probability is different from uncertainty.

Effective scenario thinking and planning give you an edge. I consider it a thinking whitespace hardly exploited by individuals. Instead, it has been always assigned to consulting experts to help large organizations imagine plausible futures and how such futures will impact the

company’s profitability. Just like a company, an individual has constraints, dreams, a future. A successful individual is an accountable one, just like the board of directors of a company.

Scenarios are about possible futures, not only likely ones. Scenario planning is an effective technique when your brain stonewalls about the next step; when we imagine the future as a story, we create much a bigger space for our brains to imagine, create and choose in.

When something is happening for the first time, such novelty prevents us from referring to probability tables – the same tables used by insurance companies for life expectancy or airlines for passengers not showing up.

Why are scenarios important?

Scenarios create value in different ways; we can utilize scenarios as a discipline and as a final self-contained product.

1. Scenarios as a discipline.

• When business teams engage in the scenario creation process, they exchange ideas. The exchange process challenges their assumptions, provides more clarity on future events, makes their models of the world more grounded, and improves the cognitive capabilities of participants. When contemporary company strategy or values are supported by hardwired assumptions, the switching cost to another set of assumptions about the future is high. Financially and emotionally, change is not a comfortable situation. Laying out alternative futures is an effective way to challenge these assumptions in a safe environment. What were the possible scenarios that Nokia built while iOS and Android started to show signs of aggressive growth? Or did Nokia drop the scenario planning exercise all together?
• Painting different futures creates a platform where shy members have louder voices. Scenario development tests how we think logically about possible events and how we reflect on the collision or harmony between future events.
• Scenario planning develops individuals, families, and organizations to think holistically and naturally because the bigger picture is a key outcome of the exercise. Not only do scenarios question the obvious, but the process runs on multiple fronts. Well-developed scenarios can dismantle your entire assumptions of the surrounding present.
• Scenarios are stories, and they add to our social capital at home, with friends or during a professional workshop. Shared stories carry systems of meanings, beliefs, and possibilities. New cognitive abilities emerge; more social capital is created – at work or with our families.

2. Scenarios as an outcome.

• In the business world, scenarios will not relieve leaders of uncertainty. Uncertainty is here to stay. Scenarios add clarity to possible futures based on assumptions, drivers, interactions, trends, and other components. Scenarios are a vehicle to accommodate uncertainty as a natural phenomenon.
• Scenarios change and upgrade the language through which we see the future. They enable the right choice of words and represent the precision of our narratives, including concepts, objects, and verbs.
• Scenarios are tests from the future. They are key to the process of learning from tomorrow. Scenario planning has been a key component of strategic planning in large organizations. It is a litmus test on how current strategies are compatible with the future. The vulnerability of present strategies, processes, tactics, and resource capabilities can be exposed when tested against possible futures of the company. I do not see why this cannot apply to individuals or families. The risk of obsolescence, irrelevance, financial struggles, and damaged relationships with partners are all applicable to groups, whether it is a family of four or a multinational corporation with thousands of employees.

In future articles, we will show how to construct scenarios and what the attributes of good scenarios are. Have a great future ahead!