Strategy Library

Scenario analysis

Scenario analysis is a qualitative method by which several alternative future pictures of problem areas can be systematically designed and made comprehensible to others in their respective developments (Götze, 1991).

Definition of the scenario analysis

Scenarios are not prophecies or utopias, but rather the logical continuation of today's realities. They start from the current problem situation and try to consider all conceivable developments and their interdependencies. Dynamic, holistic and interdisciplinary thinking plays an important role. The scenario method is used by companies in long-term strategic planning and serves to gain concrete options for action.

Description of the scenario analysis

The method provides that three basic types of scenarios are developed: a positive extreme scenario that models the best possible future development (best-case scenario), a negative extreme scenario that models the worst possible future development (worst-case scenario) and a trend scenario, which involves the continuation of the present into the future, and which is believed to be the most probable future event. These three basic scenarios are usually portrayed in the literature as funnels, spanning from the present through different time horizons into the future.

The scenario method consists of several phases. In a first step, the actual state of the problem to be investigated is recorded and analyzed. Subsequently, the areas of influence and factors that directly affect the problem area are identified, examined and presented in their context of impact. Based on the previous steps, alternative scenarios will be developed, designed and checked for consistency. Finally, action strategies are derived from the developed scenarios. Robust and flexible is a strategy if it is applicable to every scenario. On the other hand, risky strategies are those that only relate to a specific scenario.

Source

Götze, U. (1991). Scenario Technique in Strategic Business Planning. Wiesbaden: Deutscher Universitätsverlag

How can Solyp 4.0 support your strategic work?

Get a free product demo