Scenario planning is a model for learning about the future in which a corporate strategy is formed by drawing a small number of scenarios, stories how the future may unfold, and how this may affect an issue that confronts the corporation.

Royal Dutch Shell, one of the first and leading adopters, defines scenarios as follows: Scenarios are carefully crafted stories about the future embodying a wide variety of ideas and integrating them in a way that is communicable and useful. Scenarios help us link the uncertainties we hold about the future to the decisions we must make today.

The scenario planning method works by understanding the nature and impact of the most uncertain and important driving forces affecting the future. It is a group process which encourages knowledge exchange and development of mutual deeper understanding of central issues important to the future of your business. The goal is to craft a number of diverging stories by extrapolating uncertain and heavily influencing driving forces. The stories together with the work getting there has the dual purpose of increasing the knowledge of the business environment and widen both the receiver's and participant's perception of possible future events. The method is most widely used as a strategic management tool, but it is also used for enabling group discussion about a common future.

Typically, the scenario planning process is as follows:

* identify people who will contribute a wide range of perspectives
* comprehensive interviews/workshop about how participants see big shifts coming in society, economics, politics, technology, etc.
* cluster or group these views into connected patterns
* group draws a list of priorities (the best ideas)
* sketch out rough pictures of the future based on these priorities (stories, rough scenarios)
* further work out to detailed impact scenarios (determine in what way each scenario will affect the corporation)
* identify early warning signals (things that are indicative for a particular scenario to unfold)
* monitor, evaluate and review scenarios

Some traps to avoid in Scenario Planning:
1) treating scenarios as forecasts
2) constructing scenarios based on too simplistic a difference, such as optimistic and pessimistic
3) failing to make scenario global enough in scope
4) failing to focus scenarios in areas of potential impact on the business
5) treating scenarios as an informational or instructional tool rather than for participative learning / strategy formation
6) not having an adequate process for engaging executive teams in the scenario planning process
7) failing to put enough imaginative stimulus into the scenario design
not using an experienced facilitator