Scenario Planning That Changes a Decision: How Practitioners Do It

Six beautiful scenarios, and nobody knew what to do

Pierre Wack, who developed Shell's system of scenario planning with Edward Newland, once sat through a well-known futurist's presentation of six scenarios. Asked what he thought, Wack said, “It was beautifully written, if complex.” Pressed, he called it “impenetrable” and added, “The managers who hear it won't know what to do with it.” The futurist's reply: “It is up to the managers to know what they should do” ².

Wack thought that reply was the whole problem. The key failure of scenario planning, he wrote, is that “the interface of scenarios and decision makers is ignored or neglected” ². The stories get written. The decision never changes.

Scenario planning is building a small set of plausible, internally consistent stories about how the outside world could unfold, then testing a strategy or decision against each one. Paul Schoemaker described it as “a disciplined method for imagining possible futures,” built by first identifying basic trends and uncertainties ⁴. For the framework itself, see scenario planning.

The thesis of this page: scenario planning pays only when it is built around a decision and changes what the people making it believe. A set of futures that changes no choice is an expensive report, however good the stories.

A scenario is a rehearsal for a decision, not a forecast of the world.

What scenarios are for

The people who built the method at Shell were explicit that scenarios are not predictions. Angela Wilkinson and Roland Kupers, who interviewed almost every surviving veteran of Shell's scenario team, summarize the practice this way: scenarios are stories, not predictions, designed to break the habit of assuming the future will look much like the present; they must be plausible rather than probable; and while they are always paired with numbers, they are never generated by a model ³.

Wack put the target more sharply. After the first rounds, his team stopped trying to produce a good description of the future and aimed instead at the mental models of Shell's executives, which he called their “microcosms.” Unless the scenarios changed the picture of reality held by critical decision makers, he wrote, they “would be like water on a stone” ¹.

That gives scenario work a different test from forecasting. A forecast is judged by whether it came true. A scenario set is judged by whether, when the world moved, the people deciding had already thought it through, and moved faster because of it.

Wack also drew a line between two kinds of scenarios. First-generation scenarios merely quantify alternative outcomes of obvious uncertainties; his example was an oil price of $20 or $40 a barrel in 1995. Such scenarios, he wrote, are not helpful to decision makers ¹. Decision scenarios go further: they sort what is already determined from what is truly uncertain, and they are designed around the choices a management team actually faces ¹².

The 1973 story, and what it does and doesn't prove

Every scenario workshop seems to open with the same story: Shell foresaw the 1973 oil crisis. The introduction to Wack's own 1985 article says Shell's management was prepared for “the eventuality” of the 1973 oil crisis, if not its timing ¹. Wack describes how, while preparing the 1973 scenarios, his team came to see a major disruption in oil supply as predetermined, and made that disruption the surprise-free scenario ¹. Wilkinson and Kupers confirm that when the crisis hit in October 1973, Shell's committee of managing directors had already considered a comparable scenario ³.

Now the caution, from the same Shell-insider history. “We have no solid examples of Shell's having anticipated future developments better than other companies,” Wilkinson and Kupers write, “the mythology around anticipation of the 1970s oil crises notwithstanding” ³. Asked whether the practice created direct business value, their answer is yes for focused scenarios and only indirectly for global ones ³. The origin story is also less tidy than the legend: credit for scenario planning often goes to Herman Kahn in the United States, while a form of it emerged at the same time in France ³.

So sell scenario work on what the evidence supports. It prepares a team to recognize a shift and argue about it calmly. It does not make a company clairvoyant, and a team that promises its executives a 1973 moment is setting up its own cancellation.

