Strategic Foresight and Scenario Planning

Chapter 1
Foresighting
The Foresight concept is defined by 3 different definitions that
complement each other. These definitions are:

➔ Richard Slaughter (2002): “The ability to create and maintain a high-

quality, coherent, and functional forward view and to use the insights
arising in organisationally-useful ways, for example, to detect adverse
conditions, guide policy, and shape strategy and to explore new
markets, products and services”
➔ European Commission-JRC–IPTS: “A systematic, participatory, future-
intelligence-gathering and medium-to-long-term vision-building
process aimed at present-day decisions and mobilising joint actions”.
➔ Ruud van der Helm (2007): “We speak of foresight or foresighting when
referring to the general concept of all efforts to organize anticipation
within a society, network or organization.”

Individual definition: Foresight is, in my understanding, the ability to set and

try to predict scenarios that can affect a society, network or organization, justified
by the factors that were found based on an extensive research.

When foresighting, we have to consider uncertainties that are going to be

the scoping for the scenario planning. Therefore, when we are coming to the
future, the uncertainties must not be only but at least plausible.

The future is defined as a cone of possibilities that gets broader and broader
and more diffuse. There are possibilities associated with the present and we do
not have all the information about those possibilities so, to foresight, uncertainty
is a raw material to set the different scenarios.
Forecasting VS Scenario Planning
Forecasting is the action of predict, in a short-term period, scenarios or
action that might take place and that can affect an environment. Most of the
forecast are related with Operations, based on the quantitative focus, and answer
to question with a low level of uncertainty as: “What to manufacture? By using
each model?”

Scenario Planning is the action of trying to predict, in a long-term period,

scenarios or action that might affect an environment. In scenario planning, the
scenario thinking is more focused on a strategic approach, increasing this way the
uncertainties that can affect the different scenarios.
→ Foresight can and should use forecasting but cannot be mistaken with
Forecasting, once fore casting is focused in one future based on assumptions and
foresighting assumes different futures based on the different challenge
assumptions.

Forecasting VS Foresighting

Forecast:
o Focus on certainties and hides the uncertainties
o Generates linear projections in a single point
o Favours continuities
o Gives primacy to quantitative over qualitative
o Hides the risks
o Starts from simple to complex
o Usually adopts a partial approach

Foresighting:
o Focus on uncertainties
o Generates several but logical pictures about the future
o Takes disruptions into consideration
o Unites quantitative and qualitative
 o Underlines risks
o Starts from complex to simple
o Adopts a global approach

Scenarios
Scenario concept is defined by 4 different definitions that, through time,
complement each other. These definitions are:

➔ Kahn, Wiener (1967): “A set of hypothetical events set in the future

constructed to clarify a possible chain of casual events as well as their
decision points”
➔ Schwartz (1996): “Scenarios are tools for ordering one's perceptions
about alternative future environments in which today's decisions might
be played out“
➔ Fuller (2001): “Scenarios are not predictions, but ways of illuminating
possible futures. Scenarios … are provisional knowledge”
➔ Ogilvy and Schwartz (2004): “Narratives of alternative environments in
which today’s decisions may be played out.”

Individual definition: Scenarios are description of alternative futures

explained in the form of narratives and stories, by having a hypothetical nature.
The reason why is derived by the assumption of uncertainties in the scenarios,
once the uncertainties are the raw material to define environment conditions and
establish scenarios. Furthermore, setting the right scenario require the perceiving
the future in order to achieve to a consistent, coherent and plausible scenario.
After the definition of the scenario, the manager will set decisions in order to face
eventual crisis or opportunities of the scenario.
Scenarios VS Visions
→Eventough scenarios are assumptions that are created based on the
consideration of the different uncertainties, we should not mistake scenarios with
visions.

This way, a vision is “Image of desirable futures which inspire people to

action. A vision can also include descriptions of the development towards
desirable futures. The role of visions is to leverage change by targeting potential
change agents and/or mobilising resources.” (2005)

Scenario Domain Vision Domain

Focal Issue
The Focal issue is characterized as the issue or question that will guide your
scenario think and that building process. To set the right focal issue you should be
as more objective as possible and you should add supporting questions that will
be answered with the different scenario planning.

