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SCENARIO DEVELOPMENT STEP 2

OVERVIEW
Once we have completed the Rich Picture (RP) and the
Business Idea (BI) we have made some sense of the
current situation and the uncertainties surrounding it. The
next step is to speculate and conjecture about how these
uncertainties may unfold into the future and the forces
that can plausibly influence this unfolding. A scenario
reflects a particular pattern of unfolding leading to a
plausible future state. This is reflected in Figure 1.
Conjecture: A Scenario Framework
?
Current State
Review the RP and BI. Use the Brainwriting 6-3-5
technique to generate a range of different uncertainties
felt by your client that surrounds her current situation.
Discuss these in some detail and select 8-10 of the more
important ones. Check their wording and write them on
Post-Its -–refer to these as UPs. For each UP generate two
or three likely outcomes and also write these on Post-Its –
refer to these as OPs. Note UPs from which OPs come on
the back of the OPs. Be clear when writing the UPs and
OPs on Post-It. See Figure 3. Put the OPs aside for the
moment, they will be used in the scenario building
process
OP1A
Acce le rate s

UP1
Natural gas OP1B
development Stagnate s

Construct Scenarios that can

unfold into plausible futures OP1C
states
Decelerates

FIGURE 3. UNCERTAINTIES AND OUTCOMES 'POST-IT'S'

FIGURE 1. THE IDEA OF SCENARIOS

STEP 3
PHASE 1. DEVELOPING A SCENARIO Arrange the UPs in a horizontal line in the centre of the
Scenario Structuring Space. Arrange in order of increasing
FRAMEWORK
impact on the future of the clients business – from Lo to
Hi impact. See Figure 4. If you have much more than 15
STEP 1
UPs, cluster them first using the Affinity Diagram ending
Tape three flip chart pages together. Draw two axes and up with about 7 clusters. Use the new cluster titles in the
label them ‘Level of Predictability” and “Level of Impact” process
as shown in Figure 2. Hi

Hi
Level of Predictability
Level of Predictability

UP1 UP2 UP3 UP4 UP5 UP6 UP7 UP8 UP9

Increasing Uncertainty

Lo
Lo
Level of Impact
Level of Impact Lo Hi
Lo Hi

FIGURE 4. FIGURE 4 UPS LINED UP IN ORDER OF INCREASING

FIGURE 2. SCENARIO FRAMEWORK UNCERTAINTY

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STEP 4 PHASE 2 SCENARIO BUILDING

In this step we have to consider how predictable the likely
In this phase each Task Team will be responsible for
outcomes of these uncertainties are If an UP is very
constructing a scenario.
predictable, move it up vertically in the Scenario
Structuring Space, If its predictability is low, move it down
vertically. Continue re-arranging the other UPs vertically, STEP 1
up or down, according to their predictability. See Figure 5. Divide the OPs generated in Phase 1 among the 4
Hi UP4
scenarios.

UP1
Level of Predictability

STEP 2
UP6
Structure the OPs allocated to your particular strategy into
UP5 UP7
an Interrelationship Digraph. Be careful to word your
UP3 trigger question appropriately – e.g. “In the context of the
current state unfolding into the future state described by
UP2 UP9
the scenario, is there a relationship between OP2A and
Lo UP8
OP6B? If so would OP2A drive OP6B, or would OP6B drive
Level of Impact
Lo Hi OP2A?” Figure 7 illustrates a typical result. OP2A and
FIGURE 5. RE-ARRANGING THE UPS ACCORDING TO THEIR LIKELY OP5A are the outcomes and OP6B and OP3B are the
IMPACT drivers.

Future State
STEP 5 as described by scenario
Select the two UPs in the bottom right-hand corner of the
Scenario Structuring Space – i.e. the two that are least OP2A OP5A

predictable and have the highest impact. For each of

these uncertainties identify the two different but possible
outcomes A and B. These provide the dimensions for the
Scenario Matrix in Figure 6. The nature of each scenario is OP9B

determined by its associated outcomes. For example (see OP4C OP7A

Figure 6) Scenario 1 is determined by outcomes 9A and
8A, Scenario 4 by outcomes 9B and 8B. Select a name for
each scenario that reflects it nature. Try not to name the
OP8B
scenarios in ways that are judgmental – i.e. good, bad. OP1A
OP5C

