Individual Assignment

Becoming Hari Seldon

Applications of Scenario Planning in strategic planning

MBA/21/6157 Kuminda Liyanage

Subgroup No: AE5

Course: MBA518- BusinessAnalytics

Resource Person: Dr Ravi Edirisinghe ([email protected])
Term: Sep - Oct 2023

Postgraduate Institute of Management

University of Sri Jayewardenepura

 Declaration
I am fully aware of the content under plagiarism stated in the PIM Student Handbook, and I
hereby declare and affirm that I have strictly observed the law relating to intellectual property,
copyright, and plagiarism in this exercise.

Name: Kuminda C.B. Liyanage

Registration No: MBA/21/6157

K.C.B. Liyanage

Date: 17 March 2023

1 Introduction
Hari Seldon, a scientist of the galactic empire has developed a new science called
psychohistory, which allows him to predict the future of human society. Seldon predicts that
the Galactic Empire is on the verge of collapse and that there will be a 30,000-year period of
barbarism before a new empire can arise (Asimov, 1951). Above is the basis of the world-
famous Foundation Science Fiction series. It is a story about how mathematicians used the
ultimate case of scenario planning to stop civilisation from going into a complete tailspin. Can
scenario planning really do that? This article is inspecting the concepts of scenario planning
and how corporations can use scenario planning reach their targets.

2 What is Scenario Planning

Thirty-one years after Asimov wrote the foundations series, Peter Schwartz, has written
publication, “The Art of Long View” that introduce some of the foundation work in the concept
of scenario planning. Scenario planning is the tool for developing understanding about future
and dealing with uncertainties in the future (Schwartz, 1991).

2.1 Cone of Uncertainty and Long now

Schwartz explains that what can happen in the future is uncertain. Level of uncertainty is less
in the immediate future and the uncertainty increases further away the future is. This one of
the key factors that can help in developing the scenarios, where factors further in the future are
considered less in scenarios.

Long now, is the concept that emphasise on thinking beyond the immediate future and
considering the long term. Schwartz argues that organizations should prioritize flexibility and
adaptability in their long-term planning.

2.2 Importance of flexibility

The scenario planning process, itself is a recognition that future is more than a single possibility.
Schwartz argument is that the future is not predictable, but that scenario planning can help us
to think about the range of possible futures and to develop strategies that are robust to a wide
range of different scenarios.
2.3 Importance of Vision
To embark on a scenario planning exercise, the organisation must have a clear vision. The
scenarios often designed to understand what factors can prevent or support in achieving its
vision and see how the organisation can enhance its chances of reaching its target. An
organisation that does not have such clarity of vision may not know which scenarios are
important to be considered.

3 Process of Scenario Planning

Schwartz's approach to scenario planning is based on the following steps:

3.1 Identify key uncertainties.

The first step is to identify the key uncertainties that are likely to shape the future of the
organization. These uncertainties can be internal or external, and they can be short-term or
long-term.

A useful tool that can be used to identify uncertainties are a PEST or PESTEL analysis (Mind
Tools Content Team, n.d.). A PESTEL analysis can help recognise the factors that are likely
to impact the organisation, but the organisation has no control over. Schwartz called them “The
Driving Forces”.

3.2 Develop plausible scenarios:

Once the key uncertainties have been identified, the next step is to develop a set of plausible
scenarios. Scenarios are not predictions; they are stories about how the future might unfold,
given different assumptions about the key uncertainties.

When identifying those scenarios, the practitioner is expected to look into different types of
future scenarios. Those include

Probable Futures: These are the most likely future scenarios based on current trends
and available data.
 Plausible Futures: Plausible futures are scenarios that are not the most likely but are
still within the realm of possibility. They explore what might happen if certain trends
or events occur, even if they are not the most probable.

Preferable Futures: These scenarios represent the future outcomes that an

organization or individual would like to see happen.

Catastrophic Futures: Catastrophic scenarios consider the worst-case situations that

could occur. While these outcomes may be unlikely, they are significant enough to
warrant attention and contingency planning.

Wild Card Futures: These are unexpected and disruptive events that have the
potential to reshape the future dramatically.

Alternate Path Futures: Alternate path scenarios explore what could happen if a
significant event or decision diverges from the current trajectory. They help identify
potential turning points in the future.

3.3 Evaluate the implications of each scenario:

Once the scenarios have been developed, the next step is to evaluate the implications of each
scenario for the organization. This includes identifying the potential risks and opportunities
associated with each scenario.

While scenario planning is looking at the future of the organisation. However, “deeper
understanding of the methods and approaches of historical analysis can help scenario planners
to develop better insights into the world” (Schoemaker, 2020).

