By Published On: 11 August 2017Categories: Scenario Planning

I am a big fan of look backs and after action reviews. Only in that way can we learn, reflect on how we looked at opportunities, what we were thinking at the time and whether the decisions taken made sense in the context of what we knew or could know. The objective is obviously to use the learnings in new projects and analyses going forward. Against that background it is useful to review for example the (published versions of) the Shell scenarios of the 1990s. Successive sets of scenarios were released in 1992, 1995 and 1998. All three had a time horizon up to 2020. In 2017 we are almost at that point, so it is a good time to compare the old scenario perspectives with actual developments. This results in some amazing observations.

Scenarios are not predictions. They are possible ways in which things (in the world in this case) can unfold, purposely stretched to span the ranges of uncertainties, but still plausible. The actual developments will usually not precisely follow the path of a particular scenario, but may have elements of multiple scenarios. The importance of scenarios is that we better understand ‘how things hang together’ and what reactions may be triggered by certain developments, trends or phenomena.

The preamble to the 1992 scenarios recognizes that, following the fall of the Berlin wall, the world was at the dawn of a huge wave of globalization, liberalization and technological development. These would be the major driving forces shaping the world in the next three decades (as from 1992). Two scenarios were articulated: ”New Frontiers’ and ‘Barricades’. ‘New Frontiers’ describes a world in which the benefits of globalization and free trade would be seized by most countries, leading to substantial economic growth, particularly in the emerging markets and poorer countries. Companies from developing countries venture across the globe, problems are addressed cooperatively, interdependence is the norm. In contrast, in ‘Barricades’ people resist liberalization because they fear that they lose their jobs, power, autonomy, traditions and identity. Markets are restricted, trade agreements are bilateral rather than multilateral. The political spectrum in ‘Barricades’ is very different from the situation in 1992 (and from ‘New Frontiers’), as depicted in the following figure copied from the 1992 Scenarios document:

A remarkable narrative. In 1992! We may conclude that in the Shell premises, in those days, the writing was perhaps not on the wall but certainly on the flipcharts as regards the potential rise of the likes of Le Pen, Wilders, Grillo and Farage as well as the somewhat nationalistic, isolationalist oriented tendencies that can currently be observed in parts of the US, UK (brexit) and continental Europe, as a reaction to globalization, 2-3 decades later. At the same time, most elements of ‘New Frontiers’ have happened in reality as well, notably the rise of the emerging economies, be it not to the degree as articulated in this scenario. From ‘Barricades’:

..In this atmosphere, the traditional left-right political debate splinters into a number of competing nationalistic, ethnic, religious, and single-issue groups, making coalition building difficult.”

In 1995, two new scenarios were put forward: ‘Just do it!’ and ‘Do Wa’ (‘Big Me’). The core notion of these scenarios was TINA: there is no alternative. What was meant was that there was no alternative but to embrace globalization, liberalization and technological development. In fact, both scenarios were different versions of ‘New Frontiers´. In ‘Just do it!’ the emphasis is on the success of innovations, seizing quick moving opportunities and fierce competition. In ‘Da Wo’ investing in relationships is more important and governments play a stronger role in this scenario, which essentially represents the ‘Asian way’. But in neither scenario a word about any possible backlashes to globalization. This was, remarkably, no longer considered plausible, or not important enough to include. The focus was on how best to do business in an individualistic, innovation driven world on the one hand and in a world dominated by relationship management on the other hand.

From the preamble of the 1995 scenarios (i.e. applicable to both scenarios):

The stick is carried by the world financial markets, which function as a Best Practice implacable and impersonal enforcer of macroeconomic prudence. Even governments cannot resist the power of this policeman, for that power is created by the actions of millions of individuals and institutions.”

..TINA is the only game in town.¨

A drastic shift from the thinking in 1992, also with no concerns around potential issues related to the financial system.

In 1998 the two scenarios were called ‘New Game’ and ‘People Power’. The mantra was that TINA was considered more powerful than ever. A ‘Barricades’-like development was, again, out of sight. However, this time the stability of the financial system was regarded as something that deserved attention, inspired by the financial crisis in Asia/Russia in 1997. In ‘New Game’ there are clear (international) rules to govern the financial system. It is a world where governments are only one category of partners in global problem solving. It is a competitive environment, tough for businesses, difficult to find the profit zone. In ‘People Power’ the global governance is less orderly, less regulated, power is distributed, things are volatile and unpredictable. It is also a world in which several big financial crises occur.

From the 1998 scenarios:

..we saw that Barricades was a story appropriate for only a very small part of the world ” the forces of what came to be known as ‘TINA’ were simply too strong to resist.”

For example, the asset bubble of the last years of the 1990s cannot be let down gently without damaging the delicate state of the world financial system. It continues to grow, like the famous Dutch tulip bubble, until it crashes in the new millennium.”

Energy marketers in People Power aggressively exploit new information and communication technologies to differentiate services according to time and occasion-of-use, location, demography, and even attitude, creating an explosion of new bundled energy services.”

What can we conclude from these observations?

Firstly, that it is possible indeed to recognize potential future trends and reactions to trends (again, without claiming predictions). We can only admire the folks in the Shell scenario team in the early 90s who considered that globalization may ultimately lead to ‘forgotten groups’.

Secondly, that very easily the scenario spectrum becomes too narrow. In the mid and late ninetees, ‘Barricades’ was no longer considered plausible. Despite some dreadful conflicts (e.g. former Yugoslavia), it was an era of great optimism, the iron curtain was gone, block thinking was out, there was talk of ‘the end of history’ (Fukuyama), ´the new economy’ (never again a recession) and ‘the third way’ (a blend of capitalism and social democracy). There was little doubt (at least in the Western world) about the likely success of macroeconomic policies en vogue. But even an enlightened scenario team, apparently, may be fooled, both in 1995 and 1998.

Thirdly, that scenarios have the danger of being more reflective of the era in which they are composed than of the period they are supposed to cover. This is illustrated for example by the sudden attention for a big financial crisis as it featured in the 1998 scenarios (following the Asian crisis), whereas in 1992 and 1995 there were no worries about the stability of the financial system.

With these observations we must conclude that whilst scenario thinking can be extremely useful for businesses and policy makers alike, and potential implications of certain future developments can be inferred well ahead of time, efforts must be expended to avoid biases and influences from the thinking that dominates the era in which they are created.

The older Shell scenarios may be found here.

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