Scenario Planning - History of Use By Academic and Commercial Organizations

History of Use By Academic and Commercial Organizations

Most authors attribute the introduction of scenario planning to Herman Kahn through his work for the US Military in the 1950s at the RAND corporation where he developed a technique of describing the future in stories as if written by people in the future. He adopted the term "scenarios" to describe these stories. In 1961 he founded the Hudson Institute where he expanded his scenario work to social forecasting and public policy One of his most controversial uses of scenarios was to suggest that a nuclear war could be won. Though Kahn is often cited as the father of scenario planning, at the same time Kahn was developing his methods at RAND, Gaston Berger was developing similar methods at the Centre d’Etudes Prospectives which he founded in France. His method, which he named 'La Prospective', was to develop normative scenarios of the future which were to be used as a guide in formulating public policy. During the mid 1960s various authors from the French and American institutions began to publish scenario planning concepts such as 'La Prospective' by Berger in 1964 and 'The Next Thirty-Three Years' by Kahn and Wiener in 1967 By the 1970s scenario planning was in full swing with a number of institutions now established to provide support to business including the Hudson Foundation, the Stanford Research Institute (now SRI International), and the SEMA Metra Consulting Group in France. Several large companies also began to embrace scenario planning including Dutch Royal Shell and General Electric.

Possibly as a result of these very sophisticated approaches, and of the difficult techniques they employed (which usually demanded the resources of a central planning staff), scenarios earned a reputation for difficulty (and cost) in use. Even so, the theoretical importance of the use of alternative scenarios, to help address the uncertainty implicit in long-range forecasts, was dramatically underlined by the widespread confusion which followed the Oil Shock of 1973. As a result many of the larger organizations started to use the technique in one form or another. By 1983 Diffenbach reported that 'alternate scenarios' were the third most popular technique for long-range forecasting - used by 68% of the large organizations he surveyed.

Practical development of scenario forecasting, to guide strategy rather than for the more limited academic uses which had previously been the case, was started by Pierre Wack in 1971 at the Royal Dutch Shell group of companies - and it, too, was given impetus by the Oil Shock two years later. Shell has, since that time, led the commercial world in the use of scenarios - and in the development of more practical techniques to support these. Indeed, as - in common with most forms of long-range forecasting - the use of scenarios has (during the depressed trading conditions of the last decade) reduced to only a handful of private-sector organisations, Shell remains almost alone amongst them in keeping the technique at the forefront of forecasting.

There has only been anecdotal evidence offered in support of the value of scenarios, even as aids to forecasting; and most of this has come from one company - Shell. In addition, with so few organisations making consistent use of them - and with the timescales involved reaching into decades - it is unlikely that any definitive supporting evidenced will be forthcoming in the foreseeable future. For the same reasons, though, a lack of such proof applies to almost all long-range planning techniques. In the absence of proof, but taking account of Shell's well documented experiences of using it over several decades (where, in the 1990s, its then CEO ascribed its success to its use of such scenarios), can be significant benefit to be obtained from extending the horizons of managers' long-range forecasting in the way that the use of scenarios uniquely does.