Scenarios haunt the media like fruit flies around a summer fruit plate. They are often just as helpful.
The term “scenario” is not protected, which means that every journalist or trend researcher can think up a story and call it a scenario. That is also convenient. Unfortunately, this has nothing to do with research or even science. Also in many business related subjects the scenario development is unfortunately very compressed.
Therefore, I would like to share with you here the detailed scenario method as practiced by academic futurology. What I mean to say is that it is anything but trivial to think up scenarios. And, as is often the case, the result does not reveal at first glance how much work and time goes into the rather formalized process.
If you are more interested in a concrete example, it would be best to take a look here:
Introduction into scenario technique
There are two fundamental differences between everyday scenarios and those that arise in formalized processes Scenarios of futurology are…
- formalized instead of intuitive. Any gut feeling is possible.
- consistent instead of plausible. Why this is important follows later.
By the way, the scenarios are not more or less valid. This is not what scientific futurology is all about at this point, as I keep emphasizing. With the scenario technique we do not predict the future, but create orientation knowledge for strategic decisions.
At the beginning of a scenario process, a few basic questions must first be clarified:
- Modality: explorative or normative scenarios?
- Time reference: situation or course scenarios? Which time frame – five, ten, hundred years?
- Focus: system, environment or mixed scenarios?
- Continuity: reference scenarios (trend, status quo or business-as-usual scenarios?) or contrast scenarios with wild cards, worst or best cases?
In addition, the usual questions of any strategy or research project must of course be answered. What is the purpose of this process? Which strengths, weaknesses, opportunities and threats (SWOT analysis) are known?
Possibly you have landed on this page to book the service “Scenario Technique” from me. Then here is the shortcut to the contact form:
Environmental analysis: Identify influencing factors
The most important factors influencing our topic – a company, a political agenda or an ecosystem? I have written a Zlog article for the Foresight environmental analysis as a framework for analysis. In other words, we analyze the dimensions of economy, ecology, society, ethics, science, administration, law, politics and technology to see whether influential drivers, trends or actors can be found in these areas. This works best in a team.
This framework helps us to filter the relevant information from the wealth of available information. Finally, we identify drivers and trends, which we steam down to factors. In a workshop setting, we now assess the relevance of the factors found – this does not require an extensive discussion, but rather, depending on the available time or budget, the participants’ assessment without comment on a scale of zero to five. The zero stands for no influence, the five counts for very large influence. The scale should not be too large, this is about tendencies; and it is important that the number of available options is even so that there is no middle ground. Form the averages of the assessments; only in the case of significant deviations will discussion take place.
The resulting list should be quite long. Depending on the scope of the topic and the time horizon of the scenario, dozens, sometimes even hundreds, of factors may come together. Never mind, this list alone is a bumbling reduction of the real complexity “out there”. And exactly this aspect is also very important to me: it is already a model of reality and every assumption is subjective, so it cannot and will not be able to meet the future reality. But we can approach consistent scenarios of the coming reality if we really make an effort in taking these steps.
Examples of common influencing factors:
- Gross Domestic Product
- Unemployment rate
- Average temperature
- Number of company foundations
- Data protection regulation
- Patent applications
- Technological innovation
- Population development
This is not yet about the characteristics, but purely descriptively about the collection of all conceivable influencing factors. These should be formulated as generically and value-free as possible.
Which of the defined influencing factors are the most important? You now have a long list of important influencing factors. Now let’s get down to business: what are the central drivers of development? Which factors absolutely have to be taken into account, i.e. have the highest average value from the last step? And which factors are particularly interlinked in the interaction analysis and influence many other factors?
Now you get a shorter list than before; if you just had 50 factors, now there are perhaps ten. It is advisable to limit the maximum number of key factors to 20 so as not to become too excessive. Of course, more factors are more appropriate for the complex reality, but each additional factor also increases the effort, costs and time required exponentially.
Now answer the questions for each of the key factors, how strongly this single factor influences the object of investigation and how uncertain the further development is. If you like, you can do an extra round and estimate the probability on a scale to identify possible wild cards. The wild cards are not explicitly included in the further scenario steps, but they are important to keep them in mind.
For each of the factors now selected, you will consider in a brainstorming process which alternative future developments or projections are conceivable. For each key factor there are about three to six variants. You should also form practical groups for this purpose, because we are not interested in making precise predictions of economic developments, but in trends. For the influencing factor “gross domestic product”, this could look something like this:
- Growing significantly < 5
- Grows about 2-5%.
- “Black zero” 0.5-2 %
- Stagnant 0-0,5
- Decreases slightly 0.5-2
- Recession 2-5
- Severe recession > 5
Admittedly, this reduction seems almost bumbling. If you have a lot of time and budget at your disposal, of course, you will form smaller steps until you arrive at percentage decimal places; in the end it is up to you or the project framework how detailed you design this morphological box. But in principle, this presentation should be sufficient. Of course, all assumptions still have to be substantiated with theses and proofs. At this point, expert interviews are often added during the course of the project in order to identify as many projections as possible and, if necessary, to avoid nonsensical expressions.
Scenario construction or also consistency matrix
As announced, formalized scenario processes are out for consistency, less for plausibility or even probability. Consistency refers to the fact that the values of the key factors of the previous step are combined and for each possible constellation it is checked in an interaction analysis whether under common assumptions a coexistence of these two values is possible. For example, can the gross domestic product grow significantly while the population shrinks considerably? And if so, under what conditions?
The consistency analysis can hardly be carried out without software. After all, we are dealing with 2250 possible combinations of ten selected key factors, each with five variants – the more possible combinations, the more complex the calculation of the raw scenarios becomes. In my application example for the US election in 2020, 20 key factors with an average of 3.27 factors even resulted in 85,030,560,000 possible combinations. This is what I mean by exponential growth in expenditure.
There is little good software for the scenario technique. In the master’s degree program in futurology, we worked with Parmenides EIDOS, which is still being made available to me directly by the Foundation, thankfully. The tool allows for much more than just the creation of scenarios, including strategy tools such as decision architectures, visual scoremaps or data maps. A software like EIDOS now combines the key factor projections with each other and calculates the consistency value of the raw scenarios.
Ideally, the software-supported combination of all projections results in several (usually three to six) significantly different clusters with a number of scenarios. From each cluster you select a particularly consistent raw scenario and now evaluate the probability and relevance for your object of investigation as a team. Depending on the purpose of the scenario technique, the final step is to process the data for communicating the content. This can be done through stories, graphics, videos or other suitable formats and should be based primarily on the expectations of the addressees.
- Gerhold, Lars et al. (2015): Standards und Gütekriterien der Zukunftsforschung. Ein Handbuch für Wissenschaft und Praxis. M. Pausch (Hrsg.), Springer Fachmedien, Salzburg, Austria, DOI 10.1007/978-3-658-07363-3.
- Popp, Reinhold (2016): Zukunftswissenschaft & Zukunftsforschung. Grundlagen und Grundfragen. Eine Skizze. LIT Verlag, Vienna, Austria.
- Schulz-Monat, Beate; Steinmüller, Dr. Karlheinz (2013): Lecture slides „Szenariotechnik in der Unternehmenspraxis“, Free University Berlin, Institut Futur.
- Steinmüller, Dr. Karlheinz (1997): Grundlagen und Methoden der Zukunftsforschung. Szenarien, Delphi, Technikvorausschau. WerkstattBericht 21, Sekretariat für Zukunftsforschung, Gelsenkirchen.