When defining the focal issue are some aspects that must be considered:

• Must have a decision associated (ex: either decide on a digital approach or

should the company invest or not)
• Must include a strategic development and test a possible strategic decision
(ex: where should the organization place, should invest and in which
markets)
 • Must rethinking the core business in order to make sure that the final
decision goes leads on the right direction
• And must also be explanatory

The focal issue should also relate relevant emerges, once it creates a platform for
discoveries and explorations. To sum up, the focal issue should be the starting
point to discussions and questions.

The different environments that might characterize and have an effect on the focal issue

When defining a focal issue, it can be defined as more specific or as broader,

having this way different results. A specific focal issue is characterized to be more
decision and strategic development oriented, while a broader focal issue will be
more explorative of the different scenarios, to be more sensemaking that aims to
align vision and multi-stakeholder mobilization.
Time Horizon
The Time Horizon is the definition of a period that is consider the long-term
enough that is sufficient to conduct to changes in historical relations and trends.
The time horizon must no be too distant in time so one can still think strategically
about the future and build scenarios but, at the same time, should also not so close
to the present in order to avoid a simple and too conservative projection of past
and present structures and drivers.

The ideal time horizon must be the horizon of ruptures, where considerable
changes are starting to happen. However, this is not always identifiable, and in
certain situations there is a succession of micro-ruptures that could lead to a new
dynamic.

Different time horizons lead to different scenarios and different strategic

decisions. A close time horizon will lead to a rigorous and detailed strategical
decision, while a distant time horizon will lead to more diffuse and general
scenarios and, consequently, will lead to less objective decisions.

Distinctive Principles

The distinctive Principles are principles that have to be kept in mind when
building the different scenarios. To build scenarios, those are some characteristics
that must be taken into consideration.

Scenario building distinctive principles:

Retrospective and Peripheral view 360º: Be aware that change can came
from different areas that are not directly related with the focal issue and the
industry, keeping in mind a 360º view

Outside-in thinking: Think outside the box and consider different wild
cards, trends, black elephants or even implications that can lead to key scenarios
 Triangulation: Toolbox that allows to look at the future in different
methodologies

Structure / morphology of the future: Structure your thoughts to be long-

term oriented

Actors’ games: Take a perspective to put yourself in the position of all

stakeholders, in order to have a wide view on the scenario

Creativity “Out-of-the-Box: Creativity vs Imagination. Use creativity but

don’t be too imaginative, once the scenarios aim to be plausible

Multiple perspectives: Consider multiple perspectives when defining the

different scenarios, in the side of the company and in the consumer

Global, Holistic and Systemic Approach: Consider all the external factors
that might impact the scenario in order to have a global view of the environment

The Long Term and “the Long View”: Bear in mind a long-term perspective
when building the scenario, to not base the scenario only with behaviours that are
happening right now

Benefits and Outcomes of the Scenario Planning

→ Quality of Decision Making

• Provides guidance for strategic actions being taken today – not only what
to do, but how and when to do it.
• Provides useful information for actors whose decisions consider long-term
developments.
• Allows for decisions to be based on a wider societal debate and a greater
variety of knowledge sources.

→ Impact of Decision Making

• Creates commitment among actors to support future-oriented visions

• Encourages stakeholders to join forces to achieve common goals.
→ Ability to react to future changes

• Allows for knowledge and ideas to flow more freely, enhancing innovation
and the capacity to design and manage non-routine events.
• Increases risk awareness and provides a basis for more effective
contingency planning and appropriate forms of resilience.
• May result in new decision-making processes in organisations.

Areas of Application for foresight and build scenarios

o Regional/ Territorial
o Environmental
o Sectorial/ Industrial
o Corporate
o National
o Technological

Decision Tree
Similar to the flowsheets, the depicted decision tree
can be used to determine whether scenario thinking is an
appropriate tool for addressing your challenge or problem.
Through steps, there are key question that will be asked to
set the right scenario thinking, with different results for the
different answers.

A good period to start to do the scenario thinking

happens when there ir already some information about and
where it is enough stability to predict the scenarios. For
example, during the fire season we should not be predicting scenarios, we should
be fighting the fires. The best way to set scenarios and action happens during the
fall and winter, where there is enough information about the past fires and there
is time and stability to prepare the new season.
Developing a Social Capacity for Foresight
To develop a social capacity for Foresight, there is a process to develop this
capacity, characterized by the following stages:

1. Past-Driven Culture: Unreflective use of Forward Thinking in daily life of

Individual
2. Futures Concepts & Ideas enable a Futures Discourse
3. Futures Tools & Methods increase Analytic Power
4. Futures Processes, Projects & Structures embodied in a variety of
applications
5. A Futures-responsive Culture | Long-term thinking becomes a social norm:
Futures Processes, Projects & Structures embodied in a variety of
applications

Foresight Processes
The Foresight processes are characterized for 4 stages, mandatory to a
complete and assertive foresight. This processes are also called as the S4 Futures.

