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http://forlearn.jrc.ec.europa.eu/guide/2_design/meth_delphi.htm

http://forlearn.jrc.ec.europa.eu/guide/2_design/meth_scenario.htm

SCENARIO BUILDING

A scenario is a "story" illustrating visions of possible future or aspects of possible
future. It is perhaps the most emblematic Foresight or future
studies method. Scenarios are not predictions about the future but rather similar
to simulations of some possible futures. They are used both as
an exploratorymethod or a tool for decision-making, mainly to highlight
the discontinuities from the presentand to reveal the choices available and
their potential consequences.
Page contents:
Definition
Historical notes
Main characteristics
When is this method appropriate?
Who is this method appropriate for?
Approach (Step-by-step-guide)
Resources
Outputs
Pros and cons
Variations
Complementary approaches
Further references

Hi s t or i c al not es
The term scenario originates in the dramatic arts. The dictionary offers three
definitions:
An outline of the plot of the dramatic work giving particulars of the scenes,
characters, etc.;
The outline or sometimes the complete script of a motion picture or a
shooting script;
An imagined sequence of events, especially any of several detailed plans or
possibilities.

The scenario method is probably one of the main concepts and most widely used
methods in Foresight. The term scenario was introduced by Herman Kahn in the
1950s in connection with military and strategic studies conducted by the Rand
Corporation. Kahn used the term for issues related to US public policy, international
development and defence.

Scenarios were first used by corporations. They started to be used at corporate level
as planning became more complex and sophisticated. The oil company Shell was a
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pioneer in the field and became the benchmark for corporate scenario planning.
Shell's scenario planning enabled it to anticipate the rise and subsequent fall of oil
process in 1973. Scenarios have since been used by the financial services industry,
banks and insurance companies, given their value as a tool for analysing and
understanding key competitive decisions.

Both public and private sector organisations have implemented scenarios for a wide
array of functions. The public sector relies mainly on scenario methodologies when it
has to define planning activities (e.g. it was used in the past for defence planning)
and to delineate alternatives for policies. Almost all industries (especially
multinational companies) use scenarios to develop their business strategies.
In Foresight projects, the scenario method is a policy analysis tool that helps describe
a possible set of future conditions. At national, regional and local level scenarios can
be used to improve planning capacity, to enrich strategic public policy decisions and
to guide major capital investments. For example, the development of scenarios
allows new insights into the opportunities and risks involved in making decisions
about public transport that would have major consequences for the development of
a region over the next few decades.

Mai n c har act er i s t i c s
To be effective, scenarios must be plausible, consistent and offer insights into the
future.
Plausibility: A scenario must be plausible. This means that it must fall within
the limits of what might conceivably happen.
Consistency: A scenario must be internally consistent. This means that the
combination of logics in a scenario must not have any built-in inconsistency
that could undermine the credibility of the scenario.
Decision-making utility: each scenario, and all scenarios if they constitute a
set, should contribute specific insights into the future that will lead to
the decision focus that was selected.

"Qualitative scenarios can have a richness that is not bound by quantitative methods.
They can explore relationships and trends for which little or no numerical data is
available, including shocks and discontinuities; they can more easily incorporate
motivations, values, and behaviour; they can create images that capture the
imagination of those for whom they are intended." [COST 2002]

When i s t hi s met hod appr opr i at e?
Scenarios can help public sector executives to think in a disciplined way about the
future when making public policy decisions. The method helps the decision-maker to
consider the range of plausible futures, to articulate preferred visions of the future,
to use what is learned during the scenario development process in the formal
decision-making process to foster exceptional leadership. It also helps to stimulate
creativity and to break from the conventional obsession with present and short-term
problems.
Therefore, one of the purposes and uses of scenarios is to help decision-makers
acquire knowledge and understanding to anticipate the context in which they have
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to act. However, for scenarios to be used effectively, the participants must be
convinced of the soundness, relevance and value of the process. This is essential as
the foundations on which scenarios are built, the structures that they use, and the
reasoning they employ, must stand up to highly critical examination. Only then there
is a chance that they will contribute to decisions and actions.

Who i s t hi s met hod appr opr i at e f or ?
Any public or private organisation that wishes to understand the emerging future
and its implications. Scenarios are and may be used by decision-makers to simulate
the impact of different decisions.

Who i s t ypi c al l y i nvol ved?
Some of the key decision makers as well as external experts and other who have
valuable perspectives:
Include different backgrounds that could provide useful insights to your
scenario building process (i.e. science and technology, social sciences,
environmental sciences, economics, demography, etc).
Include people from the outside: if you are running an exercise on the future
of an organisation bring in people from other organisations; if you are
building scenarios on a policy area you might want to involve people from
other policy areas or related fields.

