Scenario analysis as a strategic management tool

Abstract

This paper is about the role of scenarios in strategic management. Generally, a scenario depicts some feasible future state of an organisation’s environment and mostly includes the dynamic sequence of interacting events, conditions and changes that is necessary to reach that state. The scenario approach changed considerably during the last two decades. This is reflected in the different functions ascribed to scenarios. The more traditional functions (in first generation scenarios) are tool for evaluation and selection of strategies, integration of various kinds of data, and exploration and identification of future possibilities. The more recent ones (in second generation scenarios) are making managers aware of environmental uncertainties, stretching of managers’ mental models, and triggering and accelerating processes of organisational learning. The paper discusses especially the latter cluster of functions which are closely linked to each other. By linking the dynamic scenario-development process to Kolb’s learning cycle and strategic management, the strategic learning cycle can be enhanced. The strategic learning cycle elucidates a number of bottlenecks that may seriously hinder learning within strategic management (e.g. cognitive inertia and feedback lags). Scenarios seem to dissolve these bottlenecks and in doing so support strategic learning.

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