Kiel University of Applied Sciences

Strategic Marketing
Scenario Development

by

 Birgit Boldt

CONTENTS  4

1. INTRODUCTION 7

2. WHAT IS SCENARIO ANALYSIS  8

2.1. TERM “SCENARIO 8
2.2. THE CONCEPT OF SCENARIO ANALYSIS  8
2.3. ACCURACY 10

3. HOW TO DO IT 11

3.1. THE SCENARIO MODEL  11
3.2. EIGHT STEP PROCEDURE 12
3.3. NUMBER OF SCENARIOS TO GENERATE 14
3.4. TIME HORIZON 15

4. SHELL´S SCENARIO EXPERIENCE 16

5. SUMMARY 17

REFERENCES  19

BOOKS 19

WEBSITES 20

1. Introduction

There are many different methodologies for assessing the future environment of an enterprise. But it is quite difficult to anticipate the future development successfully. Three examples illustrate this problem: 

• “In 1943 Thomas Watson, who was then chairman of IBM, forecast a world market for about five computers. 
• In 1970, Ken Olsen, founder of Digital Equipment Corporation, said no one needed to have a personal computer at home. (Of interest is that Ken´s company was purchased by Compaq – one of the leaders in home computers). 
• In 1981, Microsoft´s founder Bill Gates said that 640K would be enough memory for anyone. (Microsoft was also slow to take advantage of the early Internet – releasing Internet Explorer in August 1995, well after Netscape Navigator, which had taken a dominant lead in the early browser market.)”¹

These examples show that it can have disadvantageous consequences to rely on one apparently safe forecast. Scenario planning is a technique that allows to operate in planning with more than one possible future. This treatise describes the very interesting methodology of scenario development and demonstrates how to use it in an eight step procedure. Concluding, it shows how the oil company Shell had a remarkable success in the 1970s by using scenario planning and gives an assessment of this remarkable technique.

2. What is Scenario Analysis

2.1. Term “Scenario”

The term ´scenario´ originally comes from the dramatic arts. In the theatre, a scenario refers to an outline of the plot, in movies it is a summary or a set of directions for the sequence of action. Creating a scenario contains answers to questions as: What are the driving forces? What is inevitable? What is uncertain?²

Herman Kahn , the famous futurist³, introduced the term ´scenario´ to planning in the 1950s. Scenarios were first used in military strategy studies for the US government. In the 1960s, scenarios were used in an urban planning project for Paris. However, Pierre Wack maintains that it was a group of strategic planners at Royal Dutch Shell that came up with the idea of scenario analysis (see Item 4). Today “political, organizational, and marketing experts use scenarios .. to conjure up visions of alternative favourable and unfavourable business environments.”⁴

2.2. The Concept of Scenario Analysis

Scenarios are images of the future and are used as analytical tools for assessing the impacts of policies.⁵ No one knows how a companies environment will evolve. “The insights gathered through scenario planning often come as a surprise: ′I would not have thought that this was possible, but it makes complete sense′ is a common participant′s statement in a scenario project.”⁶ When assessing the future fundamental uncertainties that could drive change in many different directions should be considered. These fundamental uncertainties are called driving forces. Scenario planning gives us the flexibility to plan for several possible futures. By tracking early indicators, it is possible to develop the sensitivity and agility to create an emergent strategy – a strategy that changes directions as events unfold.⁷

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1 http://www.marketing-intelligence.co.uk/aware/services/scenario.htm

2 cf. http://www.futurovenezuela.org

3 cf. Schnaars (1990: 154)

4 cf. Georgantzas (1995: 22)

6 http://www.mce.be/news/tacklingfuture.htm

7 cf. www.ogilvy.com/viewpoint/pdf/v2_barnett.pdf

8 cf. Hay (1991 : 217)