The direct participation of the decision-makers implies that they truly understand,
own, and so more likely act on, the implications of the scenarios.
You can consider hiring a professional facilitator who will define how to run the
scenario building process and leads the entire operation.

Appr oach ( St ep- by- s t ep- gui de)
There are many different possible ways of developing scenarios. We suggest here
one possible approach that we could define as a 'walk through the process' divided
in six steps with two important elements. One element is the 'decision-focus' of the
scenarios, which means that the process begins and ends not with vision of the
future, but with agreement on the strategic decision which the scenarios should be
designed to illuminate. The second key element is the 'scenario logic' which
constitutes the core of the process.

Step 1: Identify the focal issue (The "setting" for the scenarios)
In general when embarking on a process of scenario development it is advisable to
start 'from the inside out'. This means starting with a specific decision or question,
then building out towards the environment. Scenarios are not an end in themselves;
rather they are means to help us make better strategic decisions. A narrow focus will
prevent the scenarios from drifting into broad generalisations about the future of
society or the global economy. When determining the focal issue it is important to
consider the appropriate time-horizon for the scenarios, because it will affect the
range of issues to be considered within the scenario development process. It is
important when deciding on the focal issue, to deal explicitly with the range of
uncertainties that might characterise the long-term future.
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In this step it is important to start thinking about the key factors that could play a
role. As a tip, you could start this step by asking the question: "What are the key
factors we would like to know about the future in order to improve the quality of our
decisions?"

Step 2: Identification and analysis of the drivers
The next step is to identify the key drivers that will influence the listed key forces at
macro and micro-level. Micro-environmental key forces are those that have a direct
influence on the issue you are dealing with. For example, if you are dealing with the
future of a specific manufacturing sector, micro drivers can be related to the sector
market trends, specific regulations on manufacturing, new technologies, etc.
Macro-environmental key forces are broader and possibly are global. They relate to
social, technological, political, economic and environmental forces that might have
an impact on the issue considered.

The aim is to start building a conceptual model of the relevant environment that
includes critical trends and forces and maps out the cause-and-effect relationship
among the forces. It will also be possible to identify what are the major trends and
uncertainties, which are the most important in determining the key decision factors
and which represent underlying or 'driving' forces for significant change in the
future.

At this stage it is possible to sort-out these forces by clustering them and by
analysing that not all the identified forces are equally important or equally uncertain.
This step may require some desk research in order to adequately define the driving
forces. Research may cover markets, understanding new technology, political
factors, economic forces, and so on. The aim is to spell out the main elements of the
driving forces by also identifying major trends and break in trends.

The list of the driving factors should include Social, Technological, Economic (macro),
Environmental, Political and Values (STEEPV).
These driving forces can be elicited in an extended scenario workshop with the
support of a facilitator.

Step 3: Rank by importance and uncertainties
The next step consists in the ranking of the driving forces on the basis of two criteria:
the degree of 'importance' of the focal issue identified in Step 1, and the degree of
'uncertainty' surrounding those factors and trends.

One suggestion is to use an impact/ uncertainty matrix with a simple 'High-Medium-
Low' scoring system. The aim is to identify the two or three factors or trends that are
the most important and the most uncertain.

As outcome of this sorting, it is then possible to focus the attention and the selection
of the scenario logics in the next step. Some examples of scenario building focussed
on:
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High importance/ low-uncertainties forces. These are the relative certainties
in the future for which current planning must be prepared.
High importance/ high uncertainties driving forces. These are the potential
shapers of different futures for which your longer-term planning should
prepare.

Step 4: Selecting scenario logics
The results of the ranking exercise of previous step help identifying the axes along
which the scenarios can be constructed, therefore find out the scenario logics. The
focus of attention should be on the 'high important/ low uncertainty' and on
the 'high important/ high uncertainty'quadrants of the matrix. Determining the axes
of the scenarios is the crucial step in the entire scenario-generating process. This is
also the step in which intuition, insight, and creativity play their greatest role. The
main goal (and challenge) is to end-up with just few scenarios that whose difference
make a difference for the decision-maker. If the scenarios have to be used as useful
learning tools the lessons they teach must be based on issues basic to the sources of
the focal decision. Basically, the scenario logics can be seen as organising dimension
around which the scenarios are structured. One trick is also to decide where, in the
story, to start the diverging alternative futures.

When you are determining how many scenarios you would like to develop, there is a
trick you might want to keep in mind: develop the minimum number of scenarios
needed to contain the 'area of uncertainty', usually just three or four.

