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Scenario Planning

💼 Business By CampusDown Wiki Editorial Team Last updated
Quick answer: scenario planning does not predict a single future; it sketches several plausible futures that branch on critical uncertainties and looks for strategies that work across them. It became famous through Shell's preparation ahead of the 1970s oil crisis.
Contents
  1. 1. Concept and origins
  2. 2. Steps
  3. 3. How it differs from forecasting
  4. 4. Limitations
  5. 5. Related methods
  6. 6. References

Concept and origins

Scenario planning is a strategy method for highly uncertain environments that systematically imagines what could happen instead of trying to guess what will happen. The military strategist Herman Kahn developed it at RAND, and Pierre Wack of Royal Dutch Shell brought it into corporate strategy in the 1970s. Having examined an oil-price-shock scenario in advance, Shell is credited with responding to the 1973 oil crisis faster than its rivals (Wack, 1985).

Steps

  1. Set the focal question: define the decision and time horizon (for example, the market in ten years).
  2. Identify driving forces: gather social, technological, economic, environmental and political (STEEP) drivers.
  3. Separate predetermined elements from uncertainties: distinguish near-certain trends such as demographics from high-impact factors whose direction is unknown.
  4. Build the scenario framework: use two high-impact, highly uncertain factors as axes of a 2x2 matrix to define four futures.
  5. Write the stories: name each scenario and narrate it as a causal story.
  6. Draw strategic implications: find strategies robust across all scenarios and signposts (leading indicators) for each.

How it differs from forecasting

Traditional forecasting assumes one most-likely future; scenario planning assigns no probabilities and treats several futures on an equal footing. Schoemaker (1995) argued that it counters two common decision errors, overconfidence and tunnel vision.

Limitations

  • It takes considerable time and participant effort.
  • Choosing the wrong axes can miss important futures.
  • It fails if scenarios are mistaken for forecasts or are not tied to real decisions.

It is used alongside the Delphi method for expert input, SWOT analysis for internal and external factors, and Porter's five forces for industry structure, and helps entrepreneurs assess uncertain opportunities.

References

  1. Wack, P. (1985). Scenarios: Uncharted waters ahead. Harvard Business Review, 63(5), 72–89.
  2. Schwartz, P. (1991). The Art of the Long View. New York: Doubleday.
  3. Schoemaker, P. J. H. (1995). Scenario planning: A tool for strategic thinking. Sloan Management Review, 36(2), 25–40.

Reports and materials that use this theory (Korean)

There are no materials dedicated to this theory yet, but you can search related reports in the CampusDown library (Korean).

Find more reports · Search '시나리오 플래닝' on CampusDown →
SWOT AnalysisSWOT analysis explained: strengths, weaknesses, opportunities and threats, the TOWS matrix, links with Porter's Five Forces and PEST, origins, criticisms, and how to write a SWOT report.💼 BusinessPorter's Five ForcesPorter's five forces: rivalry among existing competitors, threat of new entrants, threat of substitutes, bargaining power of buyers and suppliers, roots in industrial organization economics, how to apply it, complements, and limits.💼 BusinessDelphi MethodThe Delphi method: origins at RAND, its four features (anonymity, iteration, controlled feedback, statistical group response), the step-by-step procedure, policy Delphi, comparison with brainstorming, and strengths and limitations.🏛️ Politics & Public AdministrationEntrepreneurshipEntrepreneurship explained: Schumpeter's innovation and creative destruction, Kirzner's entrepreneurial alertness, Drucker's systematic innovation, the opportunity view of Shane and Venkataraman, entrepreneurial orientation and corporate entrepreneurship.💼 Business

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This article was last updated on October 15, 2026. It is based on widely recognized original works and textbooks; when citing it in a paper, please check the original sources listed in the references.