3.4 Develop strategies:

The last step is to develop strategies for dealing with each scenario. These strategies should be
flexible and adaptable, so that the organization can adjust its course as needed.
4 Practical use of scenario planning
While the scenario planning was touted as one of the key strategic planning tools. Bowman
and MacKay (2020) has done extensive research on application of scenario planning in
research. While they have found that there is lack of research on the “Scenarios planning
process itself”. They claim that the number of research articles has increased on how the
scenario planning is applied in companies, a testament for the maturity of this process within
the industry.

Bowman and MacKay (2020) further state, “Although scenario planning is described often as
a strategy tool its role in strategic planning is unclear and its connection to dominant theoretical
perspectives in strategic management has diminished”. There argument is that methodological
separation of the intuitive logics approach popularized by Royal Dutch Shell from firm-level
strategy concepts like business models, competitive positioning, and resource capabilities.

4.1 South Africa Transitioning to Open democracy

There are few practical examples that can be used from the business world. However, one
specific example exemplifies how scenario planning can be used to avoid disaster. This is how
the South Africa avoided, Low Road scenario in South Africa and ended the apartheid
government.

It is suggested that Anglo-American Corporation, a top mining corporation in south Africa has
sent its strategic planner, Clem Sunter to South Africa to present the scenarios they developed.
Those scenarios are…

The Low Road Scenario - depicted a downward spiral into further boycotts, isolation,
and civil war due to the immorality and unsustainability of Apartheid

The High Road Scenario - painted a move toward representative democracy with

South Africa rejoining the United Nations and sharing its abundant wealth more equally
with all citizens
It was suggested that this has sparked fieace debate between various parties about the future of
South Africa. Though it's unclear how much impact they had, some believe that the fierce
debates sparked by the above analysis slowly turned the tide of public opinion against apartheid.
While South Africa is still far from achieving the ideal "High Road" scenario, it avoided the
disastrous "Low Road" scenario thanks to a remarkably peaceful but protracted negotiation
process (Schoemaker, 2020).

4.2 Future of Merchant Shipping

The business model of merchant shipping is an intricate web involving numerous stakeholders
in every voyage. The initial investments and associated risks are substantial, rendering
companies susceptible to the capricious nature of markets, as well as safety and security
concerns. These intricacies render the global maritime industry a formidable challenge when
it comes to regulating against fraudulent practices and a spectrum of criminal activities.

Butchart & Lum (2017), has developed number of scenarios that world can be facing in
shipping industry based on the facts that was available in 2017. In that study they have
identified that shipping industry would have four plausible futures. Those are ..

• Fall of Maritime Trade

• Water World
• Business as Usual
• Hybrid Maritime World

These scenarios ware developed considering the factors such as Chinas Belt and Road initiative
and the high level of integration that Russia had with the Europe under consideration. Also, it
would have assumed that middle eastern peace process is moving forward.

However as of 2023, November the world has changed dramatically. The world is yet again
fallen into a cold war, the eastern civilisations of the world are actively challenging the
American hegemony.

Scenarios that would come out of a similar study today would deliver completely distinct set
of scenarios. This shows the importance of the need to continuously review the scenarios to
ensure that change of “Long Now” to “Tomorrows Future”
5 Conclusion
Problem with Harry Seldon’s method of scenario planning is that, he has accounted for all
possible future actions across a whole galaxy, for over 30,000 years. This is what makes the
Foundation Series a Science Fiction. In reality, the scope and scenarios the modern corporate
leadership encounter are much shorter in time period, simpler in scope, however much more
difficult as the real world cannot be shaped as a fictional world. However, corporate leaders
need similar level of creativity and ingenuity to come up with plausible scenarios and find
ways to handle those scenarios.

Scenarios planning is an important tool that is available for the corporate leaders to plan for its
future. However, the important lesson in the scenarios planning is that future cannot be
predicted. Different futures can be anticipated, and the corporate world must carefully craft
their strategies and plans to meet those changes while maintaining sufficient level of flexibility.
6 References
Asimov, I. (1951). Foundation. Bantam Books.

Bowman, G., & MacKay, B. (2020). Scenario planning as strategic activity: A practice-
orientated approach. Futures Foresight Sci.

Butchart, A., & Lum, R. (2017). Maritime Scenrios: Exploring the Futures of Maritime
scenrios. Vision Foresight Strategy LLC.

Mind Tools Content Team. (n.d.). PEST Analysis - Strategy Tools from Mindtools. Retrieved
from mindtools.com: https://www.mindtools.com/pages/article/newTMC_09.htm

Schoemaker, P. J. (2020). How historical analysis can enrich scenario planning. Futures
Foresight Sci, 1-13.

Schwartz, P. (1991). The art of the long view: Planning for the future in an uncertain world.
Wiley.