Step 5: Fleshing out the scenarios
Develop a number of internally consistent story lines which project as much as
possible what learned through the process up to now.
The literature on scenario building suggests incorporating elements of both desirable
and undesirable futures within the different scenarios. Then there are five useful
criteria that can help you in fleshing out the scenarios:
1. Plausibility: The selected scenarios must be plausible, this means that they
must fall within the limits of what might conceivably happen.
2. Differentiation: they should be structurally different, meaning that they
should not be so close to one another that they become simply variations of
a base case.
3. Consistency: They must be internal consistent. The combination of logics in
a scenario must not have any built-in inconsistency that would undermine
the credibility of the scenario.
4. Decision making utility: Each scenario, and all scenarios as a set, should
contribute specific insights into the future that will allow on the decision
focus that was selected.
5. Challenge: the scenarios should challenge the organisation's conventional
wisdom about the future.

Using these criteria it is usually possible to quickly select the few scenarios that are
most worthy of development. Some possibilities may be eliminated because their
combinations of logics are thought to be implausible or inconsistent. Others can be
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dropped from consideration because they would not offer any significantly new
insights to the decision making.

Once the scenarios have been selected they have to be elaborated. There are many
ways to elaborate the description of scenarios, but there are three very important
features:
A highly descriptive title: short enough to memorable; descriptive enough to
be transmitting the essence of what is happening in the scenario.
Compelling 'story-lines': scenarios are narratives of how events might unfold
between now and the selected time-horizon, they should provide the
dynamics (logics) assigned to it. In simple terms the scenario should tell a
story that should be remarkable, convincing, logical, and plausible.
A table of comparative descriptions: This provides planners and decision
makers with a sort of 'line item' description that details what might happen
to each key trend or factor in each scenario. This implies to go back to the list
of key drivers developed in Step 2 and to include them. Basically the table
provides the back-up material that gives the scenarios their nuances and
texture.

Charts, graphs, and other visual material will help bringing the scenarios to life. In
summary, it is important that the elaboration of the scenarios provides as much as is
needed to help executives to make their decisions.

Other useful tips include:
Avoid probabilities or most likely plots & do not assign probabilities to the
scenarios: Some of the most surprising scenarios maybe the ones your
organisation learns the most from. Furthermore, it is better not to categorise
scenarios as either the most or least likely. Keep the mind open to all
possibilities. Scenarios are meant to illuminate different futures, complete
with negative and positive dimensions. Choosing only one scenario as a goal
may blind other developments and possibilities.
Budget sufficient resources for communicating the scenarios and their
operational implications: Scenarios planning will simply fail; if its product is
merely a report.

Step 6: Implications of scenarios
This is the stage at which we 'close the loop' linking back to the decision focus of the
first step, and starting to turn the scenarios into strategy. In this step the scenarios
are analysed in details and we ask the fundamental questions:
What are the strategic implications of the scenarios for the particular
decision we selected at the outset of this process?
What options do the scenarios suggest?

Having said that, the development of an effective, robust strategy requires far more
than having a set of scenarios. Other elements are, for example, a strategic vision,
goals and objectives, competitive analysis, assessment of core competencies etc.
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However, this final step can develop some initial and valuable strategic insights.
Some productive approaches are:

Opportunities/ threats assessment: examine the scenarios in detail to determine
the opportunities and threats that each poses for the organisation that
commissioned them. Two questions can guide phase:
Which opportunities and threats are common to all (or nearly all) the
scenarios? These are ones on which the strategic thinking should be
particularly focused.
How well prepared are you to seize those opportunities and minimise
threats? These answers provide an initial assessment of the core
competencies needed to succeed in the scenarios, and of the gaps in the
current organisation.

Bringing together the answers to these questions will help defining some strategy
options (not an integrated strategy) that deserve more disciplined analysis.
Using scenarios to strategise: This approach is rather sophisticated and difficult. It
develops strategy within the framework of the scenarios. It is a highly intuitive
process and as one guideline the following questions should be addressed:
What are the key elements of strategy stemming from the scenarios?
What would be the best option for each element in each strategy? For
example what would be the technologies needed in Scenario A?
Which options seems to be the most resilient/ robust across the range of
scenarios?
Is it possible to integrate these resilient options into an overall coherent
strategy?

This approach makes optimal use of the scenarios in strategy development, provides
the widest range of choices, and encourages decision makers to make a careful
evaluation of these options in the context of greatly different assumptions about the
future.

