Scenarios: a tool for business decisions

The word “scenario” has its roots in the theatre: originally, a scenario meant the functional outline of a play. In a business context, scenarios are often associated with Shell, one of the first companies in the early 1970s to model its operations using alternative views of the future. Just before the oil giant, scenario planning was applied by the RAND Corporation in the fifties.

Scenarios are among the most widely used methods in strategy work. Ian Miles defines a scenario as “a chain of events or processes in which the current state of the world, nation or system develops into some future state”. Typically, scenarios result in a vision of the future: a description of a moment in time that may be desired or undesired, probable or improbable.

From complex process to everyday tool

In designing a business strategy, scenarios expand thinking. What might be possible if the impossible happened? In which direction should business be steered?

Thorough scenario work is usually preceded by an in-depth look at markets and competitors, the company’s strengths and development areas, customer needs, and future trends. Based on this, business cases are modelled and alternative futures described. Many tools exist for this, such as Sitra’s toolkit for future-makers. Customer insight is almost always an important part of scenario work.

A leaner approach to scenarios may be enough to support everyday decision-making:

• Should we invest in personal customer service or focus on developing digital channels?
• Do we allow the customer to customise options, or do we offer a tightly packaged product?

Although scenarios rarely unfold exactly as imagined, they open up new thinking, force choices to be justified, and strengthen the organisation’s change capability.

Why use scenarios in decision-making?

Scenarios support decision-making, especially in uncertain times.

1. Better decisions in uncertainty

Scenario thinking increases strategic flexibility and helps make better decisions , especially in rapidly changing times. Scenarios allow for broader perspectives and more thought-through decisions.

2. Fewer biases

Scenarios reduce framing bias and improve decision quality compared to other strategic tools.

3. Flexibility and creativity in thinking

Scenarios encourage analytical thinking by introducing alternatives. Scenario work adds intuition to decision-making, which can lead to more varied and creative choices, especially in uncertain situations.