1. Scoping and Framing | Orientation, Organization and Design

• Attitudes (towards the future)
• Audience (clients: decision makers, stakeholders)
• Work environment (openness, inhibitions, possibility for experiments
and prototypes)
• Rationales, purpose and objectives
• Teams and Experts
• Focal Issue and Time Horizons

2. Scanning | Exploration and Information

• System and Structure
• Retrospective and Context
• Actors vs. Factors
• Creating a shared language for scanning and learning
 • Sources (internal and external; primary and secondary, platforms
and databases)

3. Scenarios | Foresighting, Building Scenarios and Synthesis

• Key Trends and Uncertainties
• Diverge (generate ideas, challenge Mental Models) and converge
(rank, select ideas)
• Anticipation and interpretation (tools and “schools”)
• Alternative Futures, Scenarios, Plausibility and Appropriation
• Baseline/reference, business as usual and “to the best of our
knowledge today”

4. Strategy
4.1 Direction and Vision
• Implications of Foresighting / of the Scenarios (portfolio)
• Develop Strategic Options
• Direction and Appropriation
• Think in a Visionary Way
• Envision desired outcomes
• Preferred Futures
• Scenarios and Visions: “organizing the wish”

4.2 Action, Testing, Institutionalizing and Monitoring

• Report and communicate results
• Develop Plans, Agenda for Action (strategic objectives, KPI’s)
• Organize to achieve the Vision
• Agile, prototyping, testing
• Intelligence, Scanning and Monitoring Systems
• "Institutionalize" Foresight and Strategic Thinking
Uncertainty Management: Decision-makers

“Decision-makers base their decisions on

perceptions as well as facts. People interpret facts and put
them in context. Those interpretations and contexts are
based on the decision-makers’ belief systems,
psychological attitudes and world-views.” - Peter
Schwartz

Anticipation is one of the most important factors to the

decision-making. With a prospective view, we can plan our
action. Action is a strategic will, by aligning the current and
future steps with the strategy that was previously defined. As for
the Appropriation, it represents a collective mobilization of the
actions taken, in order to lead to a coherent decision-making.

Close links between Appropriation and Action

Not predicting a pre-determined future

but exploring how the future might evolve
Involving the relevant
in different ways depending on the actions
stakeholders. Discussion and
of various players and decisions taken
dissemination of results among
“today”.
a wide audience.

Not only analyzing or contemplating

future developments but supporting
actors in actively shaping the future.
Exploratory Foresight

“Overview of possible futures (futuribles), that is, of non-unlikely scenarios,

taking into account the weight of the past determinisms and the confrontation of
the actor’s projects” – António Alvarenga, 1993

The goal is to clarify the possible futures of a system and its framework. It is
frequently applied to the analysis of macro questions.

Strategic Foresight

It is an element of the organisation’s learning processes that allows them to

anticipate the evolution of their context and, based on these simulations, to test
the existing strategies, to inform/“illuminate” decision making and/or to define a
new Strategic Vision.

Exploratory foresight → It is the equivalent to an organization radar

Strategic Foresight → It is the equivalent to an organization flight simulator

Foresight, Strategic Foresight and Strategy

Strategic Foresight: “Foresight Exercises with strategic ambitions and goals

for the actor responsible for the exercise” – Godet, 1997
Building Strategic Agility

Agility= Sensetitvity x Unity x Fluidity

To be agile, we need to be seen change but, at the same time, we also need
resource fluidity to be able to reallocate resource.

→Agility relates not only with the ability to be fast, but also to make strategic
changes and reorientations in an appropriate timing.

Strategic Agility Loop

1. Making sense: Anticipate emerging opportunities in a fluid situation.

2. Make priorities: “No, we’re going to stop doing these things to pursue
others”.
3. Making it happen: Executing.
4. Making revisions: Consider all the actions you take in the marketplace as
experiments → all knowledge is provisional.