In order to identify implications from scenarios a way forward is to set aside time to
look carefully and analyse each scenario. This could be done within a workshop with
the participation of the project team. By discussing each scenario at once it is
possible to concentrate on the details of each scenario. It is also possible at the end
of this process to identify commonalities and differences across the implications. In
order to focus the thinking it is possible to follow a structure that includes the
following elements:
1. Review the scenario description
2. Assess implications of the scenarios
3. Identify the best strategy opportunities and threats
4. Develop a portfolio of strategic priorities

Scenarios have been used widely as a way of developing recommendations for public
policy. They demonstrated their usefulness by providing a range of possible plausible
futures, which effects of actions can be made explicit in a non-threatening way.
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Scenarios can be used as a tool to create a framework for a shared vision of the
future, to promote discussion and build consensus.

Res our c es
It is a demanding methodology which can be costly in terms of executive time.
It requires a broad base of strategic intelligence (see Environmental Scanning &
Watching) and requires participants to invest considerable effort, thought,
and creativity.
In terms of skills having some familiarity with the scenario technique is very valuable.

Out put s
A set of plausible, internally consistent and coherent scenarios which are focused on
the most relevant issues and have some decision-making utility.

Pr os and cons
Within the description we have tried to provide you with some tips so to make your
scenarios successful. Now we would like to highlight some advantages and
drawbacks of this method.

Scenario building is
Superior to many other methods where number of factors to be considered
and the degree of uncertainty are high;
Stimulates strategic thinking, creativity, communication and organisational
agility
A tool for allowing individuals and organizations to 'create their own future'.

Always in terms of advantages we can sat that a well-crafted (normative) scenario
allows an organization to become proactive, working specifically for their desired
future, rather than sitting by and passively waiting for what ever the world delivers.

On the other hand the following drawbacks need to be highlighted:
It is difficult to draw up credible and useful scenarios
Users might find it difficult to deal with multiple visions of plausible futures
which is why in developing scenarios typically only three to five scenarios are
outlined. This may run the risk of limiting the range of approaches and
dynamics which we can consider so it is always useful to have some time
devoted to examining wild cards and the like.
Scenarios can be mistaken for predictions or forecasts of the future. This
misconception sometimes hinders the adoption and use of scenario building.
It is not the complete answer to futures thinking. Environmental scanning
and monitoring are needed to round out the toolkit of external
environmental analysis.

Finally the articulation and presentation of scenarios depends very much upon the
intended users. Some scenarios stay at the level of broad generalities lacking
supporting analysis and quantification, these are not very operational, and are thus
not found useful by policymakers though they may be appreciated as giving a taste
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of the future by the general public. Some scenarios are presented in extremely
technical and formalised ways, and may be hard for ordinary readers to assimilate.

Var i at i ons
Scenario building can be carried out following different approaches. This section
describes the difference between normative and explorative scenarios and offers
some possible variations on how scenarios could be conducted.
Normative scenarios :
Starts with preliminary view of a possible future and look backwards
to see if and how this might or might not grow out from the present
Exploratory scenarios :
Starts with the present as starting points and move forward to the
future by asking what if questions about implications of possible
events outside familiar trends
Use data about the past and present bearing in mind the possible,
probable and desirable
Inductive method (or bottom-up): the approach builds step-by-step on the
data available and allows the structure of the scenarios to emerge by itself.
The overall framework is not imposed, the story lines grow out of the step-
by-step combining of the data.
Deductive method (or top-down): the analyst attempts to infer an overall
framework to start with, after which pieces of data are fitted into the
framework wherever the fit most naturally (this is the approach described in
the approach step-by-step guide of this page).

The inductive and deductive methods are the preferred approaches in situations
where it is clear that scenario building is the tool to deal with the specific decision
and/or question that has to be tackled, or where scenario building is already
embedded in the thinking style of an organisation. However, if a client may still have
to be convinced that scenario building could offer an improvement over traditional
forecasting techniques, the incremental method could be implemented. In general,
in these situations the client is attached to what he/ she reckon as 'official future'.
The incremental approach uses the 'official future' as starting point. The scenario
building team tries to identify flaws in the official future, and to develop alternatives
that convincingly challenge the official future. Or the team will develop scenarios as
excursions from this.

Compl ement ar y met hods
Environmental scanning and monitoring and SWOT analysis can be used to obtain
input for the scenarios.
The narrative statements often included in a scenario can be given quantitative
power if they are derived systematically. Simulation modelling serves this purpose.
Roadmapping can be used to test the consistence and plausibility of the scenarios.

Checkl i s t
Under construction

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Ref er enc es
Gill Ringland: Scenario Planning
Kees van der Heijden: Scenarios - The art of strategic conversation
Liam Fahey, Robert M. Randall: Learning from the Future Competitive
Foresight scenarios
Peter Schwartz: The Art of the Long View: Planning for the Future in an
Uncertain World
Millennium Project