Scenario Planning
QUOTE
Dwight D. Eisenhower once said…
“Plans are nothing; planning is everything.”
(34th US President)
CONCEPT
Scenario Planning
Scenario Planning is a strategic method to envision and prepare for multiple plausible futures. Instead of relying on a single forecast, scenario planning explores various potential events and trends that could impact goals.
This approach enhances decision-making by illuminating risks and opportunities that might otherwise be overlooked.
STORY
The Plan Is … Wack?
In the early 1970s, the global oil industry was thriving, and companies operated under the assumption that cheap oil would flow indefinitely. Amid this optimism, a small team at Royal Dutch Shell began to question the status quo.
Led by strategist Pierre Wack, they embarked on an unconventional exercise: what if the world didn't unfold as expected?
"Imagine a future where oil prices quadruple overnight," Wack proposed to a room of skeptical executives. Using scenario planning, his team crafted detailed narratives about potential disruptions, including geopolitical conflicts that could lead to an oil embargo.These scenarios weren't predictions but explorations of plausible futures that challenged conventional wisdom.
In October 1973, their foresight proved invaluable.
The Yom Kippur War erupted, and in response, the Organization of Arab Petroleum Exporting Countries (OAPEC) imposed an oil embargo against nations supporting Israel. Overnight, oil prices soared from $3 to nearly $12 per barrel. The global economy reeled, and many oil companies were caught unprepared.
But not Shell.
Thanks to Wack's scenario planning, Shell had already considered such a crisis and taken proactive measures. They diversified their oil sources, invested in alternative energy research, and adjusted their operations to be more adaptable. While competitors scrambled, Shell navigated the turmoil with relative ease, improving its market position from seventh to second among the world's oil companies within a few years.
Pierre Wack's work at Shell transformed scenario planning from a theoretical concept into a practical tool with real-world impact. His approach encouraged organizations to look beyond linear forecasts and embrace uncertainty as a strategic asset.
By considering a range of possibilities, Shell not only survived but thrived during one of the most tumultuous periods in the oil industry.