After a brief conversation with security colleague, formerly of Royal Dutch Shell, about scenario planning I was convinced that this form of strategic forecasting is ideal for most organization big or small (See also: Game Theory). I immediately began to research its application to my organization. The article below describes scenario planning 101.
Scenario Planning: Effective tool in strategic planning across cos
That Sun Tzu’s Art of War, the world’s oldest military treatise, is still a must-read for managers in the making speaks volumes about the application of battlefield tactics in the boardroom. Over the last few years, another military tactic is fast gaining acceptance in strategic planning exercises across companies — scenario planning.
Originally developed by the American Air Force during World War II, scenario planning required military strategists to try and imagine what the opponents could possibly do and work out alternative response strategies accordingly..
Scenarios made an appearance as a planning tool in the 60s, but it was only when scenario planning enabled Royal Dutch/Shell to sail through the ‘oil shock’ in the early 70s did people actually sit up and take notice.
At the time, no one believed that the price of oil could rise drastically, but the newly formed planning team at Shell presented two alternative scenarios: one where oil prices remained stable, and another, which described why the prices were likely to escalate, and the complete ramifications of this possibility . While the first was more in line with what the managers at Shell believed , the second option forced them to think, albeit reluctantly, about how they would react if such a scenario was to play out.
Eventually, when the OPEC countries did hike prices, Shell was the only oil companies that had a back-up strategy ready, propelling it to the top of the profitability charts, and making it the second largest oil company globally.