Summary.
In 1965, a time when quantitative, computer-driven planning was very much in vogue, Royal Dutch Shell started experimenting with a different way of looking into the future: scenario planning. Shell’s practice has now survived for almost half a century and has had a huge influence on how businesses, governments, and other organizations think about and plan for the future. The authors interviewed almost every living veteran of the Shell scenario planning operation, along with top Shell executives through the years. They identify several principles that both define the process at Shell and help explain how it has survived and thrived for so long.
For instance, Shell scenarios are stories, not predictions, and are designed to help break the habit, ingrained in most corporate planning, of assuming that the future will look much like the present. They must above all be plausible, with a logical story line, in order to encourage intuition and judgment. They create a safe space for dialogue and for acknowledging uncertainty.
They must also be relevant, not simply disruptive and challenging. And they need some quantification to be credible—but the numbers must flow from the stories, rather than the other way around. Otherwise, there’s always the danger that quantitative models will hide assumptions and constrain thinking rather than refine it.
Because scenarios follow a rhythm distinct from the annual strategy cycle, they allow an organization to see realities that would otherwise be overlooked.
In 1965 Royal Dutch Shell put into service what it called the Unified Planning Machinery (UPM), a computer-driven system meant to bring more discipline to the company’s cash flow planning. This kind of rational, model-based financial forecasting was very much in vogue in the 1960s. But before long, Shell’s top executives realized that many of the commitments they had to make extended well beyond UPM’s six-year time horizon—and that even within that horizon, UPM tended to get a lot wrong. In the early 1970s they shut it down.
