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be, and on and on. Whenever we think of the future, we tend to think in
terms of a single most likely outcome. As a result, whenever we must make
decisions, whether as an individual or a group, we tend to make these de-
cisions based on what we think will be the single most likely outcome in
the future. As a consequence, we are extremely vulnerable to unpleasant
surprises.
Scenario planning is a partial solution to this problem. A scenario is
simply a possible forecast, a story about one way that the future might
unfold. Scenario planning is a collection of scenarios, to cover the spectrum
of possibilities. Of course, the complete spectrum can never be covered, but
the scenario planner wants to cover as many possibilities as he or she can.
By acting in this manner, as opposed to using a straight-line forecast of the
most likely outcome, the scenario planner can prepare for the future as it
unfolds. Furthermore, scenario planning allows the planner to be prepared
for what might otherwise be an unexpected event. Scenario planning is
tuned to reality in that it recognizes thatcertainty is an illusion.
Suppose you are in a position where you are involved in the long-run
planning for your company. Let’s say you make a particular product. Rather
than making a single most likely straight-line forecast, you decide to exercise
scenario planning. You will need to sit down with the other planners and
brainstorm for possible scenarios. What if you cannot get enough of the raw
materials to make your product? What if one of your competitors fails? What
if a new competitor emerges? What if you have severely underestimated
demand for this product? What if a war breaks out on such and such a
continent? What if it is a nuclear war?
Because each scenario is only one of several possible, each scenario
can be considered seriously. But what do you do once you have defined
these scenarios?
To begin with, you must determine what goal you would like to achieve
for each given scenario. Depending upon the scenario, the goal need not be
a positive one. For instance, under a bleak scenario, your goal may simply
be damage control. Once you have defined a goal for a given scenario, you
then need to draw up the contingency plans pertaining to that scenario to
achieve the desired goal. For instance, in the rather unlikely bleak scenario
where your goal is damage control, you need to have plans to go to should
this scenario manifest itself so that you can minimize the damage. Scenario
planning, above all else, provides the planner with a course of action to take
should a certain scenario develop. It forces you to make plans before the
fact; it forces you to be prepared for the unexpected.
Scenario planning, however, can do a lot more. There is a hand-in-
glove fit between scenario planning and optimal f.Optimal fallows us
to determine the optimal quantity to allocate to a given set of possible
scenarios. Our existence limits us to existing in only one scenario at a
time, even though we are planning for multiple futures, multiple scenarios.