To seize opportunities, you need strategic agility, and that consists of going
through this loop, making sense, making priorities, making it happen, and making
revisions consistently faster and better than your opponents. If you can do that,
the cumulative benefit of many small advantages can prove decisive.
Chapter 2
Environmental Scanning

The environmental scanning concept was defined by 2 authors, that

together complement this concept. These definitions are:

➔ Aguilar (1967): “the activity of acquiring information... about events and

relationships in a company's outside environment, the knowledge of
which would assist top management in its task of charting the
company's future course of action”
➔ Auster Choo (1993-1998) |: “Organizations scan the environment in order
to understand external forces of change so that they may develop
effective responses which secure or improve their position in the future.
To the extent that an organization's ability to adapt to its outside
environment depends on knowing and interpreting the external
changes that are taking place, environmental scanning constitutes a
primary mode of organizational learning.”

→The environmental scanning is the systematic search for the forces of change in
the environment: phenomena that we observe in the external environment with
the potential to change the future. It is also common practice to use conceptual
frameworks to categorize the environment into different dimensions to facilitate
the scanning process.

The conceptual frameworks possible to use can be the PESTEL, STEEPV or

STEBNPDILE analysis.

PESTEL: Political, Economic, Social, Technological, Environmental and Legal

STEEPV: Social, Technological, Economic, Environmental, Political and Values

STEBNPDILE:
Issue Life Cycle

Mapping a trend’s diffusion into public awareness from its starting point as
an emerging issue of change.

Uncertainty

Uncertainty is a variable that is possible to happen but must be meausered,

so it is possible to understand the level of uncertainty. Uncertainty is an abstract
concept that is not perceived in the same way for everyone, so the level of
uncertainty must be defined.

High Uncertainty: 90-95% Low Uncertainty: 30-35%

NOTE: The higher the number of variables to be considered, the higher the
level of uncertainty.
Key Terminologies

Drivers of Change and Driving Forces

Drivers of Change: Drivers are any factors or forces not controlled by your
organization that can potentially influence a given strategic focus.

Driving Forces: Driving Forces are forces of change outside your

organization that will shape future dynamics in predictable and unpredictable
ways.

→The future will result from the interaction between Megatrends coming from
the past and shaping the future, Weak Signals or issues at an embryonic stage of
development, Wildcards that might surprise us in a positive or negative way, and
Structural Uncertainties that might take us not just for one but for a plurality of
possible futures.
 Trends or Megatrends

Trends: Are a declaration of the direction of change. It is usually a gradual

and long-term change in the drivers that shape the future of an organization,
region, nation, sector or society. Trends are usually specific and important for the
focal issue. (ex: More Italian students studying at Nova)

Megatrends: Are long-term processes of transformation with a broad scope

and a dramatic impact. They are powerful factors which shape future markets.
Megatrends are also ways to consider other important perspectives that are
distant from the industry but that can be important key turning points to our focal
issue. (ex: Digitalization, Globalization, Climate change)

There are 3 characteristics in which megatrends differ from other trends:

o Time Horizon: Megatrends can be observed over decades. Quantitative,

empirically unambiguous indicators are available for the present. They can
be projected – with high probabilities – at least 15 years into the future
o Reach: Megatrends impact comprehensively on all regions, and result in
multidimensional transformations of all societal subsystems, whether in
politics, society, or economy. Their precise features vary according to the
region in question
o Intensity of impact: Megatrends impact powerfully and extensively on all
actors, whether it is governments, individuals and their consumption
patterns, or corporations and their strategies.

The Trends towards Megatrends Megatrends

 Regarding trends, you can organize your own external environment
taxonomy to address your focal issue. Trends can be found on:

Weak Signals

Weak signals are external or internal warnings that are too incomplete to
permit an accurate estimation of their impact, and/or to determine a complete
response. Weak Signals can have ambiguous interpretations because are open to
interpretation but are concrete events. (ex: the earthquakes that occurred before
the eruption in Canarias)

Regarding Weak Signals, they can be groups of recent events that don’t
happen often or can be characteristics.

When Weak Signals are identified as groups of recent events, they can
point towards directions not covered by the identified trends, they can point
towards an eventual of inversion of the identified trends or can point towards the
possibility of a wild cards.

When Weak Signals are represented as characteristics, they are

characterized as Anticipatory, Qualitative, Ambiguous, Fragmentary and can have
different formats and sources.
→Weak Signals are past or current developments/issues with ambiguous
interpretations on their origin, meaning and/or implications. They are unclear
observables warning us about the probability of future events.

