211
See also: Managing risk 40–41 ■ Learning from failure 164–65 ■ Avoiding
complacency 194–201 ■ Contingency planning 210 ■ Coping with chaos 220–21I
n addition to contingency
planning, which involves
preparing for sudden disaster,
companies also need to prepare for
the many alternative futures they
face. This is known as scenario
planning. It has its roots in military
planning, and companies start the
process by asking: “what if...?”
What is likely to happen in
the next two, five, or ten years?
Companies have to consider local,
national, and international events,
and must try to identify underlying
trends. They have to determine the
probability of future scenarios,
how they might be affected, and
how they can prepare to mitigate
the effects, or even to reap the
benefits. Scenario planning does
not remove uncertainty, but it can
help a company adapt to change.Prepared for change
Oil company Royal Dutch Shell has
used scenario planning for nearly
half a century. Its early work was
based on intuition, but it has now
developed sophisticated techniques
to create scenarios, which it sharespublicly. However, it never comments
on the scenarios it discloses, since
this might guide other companies’
or governments’ decisions.
Shell’s scenario planning allowed
it to minimize the impact of an oil
embargo on Western countries in
October 1973. Within weeks, the
price of crude oil had soared and
stock markets tumbled. Although
Shell was hit by these events, it had
already begun to diversify into other
energy sources, allowing it to recover
more quickly than competitors. ■WORKING WITH A VISION
PLANS ARE USELESS,
BUT PLANNING IS
INDISPENSABLE
SCENARIO PLANNING
During the OPEC oil embargo of
1973, Shell’s scenario planning meant
it had already decided what it would
do in the case of price hikes, allowing
its executives to act fast and effectively.IN CONTEXT
FOCUS
Business planning
KEY DATES
Early 19th century Prussian
military strategist Carl von
Clausewitz formulates the
principles of strategic planning.
1940s The US Air Force
considers opponents’ possible
actions in order to prepare
alternative strategies.
1950s US futurist and military
strategist Herman Kahn
encourages governments
and individuals to “think the
unthinkable” by imagining
possible future scenarios.
1967 French philosopher
Bertrand de Jouvenel coins
the term futurible to mean
“a fan of possible futures.”
21st century Companies
and governments use scenario
planning for wide-ranging
issues including food, water,
and energy supply, and
population growth.