Scenario Planning for Strategic Decision-Making

The following article is part of the MaRS Discovery District's Startup Toolkit and is reposted with permission. The original is available here.

A core method in strategic foresight is scenario planning or “rehearsing for the future.” Scenarios are stories about possibilities, hypothetical sequences of events leading to plausible situations. We use scenario planning to stretch our perceptions of the future, accounting for a range of futures, so we can make better decisions.

In The Art of the Long View (1991), Peter Schwartz indicates that one of the most important benefits of using scenarios is confidence. Scenarios allow a manager to say, “I am prepared for whatever happens.”

Scenario planning helps you make better decisions

Consider this training technique used by the Chicago Bulls. It’s a good example of scenario planning in use.

At practice in 1984, the Chicago Bulls starting five would scrimmage against the second five in games to eight points. Michael Jordan, a rookie at the time and already the team’s leading scorer, was on the starting five.

“We used to be killing the second five,” Jordan recalls in an interview. But once the starters were up by about 5 to 1, coach Kevin Loughery would switch Jordan to the losing team, who would then come back from the deficit to win. “These were all training tools to me,” says Jordan.

Jordan saw the practice scrimmages as an opportunity to rehearse a broad scope of possible scenarios, making him a more responsive and flexible decision-maker in critical moments of gameplay.

You can never know what scenario will arise, so you prepare for everything—training yourself to identify small details that help you anticipate which scenario is unfolding. Or in Jordan’s words, “I practice as if I’m playing for real, so when the moment comes in a game, it’s not new… you don’t have to think. Instinctively, things happen.”

Scenario planning helps you build resilience to adverse situations

By switching to the losing team midway through the scrimmage, Jordan got to experience unfavourable conditions and built his resilience to adverse situations.

Scenario planning forces us to confront the uncertain, unfamiliar and uncomfortable. When we imagine operating in alternative scenarios where all the external factors seem to be working against us, we’re conquering our optimism and overconfidence biases, along with the ambiguity effect. We’re forced to consider issues that we don’t fully understand. We locate our strengths as well as our capability and knowledge gaps.

Jordan saw things the same way. When asked if he ever experienced fear of failure, he shrugs the question off, saying, “I never feared about my skills… if you put forth the work, you know what you’re capable of and you know what you’re not.”

Scenario planning is not comfortable

Scenario planning is supposed to be uncomfortable. Your colleagues may not enjoy the awkwardness of planning for the worst.

By his own teammates, Jordan was called “the devil.” The moniker alludes to his brutal competitiveness, a temperament he brought not only to clutch games, but to every single scrimmage. As one Chicago Bull put it, “if you weren’t on his team in practice, you were his enemy.”

For Jordan, practice wasn’t just about improving his skills and learning the plays. He competed with playoff-level pressure so that at game time he and his teammates were prepared for the most challenging situations.