For example, small changes in public

attitudes, an emerging pattern of concern about
emerging health problems. Finding “relevant” weak
signals is one of the most challenging tasks in
futures research and their analysis often leads to the
identification of potential Wild Cards. Given that
weak signals lie in the eye of the observer, practically
anything could be a weak signal.

→ Weak signals are emerging ideas, trends, technologies which hint at what the
future may hold.

Wild Cards

Wild cards are discontinuities, sudden events with a low probability, high
impact and a surprising character. (ex: COVID-19, Twin Towers disaster, tsunamis)

Black Elephants

Black elephants are “a cross between ‘a black swan’ (an unlikely,

unexpected event with enormous ramifications) and the ‘elephant in the room’ (a
problem that is visible to everyone, yet no one still wants to address it) even though
we know that one day it will have vast, black-swan-like consequences.” (ex: Brexit,
global warming, carbon emission)
Predetermined Elements

Predetermined elements are those events that have already occurred (or
that almost certainly will occur) but whose consequences have not yet unfolded.
Predetermined elements of structure can also be identified as areas where
structure will change, but the change is largely predictable.

Chapter 2
Scenario Planning Approaches

The type of scenario approach used depends on your purpose in using

scenarios to explore the future and your organisation’s degree of foresight
readiness. There are 4 scenario typologies:

• Inductive scenarios (or bottom-up): emerge from discussion and

exploration of drivers and trends.
• Deductive scenarios (or top-down): choose two or more of those drivers to
structure scenario worlds.
• Incremental scenarios: are similar to the official future but different enough
to move in a different direction
• Normative scenarios (visioning): these are the futures that we believe
‘should’ happen.
 ➔ Incremental Scenario Approach
1. Start by articulating the official future—the future that your
organization or group is planning for—and exploring what must
be true for this future to be realized
2. Then ask: How could we be wrong about the official future?
3. Next, develop at least two stories of the future that diverge from
the official future in provocative and plausible ways.

NOTE: This approach is a somewhat conservative approach

➔ Inductive Scenario Approach

1. Develop several stories: study, refine, and deepen them until you
arrive at a set of divergent, plausible, and challenging scenarios
that are relevant to your focal question.
2. Oftentimes while developing scenarios, we can identify an
underlying structural framework - ex: a matrix. [from stories /
scenarios to an attempt to identify the underlying structure].
Identifying a framework that highlights relationships between
scenarios can be helpful when communicating the scenario set.

NOTE: Scenarios can also be built by simply telling stories about the future based
on your critical uncertainties.

➔ Deductive Scenario Approach

1. Picture 2 critical uncertainties on axes that frame the poles of
what seems possible in the timeframe.
2. Try different combinations.
3. Cross these two axes to create a framework, which you can then
use to explore four possible scenarios for the future.
 NOTE: Settling on a scenario framework is a trial-and-error process. To build
it, we must have 4 quadrants that represent 4 scenarios, in which each quadrant
must be composed by key ideas and possible and contrasting stories. In the end
we must ask ourselves “Does the set of Scenarios "illuminates" the Strategic
Focus?”

Deductive Approach Example

The Intuitive Logics School of Scenario Building

 Types of Uncertainties

Risk: Where there is enough historical precedent, in the form of similar

events, to enable us to estimate probabilities for various possible outcomes.

Structural uncertainties: Where we are looking at the possibility of an event

which is unique enough not to provide us with an indication of likelihood. The
possibility of the event presents itself by means of a cause/effect chain of
reasoning, but we have no evidence for judging how likely it could be.

Unknowable: Where we cannot even imagine the event. Looking back in

history we know that there have been many of these, and we must assume that
this will continue in the future. But we have no clue what these events could be.

Ceteris paribus – keeping everything constant

Caeteris paribus - if there are not structural changes

Within the figure we can understand the caeteris

paribus allow the change of events, trends and patterns,
because they are not considered structural changes.