How practitioners build a scenario set

1. 1. Start from the decision and its horizonName the choice the scenarios must inform (a plant, an entry, a portfolio shift) and how long it takes to pay back. Interview the people who will make it: what keeps them up at night, what they assume, what would surprise them. Shell made this standard practice; one scenario head spent his first months conducting extensive one-on-one interviews with executives ³.
2. 2. List the driving forcesCollect the external forces that could move the outcome of the decision. A PESTLE worksheet is a good input.
3. 3. Separate the predetermined from the uncertainPredetermined elements are events already under way whose consequences have not yet unfolded; Wack's image is rain that has fallen upstream before the river rises downstream ¹. They appear in every scenario. Only the genuine uncertainties create the differences between scenarios.
4. 4. Choose the few uncertainties that would split the decisionRank uncertainties by how much they would change the best choice, not by how interesting they are. Two that are independent of each other give you a simple frame.
5. 5. Write the storiesTwo to four, each internally consistent, each with a memorable name, each told as a sequence of events from today to the horizon. Include one close to the organization's current view, so people recognize their own outlook in the set ¹.
6. 6. Quantify after the narrativePut numbers on each story for the variables your decision depends on. Shell's scenarios were never generated from a model; numbers were added to check internal consistency and illustrate outcomes ³.
7. 7. Test the options against every scenarioScore each strategic option in each future, then pick robust moves, hedges, options to buy now, and the signposts that will tell you which future is arriving.

Two judgment calls deserve more than a line.

How many scenarios. Shell's early sets ran to six or seven. By the mid-1970s three were common, but three tempted managers to pick the “middle way” as a best guess. From 1989, two became the norm at Shell, which helped people use and remember them ³. Two or four, never three, is a useful rule; four if you build from two independent uncertainties.

The 2×2. The familiar matrix of two uncertainties is often credited to Shell, but Wilkinson and Kupers say such deductive methods were never core to the Shell practice; they became associated with it because Peter Schwartz, who ran Shell's team in the early 1980s, later promoted them at Global Business Network ³. The matrix is a fine scaffold. Treat it as a way to generate stories, not as the analysis.

A worked example

The company below is invented, and so are its numbers. The point is the path from uncertainty to decision.

Option B is robust: never the best, never a disaster. The team chooses it, adds a hedge (a battery supply agreement with volume flexibility) and names three signposts with owners: city diesel-restriction votes in its top ten markets, quoted battery pack prices in its supplier tenders, and the electric share of fleet tenders it wins. If two of three move toward Green Wall by 2027, it accelerates to option A. That trigger is the real output of the work.

From stories to a decision

The step most teams skip is the last one. They present four futures and stop, which is exactly Wack's futurist. The test grid in the example is what crosses the interface: it puts the organization's own options into each future and forces a judgment.

Wack wrote that decision scenarios “deny much more than they affirm” ²: they rule out impossible developments, which narrows the range a team has to prepare for. The grid does the same for options. An option that is a disaster in a plausible scenario needs a hedge or a very good argument. The signposts go into the quarterly strategy review, so somebody looks at them on a schedule rather than when the news is already on the front page. Signposts can also fill the assumptions register in a strategic plan.

Why scenario work fails at scale

The method's own history lists its failure modes.

• The rain dance. In his retirement presentations to Shell's top committee, Wack borrowed Russell Ackoff's phrase “corporate rain dance” for the annual planning ritual: it “has no impact whatsoever on the weather, but everything that comes afterwards is nicely linked to and explained by this rain dance” ³. Scenarios bolted onto the annual cycle become part of the dance. Wack believed scenarios let an organization see what it might otherwise overlook precisely because they follow a rhythm distinct from the annual strategy cycle ³.
• Ignored relevance. In the 1980s, Shell's top management largely ignored its scenarios; one explanation offered is that the team had not listened closely enough to executives' concerns ³. Scenarios that are challenging but irrelevant to the decision on the table go unheard.
• Model lock-in. Shell's 2007 scenarios came with a large world energy model. In the following few years at least three major events failed to fit it: the 2008 financial crisis, the U.S. shale-gas boom, and Germany's faster move to renewables after Fukushima ³. When the model becomes the scenario, the scenario inherits the model's blind spots.
• Stale stories. Scenarios have a limited shelf life; as they become familiar, people start thinking inside them ³. Retire a set once its signposts have resolved.