U NCERTAINTY 9
Outcome
O UTCOME 9B OP3B
8A OP6B
Uncertaint Outcome Scenario
y8 8A S CENARIO 2
1 Current State
as described by RP and BI

FIGURE 6. THE SCENARIO MATRIX

FIGURE 7. OPS STRUCTURED IN AN INTERRELATIONSHIP DIGRAPH
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STEP 3
Look for feedback loops in the structure (for example see
the feedback loop - OP5C, OP9B and OP4A in Figures 7
and 8). Add further links that may produce plausible
feedback loops (consider OPs for which you could not
easily decide which was driving which in Step 2). Add new
outcomes until a reasonable story emerges that plausibly
describe the unfolding of the future scenario states. Don’t
go overboard – two to four feedback loops are adequate.

Future State STEP 4

as described by scenario
Think about what additional research could add new
OP2A OP5A understanding, knowledge and novelty to your scenarios.
Present the scenario to “remarkable people”. Ask them:
New
OP
 What they see as driving the situation?
OP9B

OP4C OP7A
 What are other ways of looking at the situation?

 What underlying assumptions need to be questioned?

OP8B  What needs to seen that is now not obvious?

OP1A
OP5C
 What is an appropriate level of detail for looking at
the situation

OP3B Stay open minded during the interview and make notes.
OP6B

Individuals articulate new insights gained from the

Current State interview.
as described by RP and BI

Integrate these into your scenario structure

FIGURE 8. A TYPICAL SCENARIO STRUCTURE

More Examples… STEP 5

Finalize your scenario structure and write up in story form

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ANOTHER TYPE OF SCENARIO MATRIX

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but to engage in an iterative process of adjustment and

SCENARIOS AND THE BUSINESS IDEA
The prime question to be addressed is whether the
organization is well equipped for the futures we can see
coming. The way this is achieved is by considering the
Business Idea, the characterization of the organization,
against the scenarios, the characterization of the future
business environment, to establish the degree of fit. This
is what we compared earlier to the windtunnel where a
model is subjected to tests to assess its strengths and
weaknesses. The purpose is not just to accept or reject
improvement, until a model has been developed which is
sufficiently robust to deal with the whole range of
environments that might develop. This leads to the
fundamental rule of scenario planning: Once we have
decided on the set of scenarios of the future that are
considered relevant to our situation, each scenario is
treated as equally plausible. This thinking process is
described in this chapter.

Figure 9 The Fit Between the Environment and the Business

CONSIDERING STRATEGIC FIT Idea
The analytical task is to “walk” the Business Idea mentally
through the various scenarios, to study how it would Understanding the Understanding the
Environment Firm
stand up if any of these futures were to materialize. As we (Scenarios) (Business Idea)
have seen the Business Idea contains a limited number of
key factors and Distinctive Competencies which are or will
be brought together to meet a societal need and create
Is this the right firm for these
value in a customer system. The business needs to apply future environments?
its system of competencies to the provision of goods and
services which the customer values. This ability to
produce value for the customer is what we call an
“overlap”. This overlap will produce a surplus if the value If not: Address competencies
If so: Address business choices
is greater than the cost incurred in producing the
transaction. In this case the supplier will seek to
appropriate a portion of the value thus created. While
going through the scenarios one after the other the Having gone through all scenarios in this thinking mode, a
analysis addresses the following questions: judgement has to be made on whether the answers are
positive enough to instill confidence in the future strength
• Will the customer value system overlap
of the formula. The answer may come out positive or
sufficiently with the competence system
negative. Depending on this outcome strategic attention
envisaged to create significant new and surplus
moves in a different direction.
value?
If the fit is strong the organization will want to continue
• Will the organization be able to appropriate
and expand by exploiting the Business Idea. In this case
enough of the surplus for its own development.
the strategic questions concentrate on finding new areas
Will its competence system be capable of being
where the competence system can be exploited. This can
defended against competitive emulation?
take two forms:
While going through the scenarios events unfold, and with
• The offering, which constitutes the interface with
each of these the same questions are addressed, over and
the customer, stands and the organization looks
over again: how would this influence (1) the customer
for new markets or market segments where
value creation effect and (2) the defensibility of the
potential customer requirements make it
competence system?
possible for this to be exploited.