Key Uncertainties

In order to define the key uncertainties, there are 3 criteria that must be
considered to choose the key uncertainties: The 3 criteria are:

• The importance and relevance (strong potential impact) to the focal

issue: It should be considered the drivers for understanding the
future and understand the dynamics of the focal issue
• High level of Uncertainty: uncertainties are the basis for the scenario
development. Therefore, we must defined the e dynamics that must
be monitored and towards which it is crucial to find answers.
• Uncertainties must be “sufficiently” independent from each other
 Settling key uncertainties

After defining the scenario matrix, we must define the scenario as a

narrative. To create the narrative, we must follow the rules of Scenario Building
Blocks:

1. For each quadrant, choose a small set of “deep causes” that together create
the most compelling starting point for a scenario.
2. Inside each quadrant, describe how these “deep causes” relate to one
another (ex: by a sequence of systems diagrams, or by simply describing
some of the interaction effects between them)
Chapter 4
Implications of the Scenarios

Implications of the scenarios are the transition between the narrative and
the options. They represent the implications of each scenario, either in general or
for the strategic focus. When addressing to these implications, there are some
questions we must reflect on:

• Any common implications across all scenarios?

• Any categories of implications emerging? (across two or more scenarios)
• General implications or categories of implications?
• Common lines between the scenarios?
• Access Threats and Opportunities (uncertainty incorporation in the SWOT
Analysis

To define the scenario implications, we must also consider:

1. External Context: How is this world? What happens in this world?

2. Industry: How does the industry evolve and adapt?
3. Firm: What does this mean for the firm?
4. Business Units: What is the impact on the BUs or functions?

When accessing the implications, we must have a 2-sided perspective: The

customer perspective and the supplier perspective.
 As for the customers’ perspective, there are some questions that must be
addressed. The questions are:

• What will their strategic priorities be?

• How will they do business?
• What will be their key requirements of suppliers?
• How will they evaluate supplier performance?

As for the suppliers’ perspective, there are some questions that must be
addressed. The questions are:

• What pressures will the industry face?

• What new entrants might emerge?
• What will the trends be in size and scope?
• What capabilities will be critical?
• Who could be best in class?

Example of implications of scenarios

Options

After analysing the external world, we must dive into the internal world. We
must analyse the firm’s current position, considering that different scenarios are
plausible in the long term.
 When considering the options, there are some thoughts that must be
taken into consideration in order to analyse the company’s options. The questions
that must be considered are:

• Which options should we take?

• Which options can we take?
• Which projects should we/ can we implement?
• Any common options across all scenarios? → If we find common options,
we can consider an emergent strategy, by cluster these and see if they start
to form a set of options/actions

After this, it must be considering our Strengths and Weaknesses, ad

continuation of the link to the SWOT Analysis.

When addressing the options, we must identify in

which points the current strategies stand up to each
scenario, in order to understand which strategies
should remain the same and which strategies must be
adapted.

Strategic Responses
Scenarios and Internal Factors of Competitiveness

Scenarios and the Ansoff Matrix

The Ansoff Matrix and Scenario planning are complementary tools. The
Ansoff Matrix might be used to identify alternative entry-market strategies, while
scenarios can be used to scan the environment and explore plausible and relevant
futures, identifying key market drivers, and then use the Ansoff Matrix to develop
and test product and market alternatives for each identified scenario.

The Ansoff Matrix can be a creative way to develop all product-market

alternatives, and then combine it with plausible market scenarios.

Business Model Canvas

Business Model Canvas is a one-page template for describing a new or

documenting an existing business model. It is a flexible way to describe the key
elements of the BM (or programs), distilling each element into one or two
sentences. It is a shared language for describing, visualizing, assessing, and
changing business models

This tool resembles a painter’s canvas (reformatted with the nine blocks)
which allows to paint pictures of new or existing business models. It is a hands-on
tool that fosters understanding, discussion, creativity, and analysis.
Business Model Canvas → Scenarios

The goal of combining scenarios with business model innovation efforts is

to help the organization prepare for the future. Applying scenario planning
techniques to business model innovation forces reflection on how a model might
have to evolve under certain conditions. This sharpens understanding of the
model, and of potentially necessary adaptations.

Early Indicators

Early Indicators are objective and subjective elements that, through

scanning exercises, access Trends and signs of potentially great change. The early
indicators allow us to look back at the scenarios and the elements that support
them (e.g., key uncertainties)
Perspective changes
“Planning means changing minds, not only making plans.” (Arie P. De Geus,
António Alvarenga)
Chapter 5
4Main Schools

o The Intuitive-Logics School or “Shell School” → The one considered in the

past 4 chapters
o Michael Porter’s Industry Scenarios
o The Probabilistic Modified Trends School
o La Prospective

The last 3 main school represent Other Scenario Planning schools and
methods.

Porter 5 Forces
“Macro scenarios, despite their relevance, are too general to be sufficient
for developing strategy in a particular industry”- Michael Porter, 1985

1. Threat of new entrants

2. Bargaining power of buyers
3. Bargaining power of suppliers
4. Threat of substitutes
5. Intensity of competitive rivalry between existing firms
Porter’s Industry Scenarios

Porter’s Industry Scenarios encourage managers to make their implicit

assumptions about the future explicit, and to think beyond the confines of existing
conventional wisdom. Industry scenarios allow a firm to translate uncertainty into
its strategic implications for a particular industry (technological breakthroughs,
entry of new competitors and their behaviour, interest rate fluctuations)

The time period should reflect the time horizon of the most important
investment decisions.

But what distinguishes industry scenarios?

Each scenario is a full analysis of industry structure, competitor behaviour,

and the sources of competitive advantage under a particular set of assumptions
about the future. The scenario tool is merely a framework for identifying the key
uncertainties and analysing them, not an end in itself.

The Probabilistic Modified Trends School

This school of scenario planning incorporates two distinct methodologies:

• Trend Impact Analysis (TIA)

• Cross-Impact Analysis (CIA)

Although TIA and CIA began life as essentially standalone probabilistic*

forecasting tools, they generate a range of alternative futures rather than a single
point naïve extrapolation of historical data, and when combined with judgments
and narratives about the events in these futures, they constitute scenarios.

*Subjective probabilities are difficult to put numbers on it, so that's why we often
talk about plausible uncertainties instead of using probabilities.
Trend Impact Analysis (TIA)

Developed in the late 1970s to answer a particularly difficult question in

futures research. Quantitative methods based on historical data are used to
produce forecasts by extrapolating such data into the future but ignore the effects
of unprecedented future events.

TIA represents a simple approach to forecasting in which a time series is

modified to take into account perceptions about how future events may change
extrapolations that would otherwise be surprise-free.

The steps for the trend impact analysis are:

1. Define the events to be included in the study (between 10 and 40) → these
events are identified from literature search and interview key experts. After
the research, is gotten the Initial set, where from there you will clustering,
excluding and refining.
2. Estimate the initial probability of each event [either the probability of each
event is specified assuming that the other events have not occurred, or the
initial probabilities assume that the experts making the probability
judgements have in mind a view of the future that includes the set of events
and their likelihoods]
3. Estimate the conditional probabilities: “If event m occurs, what is the new
probability of event n?” → proceed to a cross-impact matrix ready for
sensitivity testing or policy analysis.

Italian students Example:

1. Do some calculations based on historical data

2. Consider caeteris paribus
3. Set a list of events that are going to influence the scenario
4. Know the probability of this events to happen and how will affect the
scenario
Case Study on the Future of the Chemical Industry:

Event A: The use of plastics in transportation vehicles and construction

expands six-fold from 1992. → Initial Probability of occurring by 2000, according to
experts: 0.15

Event B: Increased governmental intervention in the innovation process

due to demands for consumer protection and pollution control. → Initial
Probability of occurring by 2000, according to experts: 0.20

After evaluating the probability of B if A occurs and vice-versa, we must

proceed the cross-probability between all events and conduct to a cross-impact
matrix.

The Cross-impact Matrix forces attention to chains of causality, explaining

the degree to which x affects y and how y affects z.

If a certain event occurs, what is going to happen and how it will affect other
scenarios? →The table provides the effect on the other events, if C occurs
La Prospective: Morphological Analysis

Fritz Zwicky proposed it in the 1960s for exploring all the possible solutions
to a multi-dimensional and non-quantifiable problem. The Morphological Analysis
eliminates incompatible combinations of factors and creates plausible
combinations of the key variables. With morphological analysis, we can see various
elements and dimensions in the system and develop raw scenarios for the future.

What is the process of scenario development?

1. Decompose the system into components, each with a

number of possible configurations → The components
must be the most independent possible and cover all
of the studied system.
2. There are as many possible solutions as combinations
of configurations. (A system with 4 components, each
one with 4 configurations: 4*4*4*4=256 possible
combinations) → the possible combinations can be called as the space of
possibilities or the morphological space
3. Do a “path” that associates one configuration for each component
constitutes the backbone* of a possible scenario.

*the chief support of a system or organization.

Pathway – the set of all components (components can be uncertainties)

Advantages and Disadvantages of this Morphological Analysis

More probabilities to get it right

From each scenario, there will not occur structural changes because some
of them can be really similar or go in the same direction. Furthermore, it would be
difficult to develop all options

Once there too much scenarios to be developed, how can we diminishing the
scenarios?
 1. Cluster them together, joint the ones that are similar
Ex: Names of the scenario: 1111, 1112, 2323 --> if you want to retain 1111,
you should take 2323 because probably you have already prepared, at least
in a similar way, to prepare scenario 1112

2. Evaluate the configurations that are not compatible and eliminate them
Ex: economic crash is not compatible with high public investment

Example of the Morphological Analysis:

In this analysis, we have 7 variables (components)with 2 hypotheses

(configurations) for each variable, so we have 128 possible scenario structures that
compose the morphological space.

After proceeding the morphological Field, the next step is to exclude

Constraints, that will lead to a Reduced Morphological Field. To do so we must
eliminate all the incompatible scenarios in order to achieve the reduced
morphological field. Here we got 22 possible scenarios.
NOTE: Configurations and possible evolutions of the different drivers must be
compatible

From the reduced morphological field, we will proceed to morphol calculations

to get the List of Closest Scenarios.

Here for each of the 22 scenarios, a set of calculations will be done by the
software. Those are:

1 : CT – sum of common hypotheses with the rest of the scenario group (ex: the
sum of the number of configurations that the considered scenario has in common
with the other scenarios).

2: CM – number of scenarios with which the considered scenario differs in only

one configuration → try to find the cluster

3: CX – number of times the considered scenario is completely different from

the other scenarios (ex: The CX of 1111111 is 2222222 and vice-versa)

From the CM we get the list of Closest Scenarios.

 From the List of Closest Scenarios we can determine the selected scenarios.
To do so, there are 2 selection methods:

o Tools of the Morphol software: Selection of

representative scenarios
Composed by scenarios that are distant from
the pre-selected ones (proximities graph or map) but
that are, at the same time, representative of the
scenarios’ set (indicator matrix).

Proximities map, the selection philosophy

is the same one of the key uncertainties

o Adaptation of the “Extreme-world method” First selection of two scenarios

All the “positive” configurations in one scenario, and all the “negative”
configurations in another scenario. Here we must choose most contrasting
scenarios, if you understand these two, in a way, you will understand what
is in the middle. Even tough, go a little bit deeper and try to understand
consequences that can lead to a more middle position (restrictive laws,
increase in inflation, etc)

The Extreme World Method: This a Method for scenario building that results
in two extreme scenarios. These scenarios go beyond the normal optimistic and
pessimistic by allowing planners to better and more fully explore the effects of
extreme event interactions when there is a high degree of uncertainty about
future events. A third scenario can be detailed: an extrapolation of the present
often called the ‘status quo’ scenario.

The Extreme-World Method is based in an eight-step technique, as

described by Goodwin and Wright:

1. Identify the issue of concern and the horizon year which will be captured in
the scenarios;
2. Identify predetermined trends that have some degree of impact on the
issue of concern;
 3. Identify critical uncertainties, which when resolved (one way or the other)
have some degree of impact on the issue of concern;
4. Identify the degree to which the trends and resolved uncertainties have a
negative or positive impact on the issue of concern;
5. Create extreme worlds by putting all positively resolved uncertainties in one
scenario and all negatively resolved uncertainties in another scenario;
6. Add the predetermined trends to both scenarios;
7. Check for internal coherence. Could the trends and resolved uncertainties
coexist in a plausible future scenario?;
8. Add in the actions of individuals and/or organizations who will be impacted
by the future described in a scenario. What actions would they take/have
taken to satisfy their own interests?

Backcasting
Backcasting gives you a chance to look through the front windshield seeing
clearly the road ahead, as well as the tools to imagine the best possible destination
where you could arrive and thrive. Is a technique in which through the final goal
that you want to achieve, you can understand what are the scenarios and the
directions you can take to achieve the desirable goal or output.

To Backcast you must:

1. Define a goal or end point (0 emissions 2050)

2. Go back and backcast until the present
3. Set a roadmap to achieve the goal -->with different scenarios you will
achieve a different road map

These strategies need to be effective in the

context of one of the four scenarios by working
backwards from 2050 to the present. This is
done for each scenario, thus creating four
backcasts. Backcasting roadmap