Scenario Planning - A framework for trend analysis
Shell was an early leader in the development of scenario planning for evaluating plausible futures. My experience was learned when I consulted with Cambridge Energy Research Associates (CERA), which used the Shell process, to develop a 20-year scenario assessment for the electric utility industry. The basis framework for evaluating plausible futures was to create a rational story with the following five elements:
Predetermined Elements. Some factors are known and unlikely to change in the foreseeable future. Examples include demographics, such as the average age and number of households, as well as the age, type, and number of cars, and the incomes of population segments.
Driving Forces. These are major societal or macro forces of change. Examples include the rise of AI, the rise of authoritarian governments, the resurgence of nationalism, the increase in trade protectionism and tariffs, or the adoption of a new technology.
Prime Movers. These are the individuals or organizations that can substantially influence the driving forces, often by altering the “rules of the game.” Examples include the President of the United States, Congress, State Governors, business leaders, regulatory agencies, the U.S. Supreme Court, environmental groups and advocates, and international governmental bodies.
Major Uncertainties. Key factors that are uncertain about their timing and effect (up or down). Examples include future interest rates, commodity energy prices, the speed of technology adoption (such as advanced electric vehicles, nuclear fusion, or plug-and-play home virtual power plants), the start or cessation of wars, or the pace of climate change.
Wild Cards. Unpredictable events, such as the invasion of Ukraine by Russia. The purpose of considering wild cards is to brainstorm potential threats or opportunities that seem unlikely, but could have a major impact on the future plans. Using wildcards provides a stress test of the strategic path, checking the plan’s robustness in responding to unexpected events.
Each consideration of the future begins with an evaluation of the five elements, taking into account current and foreseeable trends.