A senior strategist running this across a portfolio should therefore keep two kinds of work apart: an occasional set of global or industry scenarios that refreshes the leadership team's view of the world, and short, focused scenario sets for specific large decisions, where the evidence for direct value is stronger ³.

The case against scenario planning

The honest objection comes from Wack himself. Top executives, he observed, often find scenarios unhelpful: they rose on their judgment, and a scenario set confronts them with raw uncertainties on which they cannot exercise it ². Executives want a number to plan against. Scenario work takes weeks of senior time and hands back four answers instead of one. And it is hard to prove it worked, because nobody observes the futures that did not happen.

Most of that is right, and it is an argument about design, not about the idea. Scenarios that leave executives with nothing to judge have failed at the interface, which is the failure this page began with. Built around a decision, they give executives exactly what they want to exercise: a choice among options, tested in advance, with triggers for changing course. The decision-maker still decides. The scenarios just make sure the decision has been rehearsed in more than one future.

A light version costs little: one decision, two uncertainties, four one-page stories, a test grid and three signposts, done in a few workshops. If that cannot change the decision, a six-month global program will not either. For running the room in which the final choice is made, see getting a room to decide.

Before you present the scenarios

• The decision and its horizon are written on the first page.
• Predetermined elements appear in every scenario.
• The scenarios differ only on genuine uncertainties.
• There are two or four scenarios, not three, and none is labeled most likely.
• One scenario is close enough to the current view that people recognize it.
• Each option has been scored in every scenario.
• The output names robust moves, hedges, options and signposts.
• Each signpost has an owner, a threshold and a review date.

Monday morning: take the biggest irreversible decision on your team's list this year and ask which two uncertainties would most change the answer. If the room cannot agree on two, that disagreement is the first finding.

The stories are the visible part. The work is the interface: options tested against futures, and signposts somebody watches. When the world moves, a team that did that work recognizes the scenario it is in, and already knows what it agreed to do.

Questions

What is scenario planning?

Scenario planning is building a small set of plausible, internally consistent stories about how the external environment could unfold, then testing a strategy or decision against each. Unlike a forecast, it does not try to predict which future will happen. Its value lies in preparing decision makers to recognize and respond to change, and in choosing moves that hold up across several futures.

How many scenarios should you build?

Usually two or four. Shell's early sets had six or seven, which proved hard to use; three scenarios tempted managers to treat the middle one as a best guess; and from 1989 Shell's global sets settled on two. Four works well when the scenarios come from two independent uncertainties. More than four tends to blur together.

Did Shell predict the 1973 oil crisis with scenario planning?

Shell's scenario team had made a supply disruption the surprise-free case in its 1973 scenarios, and Shell's top committee had considered a comparable scenario before the October 1973 crisis. But Shell insiders who wrote the practice's history say there are no solid examples of Shell anticipating developments better than other companies, and call the 1970s story partly mythology.

What is the difference between scenario planning and forecasting?

A forecast gives one expected outcome and is judged by whether it comes true. Scenario planning gives several plausible outcomes and is judged by whether it improved decisions: whether the options chosen hold up across the futures, and whether the organization saw signposts early. Forecasts work well when the world is stable; scenarios are for uncertainties that could change the decision.

What are signposts in scenario planning?

Signposts are observable signals, chosen in advance, that show which scenario is unfolding: a regulatory vote, a price threshold, a share of customer tenders. Each should have an owner, a threshold and a review date, and a pre-agreed action if it is crossed. They turn a set of stories into a monitoring plan tied to specific decisions.

Where to go next

• PESTEL Analysis Template: The Worksheet That Asks “So What?”
• Getting a Room to Decide: A Decision-Making Framework
• Scenario Planning: Framework & How to Apply It
• Scenario Analysis Strategy
• Real Options
• Forecasting vs. Backcasting