5

• The organization looks for new areas
where the competence system can be made to
create customer value.
In both cases the competence system stands as the basis
of the strategy.
Thinking then concentrates on options in the portfolio of
businesses.
Strategy development revolves around portfolio options.
However, if the confrontation of the Business Idea with
the scenarios leads to less satisfactory results the strategic
attention moves to the question of how to change and
improve the competence system. In this case strategic
thinking focuses on the development of new capability
options.
In the process of testing a Business Idea in a set of
scenario strategists often develop a value judgement for
the scenarios in the set. This is mostly related to the
degree of change that a scenario requires in the Business
Idea. If little change is required the scenario is considered
a “good future”, in which growth is possible on the basis
of exploitation of existing strengths. lithe existing formula
does not do so well, the particular scenario is seen as less
friendly. The narrower the business definition the more
likely it is that certain futures are seen as uncomfortable.
Companies who tend to define themselves in terms of a
specific product often suffer from this. A wide definition
of the “organizational self’ will make the scenarios appear
more neutral. Companies defining themselves in terms of
general-purpose competencies will have fewer difficulties.
Underlying these value judgements are a resistance to
change. If change is not judged negatively, but rather seen
as the raw material of business success, then there are
any good or bad futures. As we saw earlier, the world of
business success is a relative world, in which every
successful idea will be copied by competitors. It is a
dynamic situation, a race, in which everyone who slows
down will be overtaken. The winners are those who
develop new business concepts, new Business Ideas.
Companies who see themselves in the business of change
will not find any scenarios good or bad but will distinguish
them by the different challenges they offer.
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BUILDING FOR THE FUTURE
The Business Idea generally needs to evolve with changes
in the business environment. Management needs to
develop a view on what new Distinctive Competencies will
be called for in the future, and they need to work towards
getting these in place. This is best achieved by developing
a coherent view of a future Business Idea that will be
robust against the various futures the scenarios indicate
(this is sometimes called a Strategic Vision, i.e. an as yet
unrealized Business Idea concept one aims for). The
challenge is to decide how to develop the Business Idea
for the future.
Uniqueness as such cannot be bought, it needs to be
invented and built. In principle there are two ways in
which a Business Idea can be moved forward:
• By entrepreneurial invention. This means that
new customer value potential is discovered
and/or a new and more efficient way of creating
already established customer value is invented.
• By building on the existing Distinctive
Competencies, using old competencies to build
new ones, which are better adapted to the new
business circumstances envisaged (leveraging).
A plan to build new Distinctive Competencies for the
future needs to be based on leveraging of the Distinctive
Competencies the company has at the present time. The
task of building the Business Idea for the future has the
following characteristics:
• It needs to respond to future customer values.
• It needs to be a new unique combination of
competencies, which can be exploited in a
positive feedback loop.
• It needs to be created on the basis of the current
Business Idea, leveraging existing Distinctive
Competencies.
The ability to invent a new combination within these
constraints constitutes the entrepreneurial task facing any
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management team interested in creating long-term profit

potential for the company.

Building for the future means leveraging distinctive

competencies that are present today. Most managers
find this intuitive. However, what is often overlooked is
that it can go terribly wrong if not considered in the
context of a total Business Idea. For example building up
the competencies for the future may involve acquiring
another firm with complementary competencies. In
almost all acquisition cases there is some expectation of
synergy resulting from the new combination. However,
the list of unsuccessful diversifications is very long.

So why does acquisition go wrong so often? The oil

companies discovered too late that exploration was not
the “primary game” in metals mining. EDS discovered that
distinctiveness in management consulting requires more
than technology and entrepreneurialism. The argument
here is that leveraging just one Distinctive Competency is
not enough. A successful company needs a strong overall
Business Idea. Success can only be expected from
diversification if the Business Ideas of the existing
business and the new business activity are fully
understood and merged. Companies who intend to
diversify need to be skilful in articulating and
understanding Business Ideas.

ORGANISATIONAL ASPECTS
Developing the Business Idea for the future (the “Strategic
Vision”) in the scenario “windtunnel” is a prime
managerial responsibility. But it is not the whole story.
The Strategic Vision also needs to be shared by all parties
with the power (formal or informal) to act. In the merger
example discussed, the existence of a clear and detailed
implementation plan to which all subscribe could be a
manifestation of such shared understanding. The
windtunnelling process must include all actors. The
thinking process